SIBA Publishes open letter to Robert Jenrick MP on SBR Reform
Dear Robert Jenrick MP
Review of Small Breweries’ Relief
I write in response to your launch of the Small Breweries’ Relief review questionnaire for brewers and your article setting out your views on the matter. As you know we’re committed to working with you and your officials to make the review a success. SIBA has circulated the article to its members and encouraged them to have their say by completing the questionnaire. We will continue to work closely with your officials to promote the questionnaire to all UK brewers over the next 6 weeks to ensure your department has the widest possible evidence base.
We are encouraged to hear that the Government is fully behind vital brewing businesses and wants to make sure the industry continues to flourish while recognising the importance of SBR in achieving that goal.
However, while SIBA is supportive of positive reform this must not be achieved by reducing the relief for any small brewer. This has always been SIBA’s position. We were therefore very concerned to see the introductory statement to the questionnaire sent to brewers which said, ‘Please note to ensure that SBR remains fiscally sustainable an increase in relief at one level or in one way will need to be balanced by a decrease elsewhere.’ This was reinforced by your letter which states, ‘there are good opportunities for reform without further costs to the public purse’ and‘While I don’t believe further cuts to SBR are necessary in order to reform it, we must be mindful to make sure any changes don’t put further strain on other sectors or public services in order to finance them.’
As you set out in your article, we recognise your wider responsibility as a Minister to ‘balance the books’. However, in the case of SBR and as previously set out by SIBA, a small investment of around £10m would transform the scheme, removing the damaging cliff edge at 5,000hl while continuing to support small brewers below 5,000hl who rely on current levels of relief to remain sustainable and competitive. This investment would usher in a new chapter for UK brewing. Making this change will in time encourage growth in the industry, counter-balancing the initial investment and the overall cost of SBR. Within Government total managed expenditure this is a tiny amount of money for a world beating, exciting, growing sector of which the UK is proud.
It is our view that reductions in SBR below 5000hl would lead to many brewery closures. This view is supported by the results from our latest benchmarking survey of actual costs of members analysed independently. I enclose a comparison of the results[1] with those set out in the Europe Economics report published in 2017 (which used hypothetical cost typologies) and which was used by other groups as evidence that a redistribution of relief was justified by matching the level of relief to the ‘real’ economies of scale.
This survey blows that argument out of the water as it quite clearly demonstrates that the actual production costs are much higher than the EE report claims. With the very high rate of beer duty, any cuts to relief below 5,000hl would make many businesses unsustainable. The results also demonstrate the clear need for reform above 5000hl. We believe that this latest cost-benchmarking survey is the best available data on small brewery businesses.
It’s important to bear in mind that most brewers below 5,000hl are relatively new firms, still in their early establishment phase, unlike long-established firms with strong balance sheets and in many cases substantial unmortgaged tied estates, guaranteeing outlets for their beers.
The review must have regard to the original objectives of SBR in compensating for diseconomies of scale, enabling small brewers to compete with bigger brewers in bringing their goods to market and promoting diversity. Ensuring access to market for small brewers is key to a sustainable future for the sector.
Having read your letter and the preamble to the questionnaire, many small brewers will be left confused, with the view that the Government is already minded to reform SBR by redistributing relief from smaller to larger brewers. This has no economic, political or moral basis. This would have a devastating impact on an industry defined by its contribution to local economies throughout the country and its international reputation.
I would be grateful therefore if you would clarify that reform above 5,000 remains on the table, but that no brewer will lose any relief as the result of any reform. I would also be grateful if you could confirm that a full public consultation will take place following the brewery questionnaire to allow all stakeholders and consumers to have their say in this important matter.
We are committed to working with you and Treasury to usher in the next chapter of SBR as the voice of British Independent Brewing.
Yours sincerely,
Mike Benner
SIBA Chief Executive
[1] The analysis, as in the EE Report, considers production costs only and excludes distribution and sales costs. Read the analysis by clicking here
