Chancellor hands small breweries a tax lifeline

Gordon Brown is throwing a lifeline to small breweries struggling to preserve the diversity of the domestic beer market in the face of competition from big companies such as Bass and Whitbread.

In his Budget next month, the Chancellor will cut 3p from the duty on beer produced by Britain's 400 microbreweries, many of which are family concerns. The move will cost the Treasury about £6m a year.

Although small independent brewers only produce 1 per cent of the nation's beer, Mr Brown has been persuaded that they offer choice to drinkers.

The tax relief is unlikely to mean cheaper beer. It will be used by the breweries simply to stay afloat. They are expected channel the money into promotion, marketing and investing in new pubs, particularly in rural areas. The industry sees it as a first step to safeguarding village hostelries and traditional street-corner urban pubs from the threat of closure.

Three giant companies – Carlsberg-Tetley, Scottish Courage and the Belgian-owned firm, Interbrew – control four-fifths of the market. But the microbreweries have carved out a distinctive niche, with their products on offer in 18,000 free houses, nearly a third of Britain's 60,000 pubs.

Peter Haydon, from the Society of Independent Brewers, said: "This is something we have been lobbying for for a long time. It is recognised we are disadvantaged in the European market.

"It is some compensation for us to help us compete in the domestic market place. It's crucially important for small breweries. There has been a marked increase in the number of small breweries going out of business."

More than 100 MPs of all parties have called on Mr Brown to ease taxes on small breweries. They warned in a Commons motion: "Many craft breweries are at a major competitive disadvantage and are going out of business at an alarming rate."

The MPs called for a sliding tax scale for small breweries producing up to 5.3 million pints a year and for the abolition of beer duty altogether for those whose annual output is less than 880,000 pints.

Mr Brown's move is part of his declared drive to use his Budget to ease the pressure on small businesses. He has also been sensitive to complaints about the impact on the brewing industry in general from low-duty beer being brought in from the Continent.

A Treasury source said: "The Chancellor likes a drink as much as the next bloke and thinks small breweries play a very important role in many rural areas."