Masham-based Black Sheep Brewery has announced that it is to appoint administrators, following unsuccessful attempts to secure new investment into the business. It is the latest casualty of the perfect storm of rising inflation, increased cost of living, and the lingering impact of the pandemic on the retail and hospitality industries.
In February we looked at the financial difficulties faced by pubs and bars in the UK, and the consequent 83% rise in insolvencies over the last year. This announcement by the North Yorkshire-based brewer fits into a wider trend in the industry. Our Restructuring & Insolvency team have recently advised on a number of administrations involving breweries, and in December 2022 the team advised administrators on the sale of another Yorkshire brewer, Leeds Brewery.
Businesses such as these are hard pressed on multiple fronts in a tough economic climate:
- Cost of Living - with household budgets increasingly stretched, customers have been tightening their belts. Non-essentials such as eating and drinking out are often top of the list for families and individuals looking to reduce their budgets;
- Energy - energy prices reached eye-watering levels in 2022, and in spite of government support, energy bills remain a significant overhead in 2023;
- Inflation - the rising cost of raw materials - glass, aluminium, and malt for brewing itself - has had a knock-on effect on the bottom line of many brewers. As with other retail and consumer sector businesses, these costs are not always easily passed on to the end customer, especially given the above-mentioned cost of living crisis and a reduction in disposable income. With inflation still stubbornly high in the UK, this issue may persist for longer than many would like.
Brewers facing financial difficulties should not feel resigned to failure, however. As we have discussed previously there are options available to businesses, but acting quickly to identify the risk and engage with experts is critical.
"Seeking immediate advice at the first signs of financial difficulty will help to ensure that a business has as many available options as possible," explains Andrew Walker, national head of Restructuring & Insolvency.
"Planning and preparation are vital, and in times of financial difficulty it is imperative that directors remember their duties and legal obligations, as well as recognise the warning signs. The longer issues are ignored or heads are buried in the sand, the greater the difficulties and, ultimately, the risks to the business."
Ms Lyons said support for businesses during the pandemic had been welcome, but could not compensate for reduced cash flow in the long term. "The business has been hit very hard by the pandemic and the sudden rise in all costs. "It has been the perfect storm, but the team are confident that with a new structure Black Sheep will thrive and grow as the team set course in a new direction."