On Dec. 12, the U.K. will hold its third general election in four years and the second since it voted itself out of the European Union.
It sets up another tense period for British breweries, suppliers, and distributors, who have weathered three years of a slowing economy, a sinking currency, and political turmoil with no idea of what the politics of the present hold for their future.
Usually held once every five years, the vote was called after Prime Minister Boris Johnson failed to break the resistance of Members of Parliament who refuse to give up on the idea of remaining in the E.U., or hope to negotiate a compromise with the trading block. The general election is the last thing some in the British beer industry want or need—even if it means the country will have a clearer idea of its future come Christmas.
For now, the situation is muddier than ever. All six major parties have a different approach to Brexit, although the nature of Britain’s political system means only three of them have realistic hopes of attaining any form of power—the Conservative Party, the Labour Party, and the Liberal Democrats. Here’s where things stand for each:
Johnson, the leader of the Conservatives, hopes the election will win him back a majority so he can push his E.U. deal through parliament and leave on the current deadline of Jan. 31.
Labour intends to renegotiate a deal to retain free trade, and then offer a second confirmatory E.U. referendum.
Liberal Democrats have focused on winning the votes of remainers by offering to cancel Brexit entirely.
Each party’s policy will have a unique impact on the beer industry, with Brexit stabilizing the pound but potentially making international trade much more expensive; further delays will also mean equipment and ingredient costs continue to spiral.
Magic Rock Brewery from Huddersfield, England, has been preparing for Brexit as much as possible, sending sales staff on courses to determine the consequences while querying changes with Her Majesty’s Revenue & Customs (HMRC) wherever possible. Even so, founder Richard Burhouse is nervous about all possible outcomes, which underlines the seriousness and aimlessness of the government’s planning so far. Burhouse says any form of Brexit would damage his business and the beer industry as a whole, but can’t endorse the Liberal Democrats’ approach.
“Canceling the idea sounds great on paper,” says Burhouse. “But it introduces so many more problems and so much internal conflict. With my business hat on I want to say, ‘Can’t we just go back to how it was?’ but we’re in a bit of an echo chamber.”
Ignoring the result of the 2016 referendum would likely divide the country further, even if it did offer progress towards a new relationship with the E.U. Brexit split the country in half, and all a reversal would do would change the half feeling under-represented—some even predict violence as a result.
The Conservatives would offer some stability, too, because Johnson’s E.U. deal would be voted through quickly and the U.K. removed from the union by the end of January.
Such an action would make the pound more stable as confidence returns to the markets. However, the deal is only a divorce settlement, and there has still been no talk regarding the U.K.’s future trading relationship with Europe. This will likely take years—perhaps even decades—to negotiate, and could well result in tariffs and additional paperwork on both the import and export of vital brewing equipment, ingredients, and beer itself. Burhouse says any deal needs to prevent tariffs being paid on goods to and from the E.U. and that any new system will likely be more onerous.
“We’ve got such a good streamlined system at the moment that any deviation from that is going to cause massive pain,” he says. “There’s a lot more diligence that goes into exporting outside the E.U.— designation of origin certificates, signing this or that, making sure things are tested for ABV.”
Labour seems to appreciate these issues and wants to negotiate a closer trading relationship with the E.U. However, going back to the table and running a second referendum would mean a delay of at least six months beyond Jan. 31. Given that any delay hurts beer businesses and prevents them planning for the future, it’s a tough pill to swallow, but Burhouse would gladly postpone Brexit in return for a second referendum or a deal that keeps trade laws as they are.
Brewery owners often learn quickly that they have to be more than brewers—they need to know the basics of everything from accountancy, to HR, to plumbing. In an industry with already-tight margins, adding the need to be both a politician and a peace envoy is another difficult burden, and Burhouse has to keep personal views in check while standing up for his business prospects.“It’s not good to have the uncertainty but I don’t see the pound being further devalued than it is now. We’d much rather keep the systems in place, they work for us—we built Magic Rock on our relationship with Europe.”
Unless the Liberal Democrats win, and betting firms put those odds at around 1/100, the truth is there are going to be years of uncertainty. The question is how many years.
The last election in 2016 resulted in the Conservatives narrowly losing their majority, which they propped up in a “confidence and supply” alliance with the Democratic Unionist Party (DUP) from Northern Ireland. The deal meant the DUP voted with the Conservatives in Parliament, in return for £1 billion in extra funding for public services in the region and several guarantees, including there being no customs border with the U.K.
Parliament and the public are as politically divided as ever, and as the poll margins tighten, a clear result is looking less and less likely. There will be some negotiations between parties for a powershare, and there have already been rumors of such deals. The Brexit Party is polling poorly so is unlikely to win any seats, but if it wins some marginal seats, leader Nigel Farage might be able to play kingmaker with the Conservatives and join forces to ensure Brexit goes through. Johnson has already ruled this option out, but faced with no other choice he may have to revise that stance after the election. A second confidence and supply deal with the DUP is more likely, as long as it can meet the party’s new financial and Brexit demands.
The Conservatives recently announced an overhaul of business rates that could reduce bottom-line costs for the industry, but most brewers see Brexit as the bigger issue.
One thing that is certain is Conservatives will not form a coalition with the Liberal Democrats like they did in 2010—their Brexit approaches are irreconcilable—but nor will anyone else. Labour has moved significantly left since Jeremy Corbyn became leader, pushing a socialist agenda that involves the nationalization of many public services. This has created a huge gulf between the party and the centrist Liberal Democrats, and both sides have ruled out a pact, but that might be a mistake. Polls show Labour 15 points ahead of the Liberal Democrats but still around 11 points behind the Conservatives, making outright victory unlikely. Chris Hanretty, a professor of politics at Royal Holloway, University of London doesn’t see much hope for either party.
“I think the Lib Dems have almost no chance of winning the largest number of seats,” he says, “and it's hard to see the Liberal Democrats forming a coalition government with any party. In order to win, Labour needs to get a lot more popular with voters of all types. Young voters probably aren't key; more important are 35-44 year olds who think that they should be further up the property ladder than they are.”
Labour could try to form an alliance with the Scottish National Party, but leader Nicola Sturgeon has made it clear the price of her support is a referendum on Scottish independence—which could lead to another onerous divorce, seeing as the Union has been in place since 1707.
Labour supporters are right to point out that the 11-point gap between Labour and the Conservatives was even larger during the last election in 2017, when Labour came close to pulling off an upset. But even if they win outright or agree a deal with another party, they might not be able to deliver their manifesto promise as the E.U. needs to start planning its budgets for the coming years and won’t want to include the U.K. It is worth remembering that British farmers are heavily subsidized by the E.U. and the loss of that income through Brexit or a realignment of budgets in the expectation of Brexit is a significant threat to barley and wheat suppliers to the U.K. malting industry.
“A further extension beyond January 31 is probably odds on,” says Hanretty. “[But] I think a referendum is very difficult—it takes around five months to organize one, and if we get into June 2020 then we're into the E.U.'s multiyear financial planning framework, by which time the EU27 might reasonably want us to have got out.”
Whatever the result, the brewing industry is in for another turbulent six months at least. Brexit will be a complex and damaging process for all beer businesses, and if it is cancelled is unlikely to be confirmed until late summer 2020. At this point, the darkest timeline is simply whichever one you’re looking at.
Part 3: Just Tell Me When It’s Over — Agriculture, Equipment Suppliers Suffer as Brexit Drags On
Part 4: Nowhere to Turn — U.K. Importers and Distributors Stuck in a Brexit Jam
Words by Jonny Garrett