This article is the second in a series of Sightlines stories in which Good Beer Hunting will explore the impact of Brexit on the U.K. beer scene, including its industry, political, and economic fallout. Read part one about how Brexit hurts British brewers before it even happens.
Brexit has forced Northern Ireland’s brewers to face the prospect of either losing access to vital markets or seeing violence return to the region.
Despite voting to remain during the 2016 referendum, which called for the withdrawal of the United Kingdom from the European Union, Northern Ireland has become the battleground for politicians debating Brexit. Former Prime Minister Theresa May’s trade deal with the E.U. was voted down three times by Parliament due to disputes about how the border between Northern Ireland and the Republic of Ireland should be handled. Where she sought compromise, the current Prime Minister and pro-Brexit voice, Boris Johnson, sees the issue as collateral in the fight to leave the E.U. as quickly as possible.
For the region’s brewers, though, the decision could be life-or-death. Northern Ireland is a small and heavily tied market with little opportunity for permanent taps, so any brewery looking for growth relies on export. However, whatever the result of the negotiations, these businesses will either lose a borderless trade with the rest of the U.K. or Europe, and could face worse challenges.
Any form of Brexit would require a border to be put in place, because there has to be a customs check when exiting or entering the E.U., so the question is where that border is created. A trade deal would require one between the mainland and Northern Ireland—leaving the province in the single market and essentially splitting up the United Kingdom—while one between the two Irelands would tear apart the Good Friday Agreement, terms established in 1998 which brought peace after decades of violence between pro-Ireland Republicans and U.K.-supporting Loyalists. To breweries in Northern Ireland, that means either losing free trade with the U.K. or the threat of nationalist violence in a country still healing from what amounted to civil war. Matt Dick, founder of Belfast’s Boundary Brewery, is all too aware of the risks.
He says that Belfast is healing after centuries-long conflict, but there are still tensions underneath that could boil over if anti-British sentiment was stoked by something like a Westminster-imposed hard border.
A few years ago, for example, the British flag was removed from Belfast’s city hall, leading to months of protest.
“The whole city came to gridlock, and the police had their hands tied because of paramilitary involvement,” Dick says. “That was over nothing. Imagine what could happen now if a border was put in.”
We don’t even need to imagine. In April, journalist Lyra McKee was shot and killed during riots in Derry, started when police raided dissident munitions stashes. The New IRA took responsibility for the murder, claiming the shots were aimed at police.
Last month, Jonathan Powell, chief British negotiator for peace in Northern Ireland until 2007, told the BBC a hard border to the South would be the same as tearing up the Good Friday Agreement. As one of the authors of that peace treaty, his perspective is one of horror at the idea of reintroducing the very border that caused the violence. He expects it to cause outbreaks again, and there has already been an increase in attacks on police.
“If you put border installations back in, the dissident republicans will use that as a target,” he told the BBC in August. “They will shoot your camera. If you have to put policemen in to protect that camera, they will shoot the policemen. Once they have shot the policemen, you have to bring the army back in. Each of the IRA campaigns started as a border campaign and led to full-scale violence. Why on earth would you want that again?”
In purely business terms, however, brewers think a hard border with the South would be much more preferable than a border with the rest of the U.K. There are around 1,200 pubs in Northern Ireland, but Dick says Heineken or Guinness own most of the taps and make it “the most tied market in the E.U.” As part of the U.K., Northern Ireland’s breweries can currently send their beer to the mainland without any checks or delays, so Dick has grown his mainland export to around 30% of his total output. He says that any delays, tariffs or extra paperwork caused by a customs border could hit both his volume and margin, but he can see an upside.
“We do have a large percentage of export so we could be impacted,” he says. “But we also sell a little bit to Canada, Japan, and Switzerland, so I know the paperwork to get beer out of the E.U. is a pain in the ass. So I think a lot of [E.U.] exporters might stop sending beer to the U.K., which might open up some taps for us.”
Willy Mayne, founder of Belfast’s Bullhouse Brewing Company, is much more worried about a border in the Irish Sea than he is about one to the South. He produced 340 barrels (400 hectoliters) in 2018 and sent just 5% for events in Ireland, but sent double that to the mainland and wants to send more—he intends to export around 50% of his production over the next few years to hit his growth targets. Under the deal May negotiated, that would be made harder by a customs border being placed between Northern Ireland and the rest of the U.K.
“We would essentially be part of the E.U.,” says Mayne. “So to sell to Great Britain we’d have to have a distributor like we do going into the Republic of Ireland. That would be a big barrier to trading there, which is a much larger market and would be a longer-term hindrance [than a border with Ireland].”
A border to the south would impact Dick much more. He’s spent four years trying to find a distributor for the Republic of Ireland that could achieve volume, saying the market is heavily saturated and that most drinkers prefer to buy local. He’s recently agreed to terms with one that is happy to grow his brand organically, and is doing around 213 barrels (250 hectoliters) a year there. Through his experience of sending beer out of the E.U. he knows how much harder it will be—even if the border is only a 50-mile drive from the brewery.
A hard border with Ireland would also increase the amount of smuggling between the two countries. There is already a multi-million-pound smuggling industry in the region focused on fuel and cigarettes, and if tariffs push up the prices of importing other goods in or out of Northern Ireland, Mayne says there is bound to be an upsurge in illegal, cross-border sales.
“I don’t think they’d be able to completely close the border,” says Mayne. “They could do random spot checks or check goods at the warehouses before they get on the road, but there are conflicting reports over whether that’s feasible. There’s cigarette and fuel smuggling already because the tariffs are different, so if you increase the amount of things with different tariffs, there’s more money to be made.”
The most challenging issue for both brewers is a side-effect of Brexit. The reason there are only 1,200 pubs in Northern Ireland isn’t because of demand, but because of laws enacted in 1902, before the province was founded. This limits the number of alcohol licenses in Northern Ireland, which in turn drives up the cost of buying a license to around £150,000 ($187,000)—at least three times the cost of one on the mainland. The law also prevents breweries from selling directly to the consumer, so they can’t run webshops or taprooms—although Dick has found a loophole by extending a neighbor’s license, which allows him to open once a month.
In 2016, a bill was debated in the Northern Ireland Assembly that would bring the law in line with the rest of the U.K. Despite receiving cross-party backing, it wasn’t passed before Deputy First Minister Martin McGuinness resigned and all local government was dissolved. With the shadow of Brexit, power struggles, and policy disagreements, the Assembly has not sat since, and all bills have gone nowhere.
“I’d have zero Brexit concerns if I could sell directly,” says Dick. “If the law changed, I’d be able to sell all my beer here. Demand is there—we’re a cooperative with something like 1,400 members, 90% of whom live within a few miles of the brewery, so if we could sell takeaway four-packs on a Saturday that would pay all our bills and more.”
Dick says he wouldn’t pull any volume from his foreign distributors, but would be able to add capacity and volume much faster than export routes could ever offer. Unfortunately, any law change is even further off than a Brexit deal. Mayne hopes for a new general election as soon as possible, seeing it as an opportunity for Brexit to be resolved and for the bill to be picked up again. Johnson has asked for the same, but is currently being blocked by opposition parties until the Brexit deadline is pushed back.
“If there was an election and Boris lost power or the DUP was no longer propping up his government, that would increase the pressure for them to get into government over here. But ongoing talks in Northern Ireland to restore the assembly are pretty much ground to a halt—there are big red lines and someone is going to have to compromise.”
Sadly, compromise is hard to reach in today’s political climate, with stalemates across the U.K on what happens next. Both in Westminster and Belfast, the chasm between sides has never been wider, and Northern Irish breweries are uniquely exposed to the issues—wherever the border is placed.
Stay tuned for part three of this five-part Brexit series, which will examine the impact on breweries’ supply chains and costings.
Part 2: Between a Rock and a Hard Brexit — How Losing Export Business Could Be the Least of Irish Brewers’ Worries