The number of UK breweries going insolvent jumped 82% in the last year, according to Mazars, the international audit, tax, and advisory firm. It rose from 38 in 2022 to 69 in the year ending 31st December.
Mazars says that a large portion of the insolvencies are smaller craft breweries which have suffered from an oversaturated market, high interest rates, and soaring inflation.
The rise in interest rates has made it more expensive to lease brewing equipment, while inflation has pushed up many of the biggest costs to brewers, such as electricity, hops, and wages.
As the cost of living crisis continues, some consumers have turned away from the ‘premium’ beers produced by smaller craft breweries in an attempt to curb spending.
“Despite the popularity of craft beer and ‘hipster’ independent breweries, the cost of living crisis is continuing to take its toll on brewers,” said Paul Maloney, associate director at Mazars.
“With a lot of consumers tightening their belts, cutting costs by buying a mass-market brand lager instead of a craft beer is a relatively easy thing to do.”
In comparison to large beer producers, small breweries tend to suffer from limited routes to market and lack of distribution channels to consumers. These companies may rely heavily on patronage from their local community, including bars, pubs, and restaurants as buyers. As financial challenges impact consumers, fewer craft breweries are able to financially support themselves.
Paul Maloney added: “For smaller brewers — as opposed to mass market manufacturers — regular local customers make up a lot of their sales. If those sales drop off, they can face financial difficulties very quickly.”
Some of the 2023 breweries to go into administration have since been purchased by capital investors, it has to be noted.
