Sobering thought: inflation due to Brexit could raise beer prices

PUBLISHED : Wednesday, 25 January, 2017, 3:35pm
UPDATED : Wednesday, 25 January, 2017, 3:51pm

The spectre of inflation is looming over the British pint, as two major brewers raised the price of beer and the brewing business warned of far larger Brexit-related rises to come.

Heineken and Carlsberg have become the latest beer makers to raise prices, following MolsonCoors – maker of Britain’s most popular beer, Carling – and ABInBev, which has brands including Budweiser.

Signs that beer is getting more expensive came as toy manufacturers warned prices could rise by 15 per cent owing to the plunging pound, which is also beginning to put pressure on food prices.

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The beer industry has been wrestling with higher labour costs as a result of the national living wage introduced last year, while added costs are expected with a revaluation of business rates due in April this year.

Heineken and Carlsberg said they had been left with no choice but to pass on increased costs to consumers. Carlsberg said it was responding to “significant cost challenges” by increasing prices by 2.6 per cent on average, while Heineken said it was putting 6p (US$0.07) on the cost of a pint.

The chief executive of the British Beer and Pubs Association (BBPA) said that beer inflation could take off if the pound, which has fallen 18 per cent against the dollar since the EU referendum, remains low.

“Beer in the UK is made predominantly using domestic raw materials,” said BBPA head Brigid Simmonds.

“However, the depreciation of sterling certainly means there will be some inflationary pressures through increased costs such as raw materials, packaging, energy and transport costs as well as employment and other cost pressures all businesses face.

“It is also a concern that higher inflation will also lead to higher levels of indexation for taxes like beer duty, creating a vicious circle when it comes to cost pressures, which is why we are urging the chancellor to cut beer duty on a pint by one penny in the budget.”

A source at one of the Britain’s leading brewers said Brexit-related inflation was already being felt in the cost of transporting beer, because oil used for fuel is priced in dollars.

But the source said the true effect was yet to be felt and could force brewers to impose much bigger increases on beer.

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“If the weakness of the pound remains, we’ll be looking back to the days of 3 per cent price increases fondly,” said the source. “It would need to be more like 10 per cent or 15 per cent.”

A 15 per cent increase would add 59p to the £3.92 average price of a pint in London, Britain’s most expensive place to drink.