National accountancy group, UHY Hacker Young says that while 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 market share of craft beers is still below 5% of overall beer sales in the UK compared to 23% in the US, but UK craft beer sales have been growing at around 90% in the last year versus a decrease in sales of big brand “classic lagers” by 1.3%.
James Simmonds, Partner at UHY Hacker Young, said: “The craft beer industry continues to fizz with hundreds of entrepreneurs looking to tap into high consumer demand.”
However, there are potential issues facing these breweries, particularly when it comes to tax rates and bank loans.
Simmons added: “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.”
According to UHY Hacker Young, issuing too many shares to fund company expansion, rather than debt, could see the stake of the original founders diluted away. Debt finance also allows companies to deduct interest from any taxable income.
High street banks have been reluctant to lend to craft breweries as most do not fit their risk profile.
“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,” added Simmonds.
Equipment leasing is another option according to the accountancy group, this allows breweries to avoid the large down payments required for purchases, which frees up cash for other business expenditures.
