With the UK in disarray over a leadership battle to replace Theresa May and anti-EU parties gaining a bigger foothold in the European Parliament, it looks like a bad time for beer. The UK’s exit from the bloc without a trade deal looks even more likely to happen by 31 October.
A hard Brexit will hit lovers of British beer and British beer lovers in the pockets, as those interviewed for this article expect prices to rise, with one estimate of up to 15%. However, uncertainty over outcomes prevails. End prices for consumers are not the only factor to consider.
There is the real risk of delays at customs checks, meaning that British beer might not make it through in time for a tap takeover or a festival.
Certainly, some consumers and brewers in the run-up to the first Brexit deadline, now extended to October, took action to make sure they had a stock of beer to draw on when the expected supply chain slowdown occurs.
A typical reaction is the example of Mik Walker, who recounted his beer run to Belgium on Facebook before the first deadline on 29 March.
“Pre-pre Brexit beer run completed. 2 nights in Oudenaarde. 1 beer warehouse (Bierhalle Deconinck, huge range!). 294 bottles. Averages out @ €1.575 per bottle. AND we got 7 glasses as a freebie We Yorkshiremen like a bargain. Once again, thank you Belgium.”
Meanwhile UK-based Chorlton Brewing Co. blamed Brexit for the lack of sales exports across the Channel.
“We haven’t made a single export this year; importers see no point in building brand loyalty for a brewery they won’t be able to stock after this month. This puts the future of Chorlton at severe risk,” the brewer stated on Facebook, while asking fans to sign a petition to the UK Parliament.
No laughing matter
While some might feel schadenfreude for British pain, many on this side of the channel believe imports and exports are at risk.
“Whatever happens everyone will lose,” says Grégoire Rifaut, owner of Dynamo, a popular craft beer bar in Brussels, Belgium. “It is difficult to know whether there will be a deal. It looks catastrophic if there is no deal. If there is a deal could be a 10-15% rise in price for UK beer but it depends on the currency appreciation. We could lose on the currency.”
Fresh beer factor
He notes that if there is no deal then importers of British beer also face delays at the border.
“This will affect the freshness of the beer if it is on a lorry for a long time,” he says. “To get it on a refrigerated truck, prices for transport will rise and prices will spike for beer.”
He notes higher transport costs will be a key factor in the long term rather than the expected additional paperwork.
As one of the co-founders of the Swafff! beer festival he does not expect to change his desire for British brewers to attend the festival. In fact, four British brewers attended Swafff! in May this year.
“That means not much will change,” says Rifaut. “I still find the English beer is still good value for the money and unmatched mainly for hoppy beers and IPAs even if prices increase by 15%.”
He adds that the higher competition for exports to the rest of Europe could even lead to lower prices.
“There is an overcapacity of beer in the UK,” he says. “You still have a high amount of new brewers opening and investing in beer is high in state of the art equipment. With a no deal there could be a surplus effect. If they increase prices they could lose in competitiveness. I am not sure they can lower costs. I still find it difficult to find brewers that that make good quality hoppy IPAs and it will be difficult to find replacements. I would focus on fewer brewers and those that I am impressed with and would work in advance to get super fresh hoppy beers.”
The European view
Jan de Grave, director of communications for The Brewers of Europe says the association’s role in Brexit is to “inform our members in the best possible way to ensure brewers no-deal preparedness. FoodDrinkEurope, of which we are a member, takes the political discussion forward.”
In February FoodDrinkEurope issued a letter to members warning of the “dramatic implications” of a no-deal Brexit. An internal FoodDrinkEurope report “has shown that a no-deal Brexit would result in a substantial decrease in EU-UK trade and production of food and drink products”.
Should the UK leave the EU without a deal, the World Trade Organisation’s Most Favoured National (MFN) tariffs could apply to traded goods. For agri-food products, these tariffs, often very high, would have a knock-on effect on the whole food supply chain, from producer to exporter to consumer, the association warns.
Belgian chocolate exports to the UK, for example could shrink by 31%, German bread exports by 34%, Italian pasta exports by 59%, and Irish cheese and beef exports, and French cheeses by 89%, the association estimates.
Failing acceptance of the current withdrawal agreement, as negotiated, FoodDrinkEurope has welcomed the European Commission’s adoption of unilateral contingency measures to help mitigate the damage, but wants more done at the EU level.
“The European Commission’s contingency measures provide some certainty and clarity for our businesses; we note for example, the flexibility provided by the suggestion to allow for the exhaustion of stock already on the market before the date of departure, and proposals highlighted by Vice President Katainen for checks on product safety to be carried out in the least disruptive manner, away from the land border on the island of Ireland if possible,” the association stated in April.
Intertwined beer markets and knowledge
For The Brewers of Europe, the UK and the other 27 EU members’ markets are closely intertwined, through interconnected supply chains, an international workforce and extensive trading, not just of beer but also of ingredients, machinery and brewing technology, de Grave notes.
One of the key areas of focus for members is to “encourage fair excise systems for beer that reflect the specifics of beer and the brewing process and recognise the contribution made by beer to the wider economy”.
Like other sectors being affected by Brexit, brewers are worried about the lack of clear direction about the process and end results.
“Brewers and publicans alike need certainty,” says Pierre-Olivier Bergeron, Secretary -General of the Brewers of Europe. “Clarity on the transition period onwards and a strong steer on the future relationship with the UK would be a boost to the trade and beer sales.”
Minimise the hurt
The association says the outcomes of the Brexit negotiations must ensure the brewing sector can reduce as much as possible barriers to trade and to imports and exports of beer.
“Negotiations must strive for regulatory consistency and harmonisation or mutual recognition of standards relating to the formulation, labelling, marketing and sale of beer, which are in the common interest of the EU and UK,” the association states.
Meanwhile the European Commission has advised businesses to assess whether they have enough technical capacity and staff to deal with customs procedures and rules, consider obtaining customs authorisations and registrations and contact customs for information on the procedures to take.
The Belgian view
Nathalie Poissonnier, Director of the Belgian Brewers association also notes the uncertainty among members as to future trading relationships.
“It is very difficult to assess, but for certain there will be an impact on exports and imports,” she says. “At the moment it is very uncertain for the time being. We are aware of the extent of the impact on administration. This will be less of a burden for our members. They are used to doing it. This is manageable.”
Belgian brewers are particularly vulnerable to trade flows between the country and the UK. Belgium exported more hectolitres than their European neighbours in 2017, snatching first place from the Germans, according to the latest trade numbers released in December 2018.
More than 70% of the 20 million hectolitres produced leaves the country. Of the 15.8 million hectolitres exported, 10.3 million are sent to other European countries and 5.5% leave the European Union.
Big Belgian imports
France imports the most Belgian beer (4.2 million hectolitres), followed by the Netherlands, Germany, Italy and the United Kingdom. There are about 261 breweries in Belgium, 1,500 trademarks, and 50,000 direct and indirect jobs dependent on the sector.
In February 2018 Deloitte Belgium issued an assessment of the potential impacts of Brexit on Belgium. Belgian agri-food and beverages businesses accounted for 6.4% of Belgian exports to the UK, and for 2.4% of imports from the UK. The consultancy noted that alcoholic beverages will be affected by divergent excise tax systems.
“Significant regulatory issues may arise, new dispute settlement procedures are likely to be needed, greater exchange rate volatility may ensue, and the cost of doing business with the UK will rise,” Deloitte warned in February 2018.
The consultancy also advised businesses that: “It is also about understanding how you and others in your supply chain will be affected by higher costs, both direct and indirect, i.e. from charges for obtaining certification that is not currently necessary, and from, for example, the higher transport costs if transit takes longer”.
British want business as usual
In their public statements it seems that British brewers either are against Brexit or want essentially the same favourable trading relationships and access to talent as they have currently as an EU member.
The British Beer & Pub Association for example has committed to remaining a member of the Brewers of Europe if Brexit occurs. British brewers would be like Norway, Switzerland and Turkey, who are also members of the Brewers of Europe.
“It is especially vital that pubs, where so much of the UK’s beer is sold, continue to have access to talent in the EU post-Brexit,” says Brigid Simmonds, chief executive of the British Beer & Pub Association in a statement.
“When 24% of pub employees on average come from overseas, many from the EU, a sensible migration policy is essential. It is also imperative that Britain’s world class brewers continue to be included in the Excise Movement and Control System (EMCS), which allows beer to move across the EU seamlessly. When beer exports are worth over £500 million to the UK, a fast and simple export system to the EU is vital post-Brexit.”
The association wants the UK government to maintain access to the EU’s regional protected status system for food and drink products, not change the rights of existing EU workers in the industry and supply chain, maintain current employment rights, a free trade deal without tariffs or additional paperwork, not introduce minimum pricing, maintain the EU’s food safety system, reduce excise taxes , and support the domestic production of key ingredients such as malting barley and hops.
The association also calls on government to adopt the EU Competition Law, the EU food labelling requirements, and the EU’s copyright system. In the short term it wants EU legislation as currently implemented to be the default UK law until the UK changes the rules.
The Brewers of Europe brings together national brewers’ associations from 29 European countries, representing an estimated 9,500 breweries. FoodDrinkEurope has noted that the 27 other members of the EU are the UK’s largest single export market for beer. From 1993 to 2012, the UK exported 42 million hectolitres of beer to the rest of the EU, compared to 25 million hectolitres exported to the rest of the world.
Meanwhile EU27 trade with the UK during the same period accounted for 122 million hectolitres of exports, versus 21 million hectolitres to the rest of the world. In 2015 EU27 exports to the UK was €444 million, with €218 million of imports from the UK.