Because it gets freaking cold when you are out at sea! Royal Navy Regulations^1 explicitly allowed for the growing of beard to protect the face against the cold. Minutes from the Admiralty meeting when they were drafting the rules makes clear that they wished to save money on face warmers, and with a strength of about 135,000 before 1914, it is estimated that they saved enough money to fund the construction of two destroyers during the War.^2 The Germans were quick to copy this as they are, of course, a fiscally minded country, and eager to same some money. Of course, the unforeseen consequence was that the market for domestically produced face-warmers was greatly harmed (Britain imported theirs from Canada, who was able to make up the difference by selling to America), and many believe this to be the underlying cause of Germany's economic collapse in the 1920s.^3

An interesting sidenote, is that the regulations in the British Navy saw a real hierarchy emerge between those who could grow full beards, and those unable to. It became a real stigma, and by the late 1920s there was a major investigation into the hazing suffered by the less hirsute members of the Royal Navy. A number of officers were disciplined, and an Admiral was quietly retired to avoid scandal^4. Even so, it was unspoken knowledge that to advance in rank up through the 1950s, a beard of at least four inches was essentially a prerequisite, at which point Queen Elizabeth II had to personally intercede (well aware of the type of hazing that her beardless Husband had suffered during his time in the Royal Navy) to ensure that advancement would be based on merit, and not hairiness.^5

^1 Officer and Enlisted Dress Codes, Ch. 2 Sec. 'S', 1911 Revision

^2 Board of Admiralty Budget Report for 1919

^3 Saving Face, Losing Pace: The German Economic Slide of 1921, by Pelzig Kinnreff, published in World Economic Review, Mar. 1973

^4 Court Martial proceedings of RAdm. Normand Barbe, Feb. 31, 1929.

^5 Royal Proclamation of June 1st, 1955. Declassified in 1980.

EDIT: THIS IS AN APRIL FOOLS JOKE. PLEASE DISREGARD!!