Kimi Karjalainen and his brother Marko poured their life savings into Bone Machine Brewing Co when it opened in Pocklington, East Yorkshire, in 2017 before moving to Hull, as part of the craft beer revolution that swept Britain.
“The entire investment, not including time and labour that we gave for free, was about £70,000,” Karjalainen said. Four weeks ago, it was gone. “That was my parents’ retirement.”
“It just got too much – Brexit,” Karjalainen said. “We were heavily geared for export. We’d be selling to Finland, Sweden, Norway, Ireland, Netherlands, Italy, Spain. We had Hungary in the pipeline. And it all disappeared with Brexit.”
Post-Brexit trading arrangements with European Union countries meant that Bone Machine’s craft beers needed to be accompanied by expensive and time-consuming paperwork.
“Everyone was saying ‘it’s too complicated to import anything from the UK any more’,” Karjalainen said. “In terms of pure output, that was about 30% to 40% of what we made. In terms of income, it was probably more than half.”
Bone Machine is one of more than 100 small brewers that have been forced out of business in the past 18 months, hit by a combination of Brexit, the pandemic and the cost of living crisis and now threatened by changes to beer duty laws. In June, the accountancy firm Mazars found that 45 small brewers had gone into liquidation, but many more have either been sold or swallowed by rivals.
Steve Dunkley, founder of the Manchester brewery and taproom Beer Nouveau, which shut last year, has been charting the closure of breweries since 2022 and identified 83 last year which had closed down, with a further 33 so far this year and four more under threat.
Brexit was not the only problem for Bone Machine. “Covid hit very hard,” Karjalainen said. “The final nail in the coffin was the cost of living crisis. Our production costs doubled and our customer base halved. So while people were getting worse off, the multinational brewers were going to pubs, to free houses, and saying ‘we’ll give you cheap kegs, but we want control of all your lines’.”
Karjalainen has found a job in sales for a different brewer but has given up on his life’s dream. “It cost a lot in mental health and physical health. I developed a blood clot. It’s not worth it. And I feel for all the staff. We employed five people and I saw them all last week. They were all in tears.”
The company is not in liquidation at this stage. The brewery facility is mothballed and Karjalainen is still hoping to find a buyer.
Other issues affecting the industry have been the shortage of carbon dioxide following the early stages of the energy crisis, and Russia’s full-scale invasion of Ukraine which raised the cost of barley and hops.
“There are brewery shutdowns every year. That’s just normal business,” said Yvan Seth, founder of Jolly Good Beer, an independent distributor of craft beers. “But there’s more shutting down this year than in the previous eight years of doing business. Three years ago, a keg that cost £100 is now going to cost you £150 so the pubs go ‘no, we’ll skip on that’. Staffing is still hard. Electricity is still pretty expensive.”
Even though customers have less money in their pockets, they haven’t lost the taste for craft beers. Larger companies have been doing well, including Brewdog, the Camden Town Brewery and Beavertown, which the Grocer reported had seen supermarket sales rise by more than a quarter.
But Seth believes drinkers will have less choice – something that is keenly felt in a beer culture built around constant change and some esoteric beers. “We’re seeing less of the crazy beers – the triple IPAs and the 10% pale ales, cans for more than £10, that kind of thing. So we’ll see lower-strength beers and less hypey hops.”
Another reason for the changes is new rules on beer duty. Beer, wine and spirits used to have different levels of tax but from 1 August have been taxed according to alcohol content. That means a 10.1% rise on bottles and cans of beer, according to the British Beer and Pub Association, and stronger craft beers are hit harder.
Meanwhile, lager hasn’t gone away. Pete Brown is the co-founder of Forest Road Brewery in south London, whose main product is a lager called Posh. “Out of 100 beer drinkers, about 70 are lager drinkers, no matter what,” he said.
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“The thing is that lager is like being naked on stage. When you have an IPA, you’re smelling and tasting stuff. A flaw that exists in an IPA can be covered with a hop aroma. With a lager, it’s a much more delicate, balanced product.”
Brown, who is American, said craft brewers had been through a “brutal” period. “The craft beer bubble burst in the States in the late 90s, and the same thing is happening here now.
“Everybody thought it was cool, everybody started doing it and then everyone was competing to have the next new big thing. And you overwhelm your own market so that even your most loyal customers can’t tell the difference between your key brands and your one-offs. In a bust, people go back to things they recognise. And we’re definitely in a bust.”
Trouble brewing
366,300 litres: Average production of beer by members of the Society of Independent Brewers (Siba), 11% below 2019 levels
684: Independent brewers in the UK, out of a total of 1,828, as of the start of this year
63%: SIBA members who say their focus this year is on survival
55.1%: Increase in volume of specialty lagers produced this year compared with 2019
91%: Fall in volume of craft cask ale
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