BrewDog collapse exposes £20m SME debt risk across UK supply chains

Following the collapse of BrewDog, a gaping hole in unpaid bills has been revealed. The craft beer firm went into administration last month and has left £20m debt owed to UK businesses in its wake.

The administrators’ report outlines a long list of creditors, including independent bakeries, taxi services, and major beverage companies. Many of these creditors may be unlikely to recover their funds in full.

For SMEs, for whom late or unpaid payments can be fatal, stories like this are a grim reminder to do everything you can to protect your cash flow wherever possible, from negotiating pre or staged payments to pushing back against long payment terms. 

The scale of the debt

Since officially going into administration last month, it’s been revealed that BrewDog owes money to hundreds of businesses. The majority of these are UK-based, with many located near its Aberdeenshire HQ. 

Individual debts to small firms range from hundreds to thousands of pounds. They include local caterers, laundries and coffee roasters, to significantly larger sums owed to major national organisations and corporations.

At the top end, mass suppliers such as packaging and logistics firms face multimillion-pound losses, while unsecured creditors are expected to receive less than 1p in the pound on nearly £190m of debt, as reported by the BBC. 

Realistically, larger firms may have an easier time absorbing the hit, but SMEs may not be able to bounce back from unpaid bills so quickly.

The concentration of affected businesses in local supply chains, particularly around north-east Scotland, makes this an especially regional-specific economic impact. This is in addition to the 440 members of staff who were made redundant last month following the business closure, only to be invited to reapply for their roles in a ‘fire and rehire’ controversy.

Who gets paid back first?

The administrator’s report makes clear that not all creditors are equal. 

Secured lenders like HSBC, which BrewDog owes more than £61m, are expected to recover the majority of their loans, though they will still face losses. 

In contrast, unsecured creditors, which include most smaller businesses, may recover only a small portion of their unpaid bills.

The 200,000 retail investors in BrewDog’s “Equity for Punks” scheme, on the other hand, will receive no return, with its shares now essentially deemed to have “no value”. Meanwhile, HMRC is expected to be repaid the £4m debt it’s owed in full.

What happens next

Following BrewDog’s collapse, US firm Tilray has acquired its brand and UK operations. Hundreds of jobs will be transferred, with a smaller range of bars continuing to operate. The company says it aims to rebuild the brand to its $1bn valuation.

While this may be alright for BrewDog, it does little to address losses already absorbed by suppliers. For many SMEs, the financial damage will be immediate and irreversible, serving as a reminder of the hidden risks of engaging with large clients.