SBR changes leaves small brewers in limbo

By Nikkie Thatcher

- Last updated on GMT

Down the drain: many brewers have been forced to throw beer away during the coronavirus pandemic, with pubs being closed for a large proportion of the past year and a half
Down the drain: many brewers have been forced to throw beer away during the coronavirus pandemic, with pubs being closed for a large proportion of the past year and a half

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Small independent brewers in the UK have been left in limbo, a year on from the Treasury’s changes to Small Breweries’ Relief (SBR), one trade body has warned.

The Society of Independent Brewers (SIBA) said the changes to SBR – a scheme where small brewers pay a proportionate amount of beer duty compared to global firms – could see more than 150 small brewers pay up to £44,000 extra a year to the Treasury.

The trade association cautioned this could come into force within months, meaning small brewers have little time to prepare.

It pointed to academic research, which highlighted Treasury plans could weaken small brewers’ ability to compete with the larger breweries.

Letter to Government

Professors Geoff Pugh and David Tyrral argued the Treasury should look to improving duty relief for those in the middle instead of withdrawing or reducing it for small breweries.

At present, the UK’s smallest breweries pay half (50%) of the duty if they produce less than 5,000hl a year – the equivalent of 900,000 pints.

Under new proposals, the 50% threshold will be decreased to 2,100hl, which means about 150 small breweries will have to contribute more in taxation to the Government, SIBA has estimated.

It has written to Chancellor of the Exchequer Rishi Sunak, calling for urgent clarification to address the uncertainty.

Pivotal for survival

The trade body said the Treasury has been reviewing SBR for the past three years by narrowly focusing on production costs and excise duty, has argued this gives an advantage to breweries below 5,000hl.

SIBA chief executive James Calder said: “SBR is pivotal for brewers’ survival and we have now faced a year of uncertainty not knowing when changes will be made or how much extra brewers will have to pay.

“This is at a time when pubs have been closed for most of the past 16 months and small brewers are struggling to survive and repay debt.

“We therefore urge the Chancellor to support the sector and provide the certainty we need by not reducing SBR for those below 5,000hl.”

The letter in full:

Dear Chancellor

RE: Small Breweries’ Relief Review

It is now the first anniversary of the Treasury’s announcement of the conclusions of the review of Small Breweries’ Relief (SBR).

With potentially only a few months before changes could come into place, we are urgently seeking clarification on the Treasury’s intention and ask once again that you reconsider lowering the threshold to 2,100 hectolitres (hl).

As you will know, the Treasury announced via a written statement to Parliament on 21 July 2020 that the SBR taper would be reformed with a lowering of the threshold from 5,000hl to 2,100hl.

SIBA believes under the Treasury’s proposals more than 150 small brewers will have to contribute up to £44,000 more each per year in beer duty whereas breweries many times larger benefit up to £145,000.

These changes are putting jobs and the recovery of small businesses from the Covid-19 pandemic at risk.

Over the past 16 months small brewers have seen their main route to market (pubs) closed which represents around 80% of their sales. Small brewers have not had access to the same level of Government support as the wider hospitality sector and this has resulted in small brewers losing 10 years of growth and accumulating high levels of debt averaging £30,000 per business.

It will take many years for the industry to start to recover and for them to repay this debt. Sadly, we have seen small brewers closing for good and others are still likely to follow.

Small brewers are trying to plot a route out of the Covid-19 crisis but are being hampered by the cloud of uncertainty hanging over them as they do not know what final changes you will be making to SBR or when these will come into force.

This uncertainty is causing a great deal of anxiety in the sector, making some reconsider their future growth or job plans.

We therefore ask you to urgently reconsider the proposals to reduce the threshold but also to publish a timetable for any changes that will be made to SBR so that small brewers can begin to plan for the future. I would be happy to meet with you to discuss this further.

Yours sincerely,

James Calder

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