BrewDog administration leaves £2.4m VAT and £489,000 in wages unpaid

Administrators at AlixPartners have reported that BrewDog's retail arm has "insufficient funds" to pay its preferential creditors, according to their report on the administration.

That includes £2.4m owed to HMRC for unpaid VAT. It also includes £489,000 owed to staff for wages and holiday pay, which will not be paid through the administration.

Redundant staff have instead been paid compensation by the UK government's Insolvency Service. The administrators said workers were given information about how to claim.

The shortfall is blamed on two things: asset sales raising less than expected, and costs rising during the administration period.

Some of those costs were unplanned. The administrators cited security spending at closed BrewDog pubs after what they described as "unauthorised occupiers" got in, and said they worked with landlords and lawyers to remove them.

The asset sales themselves read like a car boot sale. A 7.8 acre field at Potterton in Aberdeenshire went to a local farmer for £41,300. Nine BrewDog vehicles, described in the report as of old age and varying roadworthiness, produced a single sale worth £6,250; the rest were abandoned.

A settlement over drinks equipment sold to Marylebone Cricket Club, owner of Lord's, brought in £62,000.

The Aberdeenshire brewer carried more than £500m of debt when it was sold in March to the US drinks firm Tilray in a £33m rescue deal. Eleven bars were kept. Thirty-eight closed immediately.

Of the workforce, 440 staff were made redundant and 736 transferred to Tilray.

Parent company BrewDog PLC is still expected to pay HMRC in full as a preferential creditor, covering £3.66m of tax, mainly VAT and excise duty. The gap sits elsewhere.

HSBC was owed more than £61m across various banking arms. It has recovered tens of millions, and the report puts its remaining shortfall at an estimated £16.8m, which could fall if US assets sell.

Private equity backer TSG, which bought a 22% stake in 2017, is set to lose £27.6m. Around £190m is owed to unsecured creditors, who are expected to get less than a penny in the pound.

Those unsecured creditors are not abstractions. Around £20m in unpaid bills was left with hundreds of UK businesses, among them coffee shops, bakeries, laundry services, lawyers, councils and holiday parks, alongside West Ham United, Lord's Cricket Ground and Manchester University.

About 200,000 Equity for Punks crowdfunding investors hold shares the administrators have stated have "no value". Typical stakes were around £500, though some put in far more.

The lesson for any founder with a rescue deal in view is in the ranking. A pre-pack can move the brand, the bars and most of the staff to a buyer in a day, and still leave the tax bill, the trade creditors and the crowdfunders behind. If you are the supplier, the priority queue decides what you get, and most of it was settled long before the deal was announced.

BrewDog was founded in 2007 by James Watt and Martin Dickie, and at its peak ran four breweries and about 100 pubs worldwide. Watt said after the collapse that he was "heartbroken" and apologised to staff and investors.