- Industry hit by high inputs costs and cautious consumer spending
- Budget increase in minimum wage and national insurance adding to pinch
- Recent closures include Hackney Brewery, Burton Town Brewery and Wild Weather Ales
43 UK breweries have become insolvent in the last year*, says national accountancy group UHY Hacker Young.
The 43 breweries that have become insolvent include names like Fourpure (location of a famous photo shoot for Boris Johnson and Rishi Sunak), By The Horns, Magic Rock Brewery, Burton Town Brewery and Wild Weather Ales.
Many of which are small, independent craft beer producers facing mounting cost pressures.
Brian Johnson, Partner at UHY Hacker Young, says: “The craft beer boom was one of the most exciting recent trends in food and drink. Unfortunately, it is a sector that attracted too many entrepreneurs who struggled to break even.”
“The recent closures suggest the UK’s craft beer market cannot continue to support all the independent producers that have sprung up in the last 15 years.”
“Weak consumer spending means many breweries will have to adapt to leaner times.”
Rising costs eat into brewery margins
Johnson says that many small brewers are now caught in a perfect storm of production costs soaring while household spending remains tight.
Recent increases in the national minimum wage and employer national insurance contributions have pushed up the wage bill for brewers. Margins have been further squeezed by inflation across ingredients, brewing equipment and energy bills.
Johnson explains that producers who are often reliant on local bars and direct sales are particularly vulnerable if their customer base cuts back on spending. There is a concern that many consumers will trade down to cheaper beer brand as they tighten household budgets. This trend is making it harder for craft brewers to justify their typically higher price point.
Says Brian Johnson: “For smaller brewers who rely on loyal local followings, even a slight dip in demand can tip them over the edge. With so many brewers competing for attention, it’s increasingly hard to survive.”
He adds that many small brewers are struggling to scale up. Only the bigger craft breweries can access supermarket shelves or national pub chains meaning that many breweries cannot achieve the economies of scale needed to break even.
*Year end February 28/29 source – Insolvency Service