British breweries are very vulnerable to the consequences of Brexit. This is what Jonny Garrett, an expert in the brewing field, explains in a column of Goodbeerhunting.com. The drop in the parity of the pound sterling, the introduction of customs duties and new regulations, the increase in the cost of raw materials, as well as logistical problems, are all risks for the profession.
ThePersistent uncertainty around the brexit despite 3 years of negotiations, has a crippling effect on British breweries. They are unable to plan and adapt to a new situation that is likely to have their margins started.
British breweries in total uncertainty
Britain is currently benefiting from the common market, which allows it to sell its dutiable beers to other EU countries. But the prospect of a "no-deal Brexit", ie a divorce from the EU without agreement, is now more and more likely. Boris Johnson, the British Prime Minister, said that his country would leave the bloc on October 31, whatever the terms of the departure. This perspective places British exporting companies in great uncertainty, as they do not know what will happen in just over six weeks.
Darron Anley, general manager of the British brewery Siren Craft Brew, which exports its products in particular to Germany, France and Scandinavia, says his company has approached customs to seek clarification. But in vain. "You can call several times and get different answers. They do not even know their own laws or their application. These are just contradictory information, "he laments.
Additional costs and constraints
The UK promised that there would be no tariffs for the first 12 months, but can not guarantee that exports will proceed in the same way. However, small breweries can not count on their maintenance of their level of sales, at the risk of ending up with huge stocks of unsold expensive. Siren's exports have already dropped significantly, and the firm has sold only 14% of its production in foreign markets in 2018, compared to 34% in 2016.
Phil Brown, Costier analyst PricewaterhouseCoopers (PwC), consultant, points out that many British breweries import their equipment and raw materials, and are therefore highly dependent on the common market. However, many of them have not prepared for the possibility of a "no-deal brexit". He considers that the longer delivery times following the reinstatement of national borders could hinder deliveries of foreign orders. Similarly, new administrative formalities may lead to additional delays and costs. These could be fatal for companies with a limited financial reserve.
Recruitment will also be a problem
Most British breweries have already been damaged. The brewers initially thought that the dramatic fall in the value of the British pound since the Brexit referendum would improve their exports. But they were disappointed: it had the effect of outbid the cost of imported products by 15 to 20%. Hops, malt, but also packaging products, such as cardboard and ink for labels, are now significantly more expensive. All the expected benefits have been offset by these additional costs.
Brexit will also have an impact on the workforce. In the past, Siren Craft Brew was able to recruit German and American brewers. But here again, the uncertainties concerning the status of expatriates after Brexit now discourages foreign applications.
According to Jonny Garrett, UK small breweries most dependent on niche markets forexport to other Member States of the European Union are particularly threatened.