On Tuesday the Government announced the result of their 12 month review of Small Brewers Relief (SBR) which we broadly welcome as a step forward, despite it not being what we had hoped. We understand it will represent a modest change to the SBR curve to smooth the ‘cliff edge’ at 5,000 hl. which will encourage growth. And it is really good news that in these very difficult time financially, the Treasury did not chose to scale it down but maintain the investment at around £75m a year – a big commitment to the small brewing sector.
We have been pressed by other brewers and trade groupings to withdraw our support from this reform, which we have sought for 15 years. We will not do that, though we will be pressing for more detail from the Treasury as to what it will mean in practice. We strongly condemn the current campaign of intimidation supporting the request, which runs against the normally friendly and collegiate nature of brewers. We are an independent brewer and believe we have a right to express our views freely, without personal attacks from brewers or commentators with whom we disagree.
The SBR system was introduced in 2002 to compensate small brewers for their diseconomies of scale. It has been hugely helpful in supporting new brewers to enter the market and the total number of brewers in the UK has grown from around 600 at the time to over 2,000. However it had unintended consequences ,which has led to market distortion and particularly led to a catastrophic fall in the profitability of cask ale.
We have consistently supported calls for reform of SBR. Indeed, all Trade bodies agreed the need for reform but after over ten years there had been no change. A group of frustrated brewers formed the Small Brewers Duty Reform Coalition and I became a Co Chairman. We started by simply calling for a Treasury Review, which was opposed by our trade body SIBA but eventually granted by the Treasury. In the process the Coalition was also asked for a proposed solution which was revenue- neutral to the Treasury.
The Treasury Review called for all Trade bodies to submit their views, including SIBA, the BBPA and CAMRA, as well as confidential submissions from over 300 individual brewers. This appeared to be a very thorough and comprehensive review.
We await the full details following the Technical Review but if the SBR changes are revenue neutral as the Treasury has indicated, then the maths would indicate that a smoothly tapered curve will make a difference of some small brewers losing and others gaining 2-3 pence a pint of duty relief. This seems a worthwhile change if it leads to a fairer system and in particular leads to a more financially sustainable cask ale market. It will make very little difference to Hogs Back Brewery in cash terms but a fairer system orientated to growth will give us the confidence to reinvest in our cask ale, something we cannot currently afford to do.
The reform of SBR appears modest and reasonable, and not an outrage demanding calls for boycotts or personal attacks such as we have seen. Many of us will want to keep talking constructively to the Treasury to influence the final shape of the curve and of the mechanics of transitional merger relief, and we will continue to ask for a carve out for export volume and to support the call for a rolling monthly MAT calculation for SBR relief.
In these difficult Covid-affected times we should now be focussing on the big picture which is the huge challenge facing many pubs, and the beer sector, particularly cask beer, as CAMRA has rightly highlighted. The reason SBR distortion was such a problem was that overall beer duty in the UK is far too high. It would be more constructive to direct energy to calling for beer duty reduction in the upcoming Duty review.