Walk the back streets behind Piccadilly station on a Saturday afternoon and what was once a desolate, industrial wasteland is now buzzing with life.

The railway arches of Sheffield Street and Temperance Street are home to a growing cluster of microbreweries, many of which open their doors at the weekends for beer lovers to drink in.

Across the city, there are similar scenes around the Green Quarter, with another thriving community of breweries concentrated around Red Bank and Dantzic Street.

But now a storm is brewing that could threaten the existence of this lively scene, a tax row that is pitting new microbreweries and larger, longer-established brewers against one another.

A powerful coalition of bigger breweries is pressuring the government to review and reform the Small Breweries Relief scheme, the tax break that has been credited as the catalyst for the UK's booming craft beer scene.

The restrictions they are proposing 'could kill the craft beer scene in Manchester', one local brewer believes.

Established in 2002, the scheme allows breweries producing under 60,000 hectolitres - about 10m pints - to pay reduced rates of duty on a sliding scale.

The biggest beneficiaries are those with a capacity of under 5,000 hl (880,000 pints), who qualify for the maximum discount of 50%. Many of Manchester's microbreweries fall within that bracket, including Marble, which produces around 4,000 hl per year.

Founder Jan Rogers has seen first-hand how the scheme has shaped the city's beer scene by allowing businesses like hers to grow.

"I remember it coming in. I remember us being able to buy a van and being able to employ a member of staff," she says.

"You have got places like Squawk, Track and so many tiny breweries now. It's helped people like me and Blackjack to be slightly bigger than that. You've got all these small, independent businesses thriving."

(Image: Andy Lambert)

But not everyone is happy. Larger, more established breweries have found themselves losing market share to these upstarts and are now, as some see it, trying to claw it back.

The Small Brewers Duty Reform Coalition, a group of more than 60 such businesses - including Manchester's JW Lees and Joseph Holt - are recommending a number of changes to the system, including restricting the 50% discount to breweries under 1,000 hl (176,000 pints), while raising the upper limit to 200,000 hl.

Steve Dunkley, from Beer Nouveau - who has written an in-depth analysis of the proposals on his blog - believes some breweries could close if the reforms are pushed through. His is too small to be affected by the proposed changes but he predicts the price of a pint could rise by as much as a third for those that would be hit.

"Most breweries in Manchester are around the 5,000 hl mark or below. A change like this is really going to hit breweries hard," he says.

"I've talked to a few breweries in Manchester and two of them say if this comes in they will close up.

"Small breweries are running on very tight margins anyway. Larger breweries benefit from economies of scale and guaranteed sales.

"Manchester has a lot of freehouses but most are tied into breweries. Without this additional relief on the duty, small breweries will have to put their prices up and won't be able to compete with larger breweries, and won't be able to sell their beer.

"It could kill the craft beer scene in Manchester."

His view is shared by the Society of Independent Brewers, which says a reduction in relief would be 'catastrophic' for many brewers.

Manchester's reputation for good beer is now a global one. Cloudwater was recently named the second best brewery in the world and attracts visitors from as far as the USA, while beer-lovers flock from all over Europe to visit the respected Indy Man Beer Con festival at Victoria Baths every year.

The prospect of breweries closing could be a hammer blow to this burgeoning tourist trade.

"We get tourists coming here every weekend, people from out of the city and out of the country," says Steve.

"If all of a sudden it gets more expensive and there are fewer taprooms it's going to have a knock-on effect. We find we're always busier when there are more brew taps on. As more and more open up we get busier and busier. Everyone's reputation runs on from everyone else's.

"If some of them close up shop because they can't afford to keep running, it will really hit it."

(Image: Cloudwater Facebook)

Marble's head brewer Joe Ince, who previously worked for Magic Rock and Buxton Brewery, says losing the tax break would stifle creativity and result in job losses for businesses the size of theirs.

"We would definitely have to lose staff," he says. "If this happened next year our production would be much smaller and it would stifle us in terms of new products, technology and what I'd be willing to take a risk on in terms of innovation. If you have three to four core beers that sell, you'd stick to those."

Meanwhile, larger breweries stand to benefit if the upper level is raised, which Joe believes will find its way into the pockets of shareholders and investors rather than being passed on as a saving to the customer.

"The price of beer for those mid-tier breweries would probably go down because they would be paying less tax, but considering the market is used to a certain price for a pint, would they really lower that? It seems very unlikely to me in that situation."

(Image: Andy Lambert)

Independent Salford Beer Festival organiser Jim Cullen shares his cynicism.

Writing on his blog, Beers Manchester , he said the proposed changes would 'sound the death knell for many micros'.

"These beer bullies want to increase their own profits by removing the competition," he wrote.

"Not by the tried and tested method of takeover, acquisition and closure. But by encouraging the Government to do their dirty work."

Middleton brewery JW Lees is among the businesses that stands to benefit from the proposals. Producing around 85,000 hl (nearly 15m pints) of beer a year, it does not currently qualify for any duty relief but would do if the upper limit was raised.

Managing director William Lees-Jones insists it's not about crushing the competition but creating a level playing field.

"It needs to be reviewed; it doesn't work," he says. "It's a completely exaggerated tax loop. It was a great catalyst to spark off lots of new breweries starting but what's been created now is a price war where people are using the duty advantage, which is massive, to undercut the competition."

Other small food and drink businesses receive no equivalent relief over their larger rivals, he argues - and if the product is worth it, customers will pay higher prices, he adds.

"If you go to Pollen bakery, it's much more expensive than Warburton's but people are happy to pay more for it," he says.

"Pot Kettle Black is probably the best coffee shop in Manchester. Let's imagine they didn't have to pay VAT and could buy their coffee at half the price of Starbucks."

The current system creates 'a disincentive to grow', he argues, with small breweries reluctant to lose the duty relief by upping their capacity. Meanwhile, he claims, medium-sized breweries like his are being 'squeezed'.

"Any long term sustainable business needs to be able to grow," he says.

"We're a medium sized brewery and in the years since the relief was brought in, while there has been a revolution in the number of breweries in the UK, the number of medium sized breweries has reduced by 40%," he says.

"We've just been squeezed."

Still, they're not doing too badly. JW Lees reported a record turnover of £67.7m last year - which William says is largely thanks to a strong pub stable.

"I'm not complaining, we have a good business," he says. "When it comes down to investing, there are areas like supermarkets and distribution and pub companies' guest beers, where we think we need to be growing it, we have got this unfair disadvantage.

"The only reason we're still here, 190 years after we were founded, is we have a guaranteed number of outlets that are selling our beers because we've invested in buying pubs."

A strong heritage is something to be celebrated, but breweries can't afford to rest on their laurels anymore. Times - and tastes - are changing and businesses must evolve if they are to keep pace.

JW Lees is making inroads, collaborating with Cloudwater for Manchester Beer Week and recently recruiting its first master brewer, from 'a well known craft brewery', to head up a new 10-barrel microbrewery being built at its Greengate HQ, where it will produce a wider, more interesting range of beers.

While some smaller breweries are receptive to their efforts, others, like Jan at Marble, remain skeptical about their motives.

"There's a whole set of the old guard that were losing sales who are trying to desperately make money back," she says.

"They are trying to channel this new generation of younger, different drinkers into them - and then they are suddenly trying to put out of business a lot of those places that these drinkers like."