430 new UK craft breweries opened in 2017

In 2009 to 2010, UK brewery openings were running at more than 100 a year (101), according to national accountancy group UHY Hacker Young.

UHY also said while Brexit might slow the shift in the UK from big brand beers to premium niche beers, the craft beer market is still some way from peaking.

While the market share of craft beer is still below 5% of overall UK beer sales compared to almost a quarter in the US (23%), craft beer sales in the UK have been growing at about 90% in the past year, against a drop in sales of big brand ‘classic lagers’ by 1.3% (figures from the Brewers Association).

Significant scale

Increased spending power among the Millennial market is thought to be a significant part of this growth.

However, while the craft beer sector has now reached a significant scale, funding of these breweries is still relatively hard to come by and many are still having to rely on issuing shares through crowdfunding to expand.

Issuing too many shares to fund company expansion rather than debt could see the stake of the original founders diluted away. Debt finance also allows companies to deduct interest from any taxable income.

UHY said high street banks have been reluctant to lend to craft breweries as most do not fit their risk profile.

However, UHY partner James Simmonds said smaller brewers should be able to access asset-based finance and invoice finance.

High demand

Equipment leasing allows breweries to avoid the large down payments required for purchases, which frees up cash for other business expenditures.

Simmonds said: “The craft beer industry continues to fizz with hundreds of entrepreneurs looking to tap into high consumer demand.

“Breweries face high fixed costs and start-ups tend to burn through cash quickly. That risks giving away too much of their equity before they can start using lower cost bank loans.

“Alternatives like invoice finance or leasing should be considered – these can offer a much more stable form of finance than a bank loan that can be called in at short notice.”