One of Britain's oldest brewers has lost a High Court battle against the Government's penny-a-pint tax increase.

Two judges rejected a claim by Kent-based Shepherd that the rise in beer duty -- which came into effect on January 1 -- contravened EU law and the Treaty of Rome.

Lord Justice May, sitting with Mr Justice Moses, refused the brewing and pub group's application to have the matter referred to the European Court of Justice.

They ruled that the "inflation-only" rise did not breach EU rules intended to harmonise duties across Europe.

The beer industry, already struggling to cope with cheap European beer brought in on "booze cruises", said the decision was another serious blow.

Britons deserting their local pubs

Shepherd Neame's lawyers told the court the excise duty increase, announced in the Chancellor, Gordon Brown's first Budget last July, would further encourage Britons already deserting their local pubs and off-licences to pack the ferries to France.

But the brewery, established in 1698 and based in Faversham, Kent, was refused leave to appeal against the ruling.

Shepherd Neame said they would renew their application in the Court of Appeal.

Stuart Neame: "Hundreds of pubs will close"

Stuart Neame, the company's vice-chairman, said they had closed 45 of their pubs in the last five years because of "unfair" competition from European breweries.

Mr Neame said: "If this increase stands, the consequences will be hundreds, if not thousands, of pubs being closed."

Dawn Primarolo, Financial Secretary to the Treasury, welcomed the court's ruling: "This decision upholds the important principle that Parliament can legitimately set excise duties in the UK, subject to minimum rates agreed with our EU partners," she said.

One in 20 UK pints brewed in France

Mike Benner, from the Campaign for Real Ale, said: "A staggering one in 20 pints drunk in Britain are now brewed in France, but this is as high as one in three in Kent.

"Through their challenge, Shep's have helped put the issue of tax into the minds of millions of beer drinkers, who are starting to realise how much it costs them. A third of the price of a pint is tax."

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