Craft beer in the UK is on the verge of collapse, according to its scene.

Neither Rishi Sunak nor Gordon Brown is a beer aficionado. The former is teetotal and his predecessor all but gave up booze during his time in office.

Yet the two prime ministers loom large over the turbulent saga of the UK craft beer scene.

Brown, then chancellor, introduced small brewers’ relief in 2002, a tax tweak that helped to catalyse an explosion of innovative startups that blossomed into a globally renowned industry brewing anything from helles lager to imperial pastry stouts.

Now, amid a worrying flurry of brewery insolvencies, Sunak risks being remembered as the man who was behind the bar when the pumps started to run dry.

For the time being at least, the demand is still there. A report from the independent brewers’ trade body Siba, due for release in May, will show double-digit growth in production volumes. Increased output correlates tightly with sales, reflecting Britain’s enduring thirst for the complex and diverse flavours that the craft sector offers, particularly compared with mass-market rivals.

But competition is fierce, customers’ budgets are squeezed and costs associated with Covid-19 – and Britain’s sluggish economic recovery from it – are piling up.

“It’s like death by a thousand cuts at the moment,” said Alex Troncoso, co-founder of the award-winning Bristol-based brewer Lost & Grounded. He reels off a long but by no means exhaustive list of factors paring back the industry’s meteoric growth. Amid the inflation crisis, the cost of energy, ingredients and wages has soared. Debt repayments, including on government Covid loans, have become more punishing, as the Bank of England raises rates to keep a lid on prices.

Troncoso added: “If we were to expand now, we’re getting quoted interest rates of about 9%, about the same as when we were a high-risk startup business.”

Paul Corbett is managing director of Charles Faram, which supplies 90% of UK brewers with at least some of their hops, malt and yeast.

While it’s too soon to call the industry’s decline, he said, the wider conditions are far from auspicious. “Covid has really affected people’s habits,” Corbett said. “Despite what people tell you, we’re drinking less, and the cost of living also means people are struggling with the money in their pocket. The price of a pint is looking quite scary when you go out with friends.”

In the teeth of all these challenges, Corbett said, “We’ve had more insolvencies [of brewers] than we’ve ever seen before in one year.”

The number of insolvencies jumped 82% in the past year, from 38 in 2022 to 69 in the year ending 31 December 2023, according to the auditors Mazars.

Much-loved breweries to fall into administration include the London companies Brew by Numbers, and Brick, alongside Purity in the West Midlands and Black Sheep in North Yorkshire. All four have since been snapped up by the private equity group Breal Group, which has also invested in aerospace and steel. It is expected to move London brewing operations to Black Sheep’s home in the town of Masham to save costs. In an industry where authenticity is a key part of brand appeal, the actual provenance of supposedly local London breweries is shifting 200 miles away.

One industry source said the capital’s brewers had been particularly hard hit by train strikes.

But it is not just London where times are tough. North Brewing, in Leeds, was bought out of administration in January. And in East Anglia, the Suffolk family firm Adnam’s called in advisers in February to help it raise funds to keep going. It has been rumoured to be seeking an outright sale of the business.

The founder of one brewery that has declared insolvency, who did not want to be named because he is close to sealing a deal with a buyer, believes more failures must be in the pipeline. “To me, it feels like so many are on the brink of what we’re going through,” he said.

In supermarkets, competition is on the wane, according to data compiled by the consumer behaviour company Circana, which tracks retail sales in granular detail.

Since 2020, the total number of brewers selling through Britain’s largest supermarkets has declined from 466 to 383. The result is that the share of beer brands sold in supermarkets that are held by the top 10 breweries has increased from 18.5% to 22%.

Amid the brewing storm, the government has consistently sought to portray itself as the beer lover’s saviour, via a series of cuts to the duty charged on draught beer. However, the attempt has proved clumsy.

Back in 2021, Sunak and Boris Johnson – then chancellor and prime minister – staged a photocall to celebrate a cut in the duty levied on craft beer.

The pair were pictured wielding 30-litre kegs, which were not at that time covered by the duty cut.

Undeterred by the apparent gaffe, Sunak and his successor as chancellor, Jeremy Hunt, have doubled down on their appeal to beer-drinking voters. “British ale may be warm but the duty on a pint is frozen,” Hunt proclaimed in the Commons, as he held beer duty steady in March 2023, to cheers from the Conservative benches.

A year later, after cancelling increases in wider alcohol duty, Hunt posted a picture of himself posing with a pint on X.

The government has called the draught-duty freeze, which keeps tax levied on beer at the pumps below that paid on beer in supermarkets, its “Brexit pubs guarantee”.

This, industry figures said, ignores the wider burden on brewers, including Britain’s departure from the EU, which has brought with it administrative hurdles that have added to the cost of importing ingredients and all but wiped out opportunities for export.

At Charles Faram, getting British hops into Europe has become more complicated, at the expense of British jobs. Corbett said: “We’ve set up a company in Poland to facilitate that, shipping in bulk and distributing to the EU. We’re employing people in Poland to do the work we used to do here.”

When it comes to tax, the government’s big talk amounts to small beer, since the burden on British brewers, including alcohol duty and VAT, is still sky high by international comparison.

Sam McMeekin, the co-founder at south-east London’s Gipsy Hill Brewing, said: “We’re the second-highest taxed on the whole continent. Our margins as an industry are threadbare. Is there more they could do? Enormously so.”

Andy Slee, the chief executive of Siba, said the industry pays out about a third of its revenue in taxes. “We bring people together. There’s a huge social benefit, yet we pay tax at four times the rate that online gambling does.”

But in a sector that has thrived by innovating it’s never all doom and gloom. Charles Faram’s experts are responding to rising costs by developing British rivals to hops from overseas – such as Citra, Nelson Sauvin and Galaxy – which have proved popular with craft beer drinkers because of their punchy and complex flavour profiles.

“We’re trying to produce those bigger, fruitier aromas that are popular in craft beers and breed those here,” said Corbett. “It supports the local economy and jobs.”

Breweries such as Lost & Grounded and Gipsy Hill are also responding to setbacks by tweaking their business model, intensifying focus on supplying pubs within a smaller radius, where the beer can be served fresh, to people who value local provenance, for higher margins.

McMeekin said: “Yes, insolvencies are happening to good businesses and to less good businesses. It’s really tough for everyone affected. But our view is that people still want a treat at the pub.”

Slee insisted: “Rumours of our demise are greatly exaggerated. There’s still good demand for indie beer. Our challenge is making profit out of it.”