The impact of Brexit in the form of a weaker pound and higher inflation will add to an already complicated trading landscape for British beer exports.
A so-called hard Brexit — the UK giving up full access to the single market and full access of the customs union along with the EU — will prove to be critically damaging to the industry, with the European Union (EU) accounting for 63 percent of the UK’s total beer exports.
This is now looking highly likely, meaning a hopes for the blossoming industry are resting on the UK and the EU being able to do a deal to keep the suds flowing.
British beer exports rose by six percent over 2016, boosted by a 500 percent and a 417 percent increase in beer exports to China and India, respectively, according to the British Beer and Pub Association (BBPA) and statistics published by HMRC.
This is much faster than beer export growth in the EU, which only grew by five percent.
In China, the beer market is maturing with a five year CAGR forecast of 0.9 percent, however opportunities are opening up within the premium beer segment, an area which UK beer producers are tapping into to try and capture the interest of Chinese consumers.
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Research from GlobalData found 59 percent of Chinese consumers associate high quality food and drink with European countries.
Demand for British beer can also be attributed to pictures of Chinese president Xi Jinping drinking beer with former prime minister David Cameron back in 2015.
It’s not all doom and gloom, but the government could be doing more
These international successes are most welcoming to a sector which, along with many other British industries, is likely to suffer from the UK’s departure from the EU.
To further exploit these international opportunities, the BBPA urged the government to reduce the historically high beer duty rates for alcohol manufactured in or imported into the UK, and abolish the planned inflationary increase in duty in the March 2017 Budget, but to no avail.
As of 13 March, UK duty rates on all alcohol increased by September 2016’s predicted Retail Price Index (RPI) inflation of 3.9 percent, adding an extra 2p per pint of beer to an already heavy tax burden; in fact, the tax on beer has now risen by 43 percent over the past decade.
This may prove to be a missed opportunity by the government, as the high rate of beer duty stands in the way of further investment by beer producers to foster international exports showing significant promise.
The impact of Brexit makes it even more surprising that the government did not cut beer duties to nurture exports to non-EU nations.
To prepare for the UK’s exit from the EU, the BBPA is devising an export strategy which highlights the need to build on existing technology systems already in place to ensure an efficient trade flow and emphasises the importance of a tariff-free deal with the EU.
The latter of which may prove to be more difficult given that many EU members have made it clear that it must be worse for the UK outside of the single market, otherwise incentives to stay inside the EU will diminish.
However, the UK beer market is of utmost importance for EU beer producers, and a hard Brexit would be highly detrimental for the beer industry in the EU as well as the UK.
It is essential that co-operate over the next two years to establish a reasonable deal for industry, while ensuring the integrity of the European Union, otherwise it will be a lose-lose outcome for all involved.