Gordon sets the trap

Mark Stretton looks at how the recent Budget will squeeze many UK brewers

In the most recent Budget, the pub and brewing industry once again bore witness to another classic Labour triumph of political spin over government intervention of any real value or substance.

Small brewers are a dying breed in Britain and Gordon Brown had an opportunity to level out the playing field.

Instead, he gave tax breaks to the very smallest of brewers - those who produce fewer than 18,000 barrels a year.

Some industry figures referred to it as relief for "one man and his dog" operations.

Undoubtedly, the move will help microbrewers gain a foothold in the market and allow them to compete with larger brewers that have the advantage of size and tied estates.

But a raft of small and medium-sized brewers - those who produce between 18,000 barrels and 120,000 barrels - are now caught in a "poverty trap".

Companies such as Adnams, Black Sheep, Brakspear, Gales, JW Lees, Harvey's and Hook Norton find themselves being squeezed by both the big and small players.

It would be more efficient for a clutch of brewers who produce above the 18,000 barrel-mark to reduce their production. Therefore, this Labour sliding-scale could see the consumer faced with even less choice.

Pub companies and national brewers are in business to make money so it is only natural they should try to push margins and grow profits.

Small brewers say what should have happened is a sliding scale of tax duty right up to 120,000 barrels (200,000 hectolitres) as seen in the rest of Europe.

The industry was also angered by Gordon Brown's implication that the move would lead to cheaper beer in pubs.

Stuart Neame of Kent brewer Shepherd Neame said: "What the Chancellor said was misleading and frankly disgraceful - he implied this would lead to a reduction in the price of beer in pubs.

"The whole point is to allow for the inefficiencies of small-volume brewing so that small players can survive, not to give consumers cheaper beer.

"The other thing that was ridiculous was that he suggested country pubs would benefit from this - fewer than one per cent of country pubs take micro-beers."

The British Beer and Pub Association (BBPA) calculated that the value of the cuts is around £15m. In an industry worth £3bn to the government, that equates to about 0.5 per cent. BBPA chief executive Rob Hayward (pictured)​ said: "This was basically a triumph of spin over any real value."

With the support of the Conservative and Liberal Democrat parties, the BBPA is understood to be lobbying the government to introduce a sliding scale right up to EU levels of 120,000 barrels.

Steve Drinkwater, finance director of brewer Timothy Taylor, agreed: "This is of no benefit to companies like ours whatsoever.

"We were very disappointed in the way the information was given out - the impression Gordon Brown gave was very different from the reality.

"It was deliberately presented to the man in the street as '14p-off-a-pint' for the masses. As we all know, this simply isn't the case."