The Future of Small Breweries’ Relief

The Treasury announced a review of Small Breweries Relief in October 2018. Read SIBA’s proposals for reform here:

Read SIBA's proposals

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The Future of Small Breweries’ Relief

Budget 2018 announces review of SBR

On the 29th October, as part of the Chancellor’s Budget, Phillip Hammond announced that Treasury would conduct a review of the Small Breweries Relief scheme to examine if it continues to support growth.

SIBA is fully supportive and engaged in this review. If SIBA members, publicans, journalists or responsible drinkers would like more information, please contact political@siba.co.uk where one of the team will be more than happy to assist.

What is Small Breweries’ Relief?

Small Breweries’ Relief, or SBR, (sometimes known as progressive beer duty) allows small brewers to pay a more proportional rate of duty on their beer. This allows small professional brewing businesses to compete with global brewers who dominate the marketplace. A brewer up to 5,000 hectolitres (hl) of production per year pays 50% of the standard duty rate. 5,000hl is around 880,000 pints of beer. Above 5,000hl a year, the rate at which brewers pay on the standard duty rate tapers down until 60,000hl – whereby the full standard duty rate is applied.

Why did Government introduce SBR?

SBR was introduced in 2002. SIBA began lobbying for the introduction SBR at its formation, back in 1980 and this was successful after 20 years of hard work.

At the time, Government introduced SBR for 3 main reasons:

  1. The poor profitability of small breweries relative to larger breweries which enjoy better economies of scale of production;
  2. The difficulties faced by small breweries in bringing their goods to market and in competing with larger breweries which could offer bigger discounts to wholesalers; and
  3. The importance of maintaining diversity within the beer industry and preserving choice for the consumer.

The future of small breweries’ relief

Since its introduction in 2002, British independent craft brewing has been transformed. But the reasons for SBR’s introduction are as valid today as they were back in 2002. But now, we have a vibrant, exciting, innovative brewing scene in the UK which leads the world.

SIBA recognises that SBR has been responsible for this transformation and the growth in our sector, but also recognises that SBR could be improved. We believe tweaks can be made to an already winning formula to improve the sustainability of British independent craft brewing and now is the time to press these to Government.

Defending small brewers

SIBA is resolute that no brewer should lose any duty relief as the result of any reform. SIBA will continue to defend SBR at current levels whilst lobbying for positive reform. Small Breweries’ Relief at current levels is essential to the future – 83% of SIBA members say it is ‘extremely important’ to their business, 5% ‘very important’ and a further 8% consider it ‘important’.

After lengthy discussions with industry bodies and SIBA members, the beer sector is now united in supporting:

  • An industry-led review of SBR at least every five years to ensure it continues to work well.
  • New measures to encourage normal mergers and acquisitions activity.
  • Removal of exports from the SBR calculation to encourage export activity subject to legal advice.
  • An extension of the scheme for all brewers up to 200,000hl of production a year.

How to reform the scheme

Once a brewer reaches 5,000hl of production, the rate at which duty relief is withdrawn on every extra barrel produced is rapid. This is referred to as the ‘cliff edge’ within SBR and can act as a significant deterrent to growing a business. As our model (link above) shows, SIBA is now asking Government for this ‘cliff edge’ to be smoothed, removing the cliff edge and incentivising brewers to grow.

The Small Brewers Duty Reform Coalition (SBDRC) argue that in order to smooth the curve above 5,000hl, there needs to be reform below 5,000hl. SIBA does not believe there exists an economic, political or moral rationale for withdrawing any relief to any brewer below 5,000hl and we will continue to defend SBR at current levels below 5,000hl. To remove relief for brewers below 5,000hl would result in the closure of many brewing businesses across the UK. This would be unacceptable to both politicians and consumers, and be contrary to the original intention of SBR – as a progressive beer duty.

Treasury impact 

SIBA’s model for reform predicts an impact on Treasury of around £9.2m a year on a scheme that already sees Treasury forgo around £80m a year of beer duty revenue. Proposals from the SBDRC estimate a cost of Treasury of around £10m per year.

Next steps

 

SIBA will engage fully with the Treasury review and continue to gather as much support as possible from across the brewing industry.

If you support SIBA’s proposals for SBR reform, please register your support here:

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