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Pub Companies and the Opposition Debate

On 21/01/14 by Brigid Simmonds (Chief Executive)

Once again the BBPA and our pub company members are in the firing line as the Labour Party holds an opposition debate on pub companies and their relationship with their lessees and tenants.

BBPA is quite clear: We support the tie and we believe it is vital to the British pub trade. The tie provides a low-cost, low risk partnership between pub companies and their lessees and tenants. For as little as £30,000 entrepreneurs can run their own pub. If you wanted to buy a pub, it would probably cost in excess of £500,000.

It is the recession, high taxes and too much red tape which are the causes of pub’s recent problems, as of course we have seen elsewhere in the high street.

If you look at the responses to the consultation which BIS published just before Christmas, you find sane and sensible organisations urging caution. London Economics, appointed by BIS to undertake an economic appraisal of the proposals, believe that 18% of the pub covered in the consultation would become unviable without the pub company support. The OFT was quite clear that requiring pub companies to offer a free of tie option would set an unhelpful precedent and that large non-brewing companies already source beer from a variety of suppliers.

Perhaps most important of all, the industry has moved on. Self regulation is working. In no other industry can you complain about rents and any other behaviour from your landlord at so little cost. Any commercial tenant facing upward only rent reviews and a landlord based overseas would welcome the support we offer with open arms. The Self regulatory code (now at version 6) can of course evolve, but it already provides transparency and tackles a range of commercially sensitive issues.

A number of claims have been made by our detractors about the cost of beer, how prices rise and that the pub company takes too much in profit, but the reality is that pub companies invested some £200 million in capital in 2012. Do we seriously believe that without this support the banks would be providing the £30,000 needed for a new kitchen? There has been a transfer of value through additional support, rent decreases (down some 5% in 2012) and funding of non-obligatory repairs. Beer is cheaper in tenanted and leased pubs than it is in the independent sector.

Breaking the tie would lead to brewery closures and because competition law would not allow the Government to specify craft ale, the tenant would be encouraged to sell the pub’s best selling lager, rather than craft ale from local brewers.

There is a lot of emotion in this debate, but too often MPs only hear one side of the story. They must be encouraged to ask the pub company for their views too. It is not in the interest of pub companies that tenants change or pubs close. At the end of the day. failure is often down to a lack of understanding about the use of cash. More and more pub companies are providing ‘stabilisers’; support for a year or more with a sharing of open book accounting and real help from professionals along the way. How many other small businesses receive this sort of support from their landlord? The pub company model is evolving. Statutory intervention is not needed and would remove the benefits already derived from the Chancellor’s cut in beer duty in last year’s Budget.


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