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Monday, January 25, 1999 Published at 13:32 GMT

Business: The Economy

Bitter battle escalates

Shepherd Neame has had to shut pubs in the face of surging imports

A David and Goliath battle is brewing in the UK beer industry.

The country's oldest independent brewery is taking on the UK Government again to try and force it to cut tax on beer.

BBC's Patrick Bartlett reports on the cross-border trade that its threatening Britain's pubs
Shepherd Neame sells beer in pubs across Kent, Sussex and London. However it claims that cheap imports from France are crippling its business, costing the group £1m a year in lost revenues.

The problem is that tax rates on beer are much higher in the UK than continental Europe. That means that alcohol in France is sold at a fraction of UK prices.

Calling time on pubs

[ image: UK drinkers are paying much more for beer than their Continental cousins]
UK drinkers are paying much more for beer than their Continental cousins
A flood of beer imports has forced Shepherd Neame to close 50 pubs over the past five years and lay off hundreds of staff.

Now the brewer is going to the Court of Appeal to challenge the government's decision to increase beer duty.

Stuart Neame, vice chairman of Shepherd Neame, told the BBC: "We had two options, just to stand by and watch community pubs close and good licencees go bankrupt, or to do something about it."

The High Court turned down the brewer's case last July. But since then another 1p a pint rise in beer duty has come into force on 1 January.

Courting Europe

Shepherd Neame is using this to reinforce its claim that the issue should be decided by the European Court of Justice in Luxembourg.

Shepherd Neame claims that the recent hikes in beer duty contradict the Treaty of Rome, which first established the European Community. The Treaty sets out the need to harmonise duties among member states.

[ image: One in three pints drunk in Kent are imported from France]
One in three pints drunk in Kent are imported from France
However, the government claims that it can increase duty in line with inflation.

UK beer duty is now equivalent to 33p a pint, more than six times the level in France and more than four times the European average.

Brewers claim that one in three pints consumed in Kent now comes from across the English Channel and that every year ten times more beer is imported via Dover, taking away potential sales from brewers like Shepherd Neame. Last year an estimated 1.5m pints of beer entered the UK every day.

New Customs and Excise inspectors have been appointed to stem the flow of imports by bootleggers who import large quantities of cheap beer to re-sell at a higher price.

If Shepherd Neame wins its case, the brewing industry could be in line for a huge compensation pay-out.

However lawyers are pessimistic about its chances and in any case the legal battle may drag on for years.

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