The real risks in brewery borrowing and where they appear first

UK brewing continues to face sustained cost and margin pressure, with failure rates rising among smaller and mid‑sized independents. For ABL lenders, the challenge is clear. Availability can fall away far faster than the asset base suggests.

Our recent analysis of UK brewery financials showed 119 restructuring indicators across 65 businesses – almost two per company. It underlines how quickly cash conversion weakens even when plant, inventory and container fleets imply strong borrowing capacity.

Where stress shows up first

Asset bases mask liquidity strain
Brewers carry plant, returnable containers and finished stock. It appears financeable, but cash becomes locked in inventory while debtor performance deteriorates. In recent insolvency processes the ledger has consistently been the most stretched asset and the first signal that liquidity is tightening.

Retail relationships tighten liquidity
Selling into grocers brings strict terms, deductions, promotions and retrospective rebates. Unless field exams quantify these items properly, eligibility is easily overstated. Headline receivables often differ materially from what will actually be collected.

Scale matters
Brewers with less than £50 million turnover feel duty uprates, packaging costs and energy inflation more acutely. Their covenants compress sooner and they depend more heavily on lender flexibility when trading becomes tight.

Borrower types most exposed

Packaged beer independents selling through retail and wholesale
These operators face significant invoice dilution from credits, promotions, marketing support and short‑dated stock allowances. Even strong debtor names shift once deductions are applied. Dilution should be reserved by debtor and by reason code, not applied as a flat percentage.
Packaged beer is perishable and brand‑sensitive. Availability is overstated when advance rates fail to separate input materials, finished product and cask.

On‑trade brewers with exposure to pubs and small chains
Debtor books move together. When pubs come under pressure, ageing and bad debt rise at the same time. Disputes over delivery, breakages and quality are common. Container returns rarely reconcile cleanly. Outsourced keg distribution can become a ransom creditor in distress, weakening availability further.

Taproom and hospitality‑heavy brewers
These businesses carry a heavier fixed cost base. The borrowing base ends up covering wages, rent and rates rather than working capital. When revenue shifts with weather, footfall or tourism patterns, headroom shrinks quickly.

Duty‑suspended operators and bonded warehousing
Failures in EMCS processes, bond approvals or movement controls can halt dispatches immediately. This becomes a liquidity issue, not just a compliance matter. Lenders need confidence that excise controls and audit trails are robust before treating related receivables or inventory as eligible.

Macro and regulatory factors
Duty changes taking effect in February 2026 will add further pressure on packaged and higher‑strength SKUs, with temporary spikes in disputes and credits. CO₂ supply issues can delay dispatches and age stock within days. Extended Producer Responsibility pushes packaging liabilities up the supply chain, and those liabilities can survive insolvency.

Why FRP
FRP has deep experience across brewing and hospitality, including real‑world insolvency processes, sales of brewing assets and hands‑on ABL engagement. We bring the right expertise into the room quickly – people who have seen where cash conversion breaks, understand lender expectations and can move at the pace situations demand.