Hop, malt, and equipment suppliers are united in their desperation for Brexit negotiations to end—whether a trade deal is agreed first or not.
The uncertainty caused by the lack of progress in talks between the U.K. and the E.U. has caused massive fluctuations in currency and workforce shortages throughout the beer supply chain, which costs these businesses customers and profit.
The hardest-hit may be farmers in the British hop industry, who should be resting up after a busy harvest season—but employees are still in fields picking hops that are close to being past their best. Like grapes in wine, hops need to be picked at perfect ripeness to yield the right levels of essential oils. Now, British hop growers are racing against time to meet quality standards.
The main cause in harvest delays is a lack of seasonal workers from the E.U., who normally form most of the workforce. Ross Hukins, director of Hukins Hops in Kent, says he’s seen applications from Polish and Romanian workers drop since the Brexit referendum in June 2016, thanks to confusion over their work status. That change has compounded this year, as the pound bottoms out to around 15–20% below where it was in 2016. Where a month’s hop picking used to be worth a month away from home for seasonal workers, the currency conversion rates mean many hop pickers are better off spending the harvest in Germany, where they are paid in Euros.
“We have had previously reliable workers not come because they weren’t sure they could get in, but with the currency we have really struggled,” Hukins says.
British hop growers have been in need of a resurgence after real ale volumes declined and Lager breweries looked to cheaper European varieties in the second half of the 20th century, causing a huge drop in demand. The U.K. craft brewing revolution, which began around 2007, hasn’t helped them either, as most modern breweries prefer the big aromas of American, Australian and New Zealand hops. From its peak of 77,000 acres in 1878, the U.K. hop industry now operates across fewer than 1,000 acres, roughly the annual amount used to grow just Chinook hops in Idaho. Hukins wants “grow the brand” of British hops by celebrating previously unloved but versatile varieties like Bullion, which have qualities to rival American aroma hops.
“British hops have this brand associated with them with traditional [British] flavors,” Hukins says. “We’re trying to encouraging craft brewers to buy British with intense varieties. Bullion was once widespread here in the southeast, with about 600 acres in the 1970s. It was used as an alpha hop in Stouts, but we’re only interested in its aromas, which in light beers [are] citrus, orange, and lemons.”
Success with this variety would be a double-edged sword, however. Even if Bullion does find demand, that will only compound the worker shortages Hukins already faces.
Meanwhile, British maltsters aren’t struggling to produce their product, but they are worried about selling it. Britain is the world’s ninth-biggest barley grower and its maltsters process 2 million metric tons of grain a year to supply brewers and distillers of all sizes, all over the world.
Simpsons Malt, a 157-year-old company with a turnover of $191m (£155m) in 2018, has a committee investigating and preparing for the impacts of Brexit. However, it still has no idea which of those plans will be implemented. Managing director Richard Simpson says the worst-case scenario is a no-deal Brexit, which could see the government remove the current import tariffs of €131/metric ton (white malt) and €152/metric ton (colored malt) on malt from outside the E.U. This could cause a flood of foreign malt into the country, undercutting malt made in the U.K and putting downward pressure on pricing, which would mean lower profits—if there are still any—for domestic companies. At the same time, a no-deal scenario would mean enforcement of those tariffs on British maltsters exporting to the E.U. Even before that happens, Simpson claims some breweries are switching to malt from mainland Europe to avoid the uncertainty and risk.
“We’re most worried about an imbalance of quotas and tariffs,” Simpson says. “We fear the tariffs on our malts going into the E.U. at that level that would make the business unsustainable in the long term. I have already had a few [breweries] say they were changing malt supplier this year—that they love our malt but didn’t want to risk an issue due to to supply.”
Any drop in demand or price from British maltsters could have an equal impact on the farmers supplying the grain, with the Maltsters Association of Great Britain (MAGB) issuing a statement saying that the loss of malting capacity “would also impact heavily on the agricultural sector with malting barley growers likely to struggle to find new markets.”
Like their agricultural counterparts, many equipment suppliers seem equally worried about tariffs, but also have demand and fulfillment issues. SSV Limited, a supplier of stainless brewhouses and fermenters to breweries, is seeing issues in pretty much all other areas, including demand. Founder Sam Lawson says he has built just one new brewery this year compared to four last year, but has seen much greater impact on bigger expansion projects.
“There’s a project in Glasgow we’ve been looking at for 50 new tanks,” says Lawson. “A £2-million investment that the brewery has put on hold, specifically until they understand what’s happening with Brexit. We have another in Edinburgh, probably for the biggest new brewhouse in the U.K. for years, which is the same because they see a lot of demand in export.”
Lawson also intended to push his business out into Europe, but has “held back” as a result of the indecision around Brexit and lack of clarity about which tariffs he might need to pay if there is no trade deal. This uncertainty has also impacted a huge contract SSV won to build some 5,000-barrel (7000hl) fermenters for Anheuser-Busch InBev in the U.K. Given the scale of the project and the expertise needed for the welding, Lawson needs to outsource the work, but is currently unable to do so.
“There’s no one in the U.K. with the manpower or experience in building them,” Lawson says. “There are two companies that specialize in this—one in Bulgaria and one in Romania—however, both have stipulated they’d rather not put a price or delivery date on it, because of what might happen on 31 October.”
Currency is one area that hasn’t worried Lawson, because SSV imports its fabrications from China, where the pound is stable against the Chinese yuan and only down 6% from June 2016. However, any U.K. brewery buying from an E.U. supplier such as Germany’s Krones is likely to be affected if it leaves too long a gap between agreeing on a price for a piece of equipment and actually paying for it. Darron Anley, founder of Siren Craft Brew in Berkshire, learned that firsthand when he prepared to replace his brewhouse in June 2016, just before the referendum. He was ready to sign a deal, but hadn’t fully finalized a loan.
“I was in a position to do it five days after the [Brexit] referendum, and it pushed the price up by at least £20,000,” he says. “It was the same with our new canning line this year. We placed the order at £1.22 [against the euro] and by the time we actually paid, it’s come in at £1.09 on an €800,000 order.”
The result would be that, if all paid at that rate, Siren’s new canning line would cost around £80,000 more than the brewery had originally budgeted.
Throughout the supply chain, the message seems to be that the uncertainty around Brexit is as damaging—if not more—than the possibility of leaving the E.U. However, Boris Johnson’s hopes of exiting on 31st October with or without a deal were dealt a blow last week, when the Supreme Court forced him to reopen Parliament and face opposition parties still pushing for an extension. Further delay under the Benn Bill is still a strong possibility, but it might not be in the interest of businesses.
“An extension for an extension’s sake isn’t going to make life any easier for anyone,” says Anley. “It might give us some more time to prepare in the short-term, but the currency issues will drag on. I’d rather get on with it.”
Stay tuned for part four of this five-part Brexit series, which will examine the impact on the U.K.’s importers and distributors.
Words by Jonny Garrett