Craft brewery openings in the UK begin to slow

More than 430 new craft breweries opened in the UK throughout 2017, down from a record 520 the previous year, according to the latest statistics from HMRC.

A total of 430 new breweries opened in the UK in the year ending 31 December 2017), as craft beer increases its market share in pubs and supermarkets, says UHY Hacker Young, the national accountancy group.

This compared to an average opening rate of just 100 per year in 2009, but nevertheless represents a slowdown from 2016, which saw a record 520 new brewery openings, reflecting fears that independent brewers “have been hit by rising ingredients costs caused by a slump in the pound”.

Another challenge lies in securing funding and investment, with many breweries relying on crowdfunding and selling shares to set up their businesses, with high street banks typically reluctant to lend to craft breweries as most do not fit their risk profile, says UHY.

Issuing too many shares to fund company expansion, rather than debt, “could see the stake of the original founders diluted away”, warns UHY. Most recently, Leeds-based brewery Northern Monk raised £1.5m from 2,161 investors, and East London brewery Five Points raised more than £950,000 from 1,350 investors

UHY Hacker Young says that whilst Brexit might slow the shift in the UK from big brand beers to premium niche beers, the craft beer market is still some way from peaking.

“The craft beer industry continues to fizz with hundreds of entrepreneurs looking to tap into high consumer demand,” said James Simmonds, partner at UHY Hacker Young.

“Breweries face high fixed costs and startups tend to burn through cash quickly. That risks giving away too much of their equity before they can start using lower cost bank loans.”

“Alternatives like invoice finance or leasing should be considered – these can offer a much more stable form of finance than a bank loan that can be called in at short notice.”

In the UK, the craft beer market is still growing, but with a market share of less than 5% with regards to overall beer sales in the UK. This compares to the US where craft beer sales hold a 23% share, with an overall trend showing a slow down in this market.