Brewery taxes choking ‘golden goose’

Entrepreneur Paul Theakston warned that many small brewers were being squeezed at a time when consumer spending was under pressure.

As the driving force behind the development of the Black Sheep Brewery, Mr Theakston is a passionate supporter of Britain’s smaller breweries. Yesterday, it was revealed that Black Sheep Brewery increased its turnover by £1.5m to £19.8m in the year ended March 31 2012, as pre-tax profits grew from £464,878 to £504,053.

The Masham-based company, which has around 100 staff, recently celebrated the 20th anniversary of its launch by Mr Theakston, who is a member of the well-known brewing family. He took the role of chairman at the business last year, while his eldest son, Robert, became managing director.

Writing in the company’s latest directors’ report, Paul Theakston complained that the Government was increasing taxes on beer at a time when the industry cannot pass price rises on to consumers. He said: “The brewing trade golden goose is coughing badly and the sooner the Government recognises it and stops choking it with an excessive duty burden, the better. The same message applies to fuel duty and VAT.”

Mr Theakston described the trading environment as “extremely challenging”. He said pressure on pubs was likely to mean only the best will survive, which, in turn, meant trade volumes will not rise until drinkers feel better off. The company has looked to protect margins and control costs without reducing the quality of its beer.

“It is a reflection of the times that all that effort and good husbandry results in a similar profit performance to the previous year,” he said.

In a report to accompany the accounts, Robert Theakston said: “There have been many ups and downs over the years in the life of Black Sheep but I believe we are pushing in the right direction, and with the dedicated Black Sheep family there to support us, we have the exciting opportunity to move the business on over the next 20 years.”

Paul Theakston told the Yorkshire Post yesterday: “There are two aspects to the tax situation regarding Black Sheep. The first is the overall impact on the brewing and pub industry of excessive taxation at a time when consumer spending is being squeezed very hard. The second is more specific to the smaller regional brewers and cask ale.

“The overwhelming volume of cask ale... is produced by the long-established regional family brewers of this country, of which Black Sheep counts itself as one.

“Over the past 15 years or so, we have seen massive growth in the numbers of micro brewers, a high proportion of them owe their continuing economic existence to the fact that, through the progressive beer duty regime, they pay about half the level of duty on the beer they produce, when compared with the regional brewers.

“This enables them both to sell their beers into trade very competitively, and still retain enhanced margins with which to support themselves.”

Mr Theakston said micro brewers had been a “breath of fresh air” for the world of cask beer because they increased consumer choice by producing new beers.

However, Mr Theakston claimed regional brewers were being “brutally squeezed” by the “excessive duty burden”.

He added: “They need the playing field levelled out by the extension of progressive beer duty well beyond the limit currently in force.”

In recent years, Black Sheep has started to introduce a range of seasonal and one-off beers as well as bespoke beers for major supermarkets including Sainsbury’s to attract new customers and broaden its appeal.

In his statement, Paul Theakston said: “Despite the difficult trading conditions, we are proposing to maintain our dividend at nine pence. We very much appreciate the support of our shareholders.”

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