UK: Craft brewers may benefit from the Brexit decision as weak pound makes their exports more attractive - report

Craft beer brewers and English winemakers may have reason to raise their glasses to celebrate the Brexit decision as the weak pound makes their exports more attractive and foreign imports more expensive, according to research released by Rabobank on July 8.

Sterling reached its lowest level since 1985 this week and analysts expect it to remain low as the UK’s economic future within Europe remains uncertain.

The decision will have “critical implications for the beverage sector, given the UK’s role as both a major importer (e.g. wine) and a major supplier (e.g. scotch),” Francois Sonneville, food and agribusiness analyst at Rabobank, said.

The UK wine-making industry has grown strongly over the last decade and is now worth £100 million according to the Wine and Spirit Trade Association.

This trend may be given a boost as vineyards in particular stand to gain from the Brexit vote, according the analysis.

Britain is the largest wine importer in the world and the EU the largest wine-producing region. France, Italy and Spain supplied 60 per cent of the UK’s wine in 2015, all of which will become more expensive after the decline in the pound, making locally produced wine more attractive to consumers.

UK-based craft brewers and spirits distillers could also see competition from overseas ease as foreign competitors are affected by the weak pound although the effects may not be as strong according to Rabobank.

Most barley and malt, which make up a small proportion of the cost price of beer, are sourced domestically so will not become more expensive owing to the weakened currency. Although raw material for packaging is often imported, most added value is created in the UK, the report said.

The report was not all good news for the sector however. The UK’s uncertain trading position outside of the EU means that it may no longer benefit from free access to European markets.

“For a trade agreement with the EU itself it is difficult to see how the current situation for the UK can improve,” Rabobank, said, pointing out that the current trade tariff of 0 per cent is “as good as it gets for companies with international exposure.” This may particularly affect makers of scotch whisky.

“Scotch suppliers are clearly concerned about the potential of losing the free trade agreement with their biggest market,” Rabobank said.

Whisky from Scottish distilleries makes up the majority of UK spirits exports. Scots voted overwhelmingly to remain in the EU.

08 July, 2016