Brewers’ profits at risk of ‘wipeout’ from rising costs after budget

British brewers are at risk of seeing their profits “wiped out” in the aftermath of the budget, according to their industry association.
The British Beer and Pub Association said that a combination of higher alcohol duty on non-draught beer, increasing employment costs and the financial implications of a new tax on packaging will hit the industry with millions of pounds in extra costs.
The organisation’s data shows that brewers were making, on average, just 2p per bottle of pre-packed beer prior to the budget.
Despite much public cheer about the chancellor declaring a 1.7 per cent cut in alcohol duty on draft beer, knocking a “penny off a pint”, the duty on non-draught products will increase in line with the retail prices index (RPI) from February. The BBPA estimates that the duty increase will cost the sector an additional £80 million a year.
The trade body, whose members brew 90 per cent of British beer, has calculated that the proposed “extended producer responsibility” tax will cost the brewing industry an additional £138 million in costs a year, equivalent to about an extra 4p per 330ml bottle and 7p per 500ml bottle.
The tax, which is set to come into effect in April, means businesses that handle and supply packaging to consumers, or to other companies, are to be charged for the costs of collecting, recycling and disposing of the waste.
The budget increase in employers’ national insurance contributions by 1.2 percentage points to 15 per cent from April, and reduction in the level at which employers start paying tax on salaries from £9,100 per year to £5,000, has prompted alarm across the hospitality industry, with a number of household names warning of passing on rising costs to customers.
Emma McClarkin, chief executive of the BBPA, which is calling on the government to review these new costs pushed on to the sector, said that the Treasury must “urgently consider how to phase in some of these eye-watering costs over a longer period” so the brewing industry can remain a key role in the UK’s economy.
She said that the impact of soaring costs put investment and jobs at risk and would lead businesses to make some “tough decisions”, including passing on extra costs to customers and reviewing the viability of some beer brands.
Brewers’ gross value added — the increase in economic value from the production of goods and services — amounted to £5.7 billion, according to figures from Oxford Economics.
The BBPA anticipates that the cumulative impact of the chancellor’s budget measures will result in a £500 million increase to the cost of doing business for Britain’s pubs and brewers.