Thursday, 30 July 2009

All tied up?

In recent weeks the role of large pub companies (or pubcos) was thrust into the spotlight following an investigation by the Business and Enterprise Select Committee

Committee member Brian Binley MP said: “We had a lot of complaints about relationships between certain pubcos and their tenants so we felt it was right and proper to look into the matter.”

The pub tie is an agreement, between landlords and pub companies, allowing tenants to run a pub without owning the property while being tied in to certain Beers and products from the pubco.

The tie itself has been in use for nearly 200 years, but it is only since the 1989 Beer Act that pub companies, acting as middle men between landlords and breweries, have flourished.

Fellow BEC member Lembit Opik MP said: “The thing must be brought to a head; if nothing is done then pubs will continue to decline.

“The single biggest change needs to be a level playing field for the tenants of tied pubs. They pay a lot for their beer, often more than if they were free hold and they lose a lot of their income on the arrangements made between the landlord and pubco.”

The BEC report itself has recommended that the tie be investigated further by the standards commission, a body with strong legislative powers.

Mr Opik said: “The standards committee have the teeth to make a significant intervention if that is what is called for. This could lead to the biggest change in the pub environment since 1989.”

Following the BEC report landlords have come together to form the Fair Pint Campaign and call for the abolishment of the tie.

Co-founder Michael Bell said: “The cost of tied beer is now almost twice as much as you would pay at a standard wholesaler.”

A lot of pretty good pubs have gone to the wall that should not have done.”

However pub companies have hit back following the report, in a statement Enterprise Inns one of Britain’s largest pub companies said: “We are currently spending c£1.4m per month on rental support and special discounts and have also frozen prices on five key brands across the estate, costing us an additional £700,000 per month.

“From a tied licensee’s perspective, the ‘compensation’ for paying more for beer is that he/she pays much less rent and may receive a vast array of additional support services.”

Yet Mr Bell feels that they could do more; “They are not doing enough for landlords at all, the situation is very bad. The rent is about as highly rented as it should be and yet we are still paying over the odds for beer.”

Director of McManus pubs Paul McManus agrees: “I think the pub tie is not fair, the pubcos were just having a revolving door of a manager. They must know that with some pubs that business model doesn’t work.

“They were letting people buy into this tenancy agreement, maybe some people would sell their house to raise the money and then it wouldn’t work they would kick them out and get the next person in.”

However other areas of the industry feel that other factors are to blame. The British Beer and Pub Association who represent pub companies feel that it is the tax on beer that is driving prices up rather than the tie.

BBPA Communications manager Neil Williams said: “we certainly feel that the recent problems the industry has suffered are not due to the pub tie. They are due to other factors, high taxation, rapidly increasing regulation and very, very difficult economic circumstances.”

Wetherspoon’s Media Manager Eddie Gershon said: “People are hurting and taxation on beer is very very high, we would defiantly call for a reduction on that.We know it’s cheaper to buy drink in a supermarket or to go to Calais and buy it but when you go to a pub you go for a social experience and that is what we have got to sell.”

However BEC member Mr Opik disagrees, arguing that a review of taxation is not as important as reviewing the tie: “There may be an investigation to be had there in the future but is not nearly as pressing as getting the pubcos sorted out.

The pubcos are very angry about the report and they have become very defensive about it, but somebody had to say something and the tenants didn’t have the power to do it.”

Iain Loe from the Campaign for Real Ale summerised: "In an ideal world we would like to see more freehouses run although we do see the value of the tie.

"Many of the family breweries in Britain do run their pubs very responsibly they give help to their tenants or lessees."

The pub tie is set to go before the Competition commission in the next few months and may yet herald a new chapter for the British pub sector.

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