PMA Posts - The FLVA 2011 - One of the reasons the pub sectors in a mess

RE: GMB: pubco tenants interests too disparate for industrial action

Steve Corbett - 16/09/2011 15:14:26

Matthew, thanks again for responding.

The nature of the rent review process is inherently confrontational and whilst the illusion of partnership is much touted by the pubcos it is rarely, if ever, a reality. And as more money is needed by pubcos to service debt the relationship between pubco and tenant remains far from perfect. This, as far as Fair Pint is concerned, is why trade bodies need to look closely as their real obligations to members and why supposedly independent bodies such as the FLVA and the BII must move away from conflicts that are currently so badly damaging the sector.  

In your response above, much of which I agree with, you choose to hide behind statements such as “I am not privy to the decisions or the funding of the FLVA executive” then wonder why questions surrounding conflicts within your organisation are repeatedly being asked. It's this “I don't really know” approach that has continually let down tenants for far too long leaving them poorly represented by people who ought to know better. If we are to move forward with a truly independent, representative body then it can't be a disingenuous replication of the existing and failing support groups or by papering over industry cracks. If you don't know the answer Matthew then perhaps you have an obligation to your membership to find out.

Whilst I accept that the rent review process contains a certain amount of negotiation a lower rent may not be the correct rent for the tenant or the pub. For far too long 'horse dealing' may have got rent quotes down from an excessive increase to a nominal or nil increase in the past but where the open market rental value is less than the passing rent a falsely inflated tied rental value has been created. This is the sectors Achilles heel. Tenants, at all times, need to take professional advise from a surveying practice or a suitably qualified expert that is on their side and not conflicted with financial relationships with pubcos or brewers.

Fair Pint, along with the IPC and others, is calling for tenants to be offered a genuine free of tie option and we are openly campaigning for reform in a sector which seems to be dominated by large companies and trade representatives behaving as a cartel and suppressing real information about the real problems faced by publicans. The tie isn't the only problem in the sector and to my knowledge no one in FP ever said it was. That said, the beer tie in its various forms has been damaging the licensed sector for many years and in times of much needed change you encounter dinosaur like thinking arguing for the maintenance of an outdated business model for no other reason than that it supports a lifestyle to which a few have become accustomed. There was no need for pubcos and brewers rip off their tenants with unreasonable beer prices that leave their businesses uncompetitive. Sadly they do. The sector isn't able to reform itself Matthew – codes of practice tinkle with the bells and whistles but conveniently avoid the real issues. The industry needs reform and that unlikely to happen without government intervention.

If tenants are now questioning the motives and integrity of organisations such as the FLVA and the BII than that can only be a good thing. For far too long conflicted bodies have waved the flag of a rapidly declining sector whilst ignoring the real cause of that decline. Perhaps now, with groups such as IPC, JFL, Fair Pint and the good work done by the GMB we can begin that much needed reform process.

RE: GMB: pubco tenants interests too disparate for industrial action

Steve Corbett - 15/09/2011 13:34:51

Matthew, thanks for responding.

Your work in helping tenants, I assume for no remuneration, can only be commended. I worry about your qualifications on giving advice at rent review. There are many out there helping tenants in this regard that don't have the expertise or complete understanding of the RICS guidance and the legal terminology contained within the rental valuation document. As you know, it takes many years of study and experience to achieve the level of knowledge required to establish an appropriate rental level and effectively negotiate a suitable conclusion to a review. I've seen examples of 'so called help' at this level where the unqualified rent adviser has, with good intentions, agreed a rent that in no way represents a fair share of the profits of that business but instead is based entirely on what the pub can afford and not what the rent should actually be.

The new rent, agreed by unqualified advisers, becomes the comparable and by default, the benchmark in which all other rents are then incorrectly set. Sadly Matthew, this attempt to help a tenant is one of the single most important factors in the complete demise of a sector as the good intentioned 'helper' unwittingly negotiates an incorrect rental valuation which in turn begins the process in which a whole rental market is distorted.

I'm sure you will agree, ex BDM's helping tenants at review using methods that amount to nothing more than horse trading should be discouraged and hopefully eradicated from a sector that really needs sound professional help at every level. You may of course be a surveyor or have other qualifications that indeed qualify you as an expert in this field and I'm sure you would confirm this before undertaking any work on behalf of tenants in the rent review or lease renewal process. I'm hopeful that Martin Caffrey, ex executive of Enterprise Inns, does the same.

Moving on, I'm saddened that you think I've insulted FLVA members. Looking through my previous post I can see no example of your claim, indeed I see only a factual account of the circumstances to date, all of which can be verified by other IPC members. You mention that you are not in a position to comment on these issues then proceed to give us your unbridled assessment of the inner workings of the FLVA as well as an incorrect opinion of the Fair Pint Campaign. Perhaps you should have taken the time to carry out some real research on your own house and the organisations you criticize before passing comment.

Richard Yates makes an excellent point and I note its one that you have yet to answer. He asks why the FLVA didn't join with the IPC if it is all in favour of supporting tenants through unity? That question is one that remains unanswered by yourself and indeed the FLVA and is one that is right at the heart of whole industry conflict debate. I'm hoping that you can shed some light on the FLVA's reasoning here but I suspect the answer may lie in Solihul and with the senior executives, past and present, of Enterprise Inns,

Finally, your justification on “reaching” members is perplexing to say the least. You imply that the only way to recruit is via the pubcos. Hopefully you can see the difference in recruiting new members that are pubco tenants from tenants whose membership is paid for by their pubco? And if you do, perhaps you can also see that there might be a conflict of interest here as the pubcos may want your organisation to justify their investment in the FLVA. Surely it might have been better to base your recruitment strategy on strength of independent advice rather than rely on a financial “leg up” from those you seek to safeguard your members from? A man more learned than me once said “the right to do something does not mean that doing it is right”

As far as I'm concerned, we are right to question the morals of the FLVA. Not an attack Matthew, just a thought.

Letter to the chancellor, George Osborne

Sent: Monday, 8 April 2013, 23:09
Subject: Pub Industry Statutory Code of Practice

Dear Mr Osborne

I’ve been in the licensed trade for almost 30 years. I have successfully operated numerous restaurant, bar and pub groups. I’m a founder member of the Fair Pint Campaign and a current steering group member of the Independent Pub Confederation (IPC).

Along with many others, I was shocked to read in the Mail on Sunday that you may be looking to block plans to introduce a pub industry statutory code of practice.

In recent years pub businesses have been failing in unprecedented numbers. Much of the damage being caused to publicans, and the cause of so many of these pub failures, is the abuse of the beer tie and rental valuation systems by companies such as Enterprise Inns, Punch Taverns and brewers that copy them such as Greene King, Marstons and Shepherd Neame. Organisations like the British Beer & Pub Association (BBPA) may wish to promote ‘other issues’ such as duty and supermarket pricing as the reasons for pub failures but this simply isn’t true. Higher taxes may not help but they aren’t closing pubs.

The BBPA does not represent publicans. It is paid for by property companies and brewers. The so called Beer Group (APPBG), Chaired by Andrew Griffiths and managed by Robert Humphries, is paid for by those same parties and does not represent publicans. For far too long both of these organisations have pretended to represent the interests of real publicans whilst in fact furthering the interests of a small number of larger benefactors such as Enterprise Inns and Marstons. In truth, the BBPA and the beer group are far too conflicted to present a true and complete picture of the problems faced by pubs and it does not help with the real issues, nor does it confer credit on Government, when the treasury seems so ready to be part of the smoke screen being thrown up by the BBPA, the pubcos and the beer group.

The statutory code was set to level the playing field between tied and non-tied tenants and breathe life back into a sector that has been virtually destroyed by the greed of a few. Vince Cable’s much needed solution, originally put forward by Peter Luff, was all about preserving jobs, livelihoods and community assets. It was about looking for a fair deal for small businesses in a sector that has become dominated by a small number of property companies and large regional brewers. Whilst we are all looking for a statutory code to ease the pressure for tied publicans, we are still losing hundreds of millions of pounds each year to pub companies in order to support the unsustainable debts they took on in the first place. Much of this money, so needed for investment in the sector, is simply paid away offshore to bondholders. This simply can’t be right.

The sector is at a crossroads and a statutory code, with the correct content, will put the industry back on the road to recovery. It will create necessary change and promot a way forward that offers greater protection for existing publicans and newcomers to the industry such that they do not suffer the extraordinary level of exploitation that has been seen is so many cases up and down the country. We have had four select committee inquiries all screaming for change yet the abuse leveled at tied publicans still goes on today. It seems that Vince Cable, Jo Swinson and other like minded MP’s who care about pubs and publicans are keen to see change that will loosen the grip of the property companies that care very little indeed about the future of the cultural icon that is the Great British Pub.

A statutory code of practice that enshrines in law the principle that the tied tenant should be no worse off than if they were free of tie is the only supportable position. I hope you will agree.

Yours Sincerely

Stephen Corbett

Evidence to Government's Pubs Consultation - The truth isn't what it seems

STEPHEN DOUGLAS CORBETT

West Essex Golf Club, London E4 7QL

Tel: 07946721117 email: stevedc76@yahoo.co.uk

Pubs Consultation

Consumer and Competition Policy

Department for Business, Innovation and Skills

3rd Floor, Orchard 2

1 Victoria Street

Westminster

SW1H 0ET

Email: pubs.consultation@bis.gsi.gov.uk

Pub Companies and the Beer Tie – A Case for Reform

The future of the British Pub is in danger. Pubs are still closing at a rate of around 26 a week – thousands have been lost over the last few years and many more individual businesses have failed or are failing. The reality is that this is only the tip of the iceberg – there are many thousands more under invested, asset stripped, once vibrant thriving pubs, waiting beneath the surface ready to float onto the market as ‘serially failed’ tied pubs suitable for alternative use. In a society where the pub is at the heart of many communities, this simply is unacceptable.

The real reasons for pub failures are hidden behind a wall of deceit and a smoke screen of National proportions put in place by those causing the damage in the first place and perpetuated by their lobbyists and ‘paid for’ trade organisations intent on maintaining industry status quo for no other reason other than it benefits an irresponsible few. The beer tie and the ‘Pubcos’ that operate it are the fundamental cause of the systematic failure of the UK’s pub sector. Part of Britain’s legacy, heritage and tradition is being destroyed in front of our eyes for the sake of satiating the demands of short term private equity greed.

Around 50% of pubs in the UK are owned by Pub Companies - large property companies known as ‘Pubcos’ who lease pubs out to tenants to run as their own business. These pubs are contractually obliged to buy their beer from the Pubco who charge over market rent for the property and as much as double the price for beer that is available on the open market - this is known as the beer tie. 

The sector has been investigated no fewer than 26 times since 1966; 22 times in the UK and 4 in the EU, and each time there have been grave concerns about the Pubcos and the beer tie. In more recent years the BIS Select Committee have examined the model 4 times and each time they have produced a damning report that painted a worrying picture of Pubco abuse, lack of tenant support, agreements not honoured and downright bullying.

After much political debate the Government have decided to act and are currently consulting on proposals to establish a Statutory Code and an Independent Adjudicator to govern the relationship between large pub companies and their tenants. Although long overdue, they have at last recognised that after many years of serious concerns and numerous complaints the pub is sector dominated by unfair contracts, anti-competitive behaviour and market foreclosure that has damaged pubs, driving prices up - and quality down - for publicans and consumers alike. The overriding factor in all but a few cases is the disgraceful way the Pubcos and brewers that copy the tied supply model choose to implement the beer tie arrangement.

This document seeks to draw attention to the terrible effects that the tied model and the Pubcos are having on pubs, part of the cultural heritage of the UK and creating much needed debate and honesty in a sector where it has been missing for so long.

The beer tie – A low cost road to ruin?

Pubs operate under many different forms of ownership and management, ranging from independent free houses to pubs owned by large pubcos. Most will come under the following descriptions:

• Freehold - The owner buys the pub outright and is free source products from any supplier at competitive market rates.
• Leasehold - May operate under a tied or a non-tied arrangement.
• Tenancy – A short term tied agreement, typically for a 3 to 6 year term.

There are many other agreements most of which operate outside of the Landlord & Tenant Act and provide the occupying tenant little or no security. These agreements include; Franchise, Tenancy at Will (TAW), Retail Partnership etc. Some Pubcos and brewers are seeking to use these agreements as a replacement to traditional leases in an attempt to circumvent calls for greater transparency and potential Government legislation. Certainly, there has been a push by some of the larger Pubcos to place prospective tenants on short term lease agreements that offer no rent review provision, relying exclusively on annual RPI linked increases to push rents upwards. Pubcos have committed themselves to removing upwards only rent review clauses from all lease agreements yet still include RPI linked rents. In a declining market place any form of compulsory rent increase agreement simply cannot be right.

There is no evidence to suggest that it would be any more expensive to enter into a free of tie lease than one that is tied. This is a myth kept alive by the Pubcos who seek to divert attention away from the fundamental problem caused by the beer tie. Before the emergence of the Pubcos in the early 90’s, free of tie leases were plentiful and competition was healthy. It wasn’t unusual to see freeholders offer reverse premiums or rent free periods in the hope of attracting experienced operators into successful pub businesses. Post 1989 Beer orders, armed with cheap debt, the Pubcos aggressively acquired tens of thousands of freehold pubs and overnight pubs and the supply of beer in the UK simply changed hands. Gone were the real ‘low cost’ entry offers as the transfer of power and profit shifted to companies such as Punch Taverns and Enterprise Inns and entire industry was essentially brought to its knees.

Pubcos actively and glossily market their model as a low cost entry to the pub business. This all too often attracts vulnerable, naive, ill-advised, ill-resourced and highly inexperienced people who invest their savings and who frequently find themselves ruined within 2 years or less. The standard, quality and success of any pub business depend on the level of experience, commitment and investment by the actual publican. This cannot be achieved in a distorted and totally unfair market. Where once there was competition between tied and free of tie leases, thousand of tied tenants have since suffered at the hands of the dominant, un-regulated Pubcos and brewers that copy them, losing their homes and their livelihoods in the process. The true cost on an entire society will never truly be known. In a very short space of time a low cost entry became an extremely high cost exit and the fallout is evident for all to see.

Why are pubs closing?

There are currently around 50,000 pubs in the UK. These are tough times and consumer confidence is weakened by the expensive cost of going out brought on in the main by overinflated tied product prices and a nation of serially failing, under invested pubs. It is clear that the increases in product prices purchased through the beer tie, combined with high levels of rent, is leading to the failure of many more tied pub businesses than free of tie.

Much scaremongering has taken place by the Pubcos with little foundation. Campaign for Real Ale’s (CAMRA) own statistics indicate that more tied pubs are closing than free of tie and in fact there are more free of tie pubs now than there were five years ago. The BBPA have consistently presented pub closure figures in a misleading way as they do not include reclassification of pubs from tied to free of tie just before they close. A pub that may have been tied for the last 50 years is sold to a property developer as a free of tie pub, subsequently, on receipt of planning permission, closes and then registers in the BBPA figures as a free of tie closure. This is misleading and wholly inaccurate.

Whilst pub closure figures are a good indication of the poor health of our sector they capture only part of the picture. The Pubcos still refuse to publish individual pub failure rates where the tenant surrenders the lease, goes bankrupt or simply hands back the pub keys because they can’t make it pay, only to be replaced with a new tenant or a management company. This ‘churn’ rate, if published, would provide a damning picture of sector abuse and paint a more accurate picture of the damage being caused by the Pubcos and their rapacious exploitation of the beer tie.

We do, however, have some indication of the tied sector churn rate – Enterprise Inns most recent accounts show that out of 5,720 pubs, 1,463 have had tenants in them for less than a year, suggesting a churn rate of 26%. This is a conservative estimate because it doesn’t include pub closure figures, TAW’s or pubs that have had multiple ‘churns’ in a short space of time. In 2010 Neil Robertson, the then CEO of the British Institute of Innkeepers (BII), issued a press release stating that one pubco had a churn rate that had dropped from 65% to 35%. Even if were to only extrapolate the lower figure of 35% across the whole sector this would indicate an annual tied churn rate of circa 10,000 pubs. As the average pub is thought to employ 10 staff that’s around 100,000 lost jobs in the pub industry annually.

Has self-regulation worked?

The tied model has clearly failed and the pubs sector has been stifled by the unreasonable and unsustainable business practices of the Pubcos. There are parallels with what happened with the banks speculation, which did so much damage to the economy. Some of the pub owning companies can be seen to have behaved in a similarly irresponsible manner, overvaluing their estates and borrowing vast sums against this, which has led to not only their mind boggling levels of debt but also to them taking much more than is reasonable as a proportion of income from their pubs. This is damaging and destroying what would otherwise, even in difficult economic times, be viable small businesses that of course also employ local people and buy local produce.

The problem is now as always has been that under a self-regulated approach there is no will and certainly no mechanism in place to restrain the pubcos from abusing their dominant position and taking more than a fair share of the a pubs’ profits. The idea of relying on corporate goodwill where it clearly doesn’t exist is ludicrous. The BBPA have confirmed that they are not empowered to offer provisions that balance risk and reward. The self-regulatory body that proposes to govern over PIRRS and PICAS, has been unable to confirm, despite written requests, that it will seek to deliver the Government's commitments of 'fairness' or that a 'tied licensee should be no worse off than if they were free of tie. The very fact that the self regulatory process is unable to offer any reassurance that it seeks to deliver the same commitments as Government, indicates there is no motivation from the Pubcos to address these fundamental issues. The absence of such assurances undermines the credibility of the self-regulatory process and relying on any part of it to deliver meaningful progress, even in its perceived state of independence, remains a meaningless exercise.

The Pubcos introduced codes of practice shortly after the T&ISC in 2004 and after six separate attempts we still have self-regulated codes that address nothing more than the peripheral and less significant issues. A self-policing code funded entirely by the very people causing the problem simply cannot work and it’s crazy to watch so many people get distracted by it.

Are the fixed costs in a tied pub lower?

Far from being a low cost entry there is much propaganda surrounding the tied tenant having a reduced ‘risk profile’. Pubcos argue that lower fixer costs (annual rental charges) are offset by higher variable costs (higher price for beer purchases) when this simply isn’t the case at all. In a recent benchmarking survey, the Association of Licensed Multiple Operators (ALMR), found that tied rents were higher than free of tie rents and in doing so, dispelled the myth that the true cost of the tie was countervailed by cheaper rents – the reason that the tie is allowed to continue under EU block exemption.

In 1969 the Monopolies Commission, Beer – A Report on the Supply of Beer, highlighted the fact that there was little difference, if any, between the tied and free of tie price of beer sold to publicans. Today that gap has widened, so much so that an average tied pub could pay as much as double for beer than a free of tie tenant. Despite the current recession, Pubcos are continuing to raise beer prices and rents forcing many of their tenants out of business. As more of their pubs close and fewer people want to take a tied lease the Pubcos are trying to squeeze more income out of fewer and fewer pubs. Like the banks, Pubcos have been caught out by over leveraging and securitized debt and it is the tenants and consumers that are suffering.

I run small, free of tie, low turnover bar in a golf complex in North London with an annual barrelage of less than the national average. While tied publicans across the UK continue to pay an extortionate price for beer, perhaps as much as £160 for a 11 gallon keg of lager, I pay less than half for the same product. I have attached the latest price offer from Heineken UK showing Fosters available at only £73.23 a keg (including retrospective discounts) and a FREE promotional, marketing and training package that would never be available in the tied sector.

In Summary - Heineken offer to small free of tie bar:

Heineken keg (11gal) - £240 brewers barrel discount

Fosters Keg (11gal) - £225 brewers barrel discount or £245 a barrel with retrospective discount.

• Heineken UK will refurbish all existing bars & cellars to ensure optimum dispense across portfolio
• Provide product quality & training initiatives to deliver the perfect drinking experience

• Heineken will provide all owned branded glassware free of charge
• £1k per year for the you to spend on anything required
• 6 free 11g kegs made available for captains day and charity days, etc
• Access to all Heineken free stock promotions across all product sectors

The OFT did not give the pubcos a clean bill of health!

Pubcos and the BBPA have claimed a clean bill of health by the OFT but this is simply untrue. It was not in the mandate of OFT to consider business to business issues instead they only considered the pub sector as it applied to consumers. No report by a competition authority for decades has found anything other than problems, of one sort or another, in the pub sector. Whilst the OFT, in response to CAMRA’s 2010 Super-complaint, declined to undertake a market study they did caveat their decision by stating they did not have a mandate to consider competition issues, supply terms or the fundamental issue of the tied tenant being no worse off than if they were free of tie, nor did they have the power to consider the commercial relationship between landlord and tenant. Contrary to Pubco assertions It is wrong for them to claim the OFT gave the industry a clean bill of health when this is clearly not the case.

Will the price of beer rise under a market rent only?

Reform would undoubtedly reduce the cost of the beer in tied pubs as product cost would be significantly reduced. If tied tenants were able to buy beer on the open market at a competitive price, this would result in some cases of a saving of up to 50%. The tenant could then choose to offer beer to their customers at competitive rates or use the increased profit to reinvest back into their business.

Will brewers stop brewing?

The current dominance of the Pubcos in the beer wholesale market creates significant barriers to entry for smaller brewers. Brewers can only supply their products to Pubco tenants if they are on the Pubco’ exclusively restricted product lists. Pubcos require that brewers offer them substantial discounts, meaning that some small producers end up making a loss on supplying Pubco tenants. A substantial number of products from small and regional brewers are excluded from the Pubco lists or priced at an uncompetitive level. In many cases smaller brewers are almost completely excluded from their own local markets. A truly open and competitive market will provide plenty of scope for local and regional brewers to promote and distribute their products resulting in greatly enhanced choice for the publican and the consumer. There are around 1,000 brewers in the UK and the vast majority do not have access to two thirds of the pubs in the country.

Fewer pubs will close.

It is difficult to see how the prospect of offering tied licensees the right to a fair rent and being able to sell beer to their customers at a fair price would result in pub closures. The Pubcos and their lobbying arm; the BBPA, will tell us that more pubs and breweries will close under a MRO but this is entirely without foundation with no evidence to back it up. Reform of the beer tie through offering tied tenants a market rent only option is intended to result in higher licensee profitability regardless of the type of agreement they have. With increased profitability comes increased stability and financial prospects for the licensee, this cannot result in further pub closures but instead offers a sustainable future for the tied model and potential growth right across the sector.

Will Pubcos stop investing?

Pub owning companies currently claim they invest in their tied estates. They have argued that if a licensee chose to terminate the tied agreement this purported investment would cease. On a market rent only basis the pub company would only derive income from rent and not from over inflated products. Unlike other commercial agreements, like shops and offices, rent in the pub sector is determined by licensee profitability. It follows that if the only revenue stream is rent the pub company would be incentivised to ensure their licensees were trading profitably. Investment and support of licensees, whatever their agreement, would therefore form the foundation of any forward thinking and optimistic pub owning company.

The Solution – A statutory code and a market rent only option?

Government is now proposing to legislate in order to secure a healthy pubs industry and I believe the Statutory Code of Practice should include the following provisions:

• The tied tenant should be no worse off (or better) than a free-of-tie tenant.
• An option for the tenant to opt out of their ‘tied’ arrangement resulting in them paying a market only rent to the pubco (MRO) and allowing them to acquire products from any source.
• There should be a provision contained in all codes that contracts will be fair, reasonable and comply with all legal requirements.
• The principles of both fairness and the tied tenant being no worse off should apply to all pub owning companies with the MRO applying to only those with over 500 pubs.

The Market Rent Only option (MRO) is absolutely not abolishing the tie, indeed it is making it work as it should. That is, if you pay more (above market prices) for your beer, then in return your rent should be lower (than market) and ‘countervail’ inflated product prices leaving a scenario where the tied tenant is no worse off than if they were free of tie.

The Market Rent Only option reduces Adjudicator work load offering a self-policing opportunity at an individual pub level. If it were made available to tied tenants it would enable individual operators to compare and contrast their tied agreement with the circumstances and profitability of being free of tie. It is the terms of the tied agreements, if perceived to be unfair and unreasonable that will result in tied operatives choosing to release themselves of the burden of being tied. The threat alone of this flexibility will ensure that those pub owning companies operating tied agreements will seek to maintain fairness and competitive behaviour rather than using their inflexible models as a tool to oppress their licensees. If the Pubco operated in a manner that was both fair and reasonable, no tied tenant would opt out of their tied agreements, choosing instead to stay tied in a fair and equitable agreement.

The unintended consequences.

Positive outcomes of the Beer Orders in 1989 were the breaking of the stranglehold held by a handful of brewers on the UK pub sector and to increase the choice of beers to consumers, the Orders succeeded in both those aims. An unforeseen consequence was the birth of pub companies, little more than non-brewing property companies. The failing of the Beer Orders was the absence of a review and variation of the regulations. This fundamental flaw has been considered and gaming of Government intentions restrained by allowing the proposed Adjudicator the power to review alter and amend the statutory code. Leaving the beer tie model in an unregulated form enabled exploitation of what are essentially unfair contract terms in commercial agreements. Maintaining industry status quo is simply not an option.

You signed it so it’s your fault

It's an ignorant argument - the courts and parliament are there to encourage the development of commercial models with contractual agreements being constantly challenged and updated. This shouldn’t be any different in the pub sector. It is the role of society, the courts and parliament to make the changes that are required. If the government look with open eyes at the current situation in the pub sector then they will see what four successive Business and Enterprise Select Committees saw - an inefficient and exploitative market place in the hands of an irresponsible few. 

Why Government must intervene.

The pub sector is in urgent need of reform. Government must act now and introduce a statutory code of practice that enforces the principle of the tie tenant being no worse off than if they were free of tie. The adjudicator must have real power to amend tied contracts at any stage in the future should the market adjust negatively or Governments immediate proposals not go far enough. Tied publicans across the UK should be allowed to compete in a highly uncompetitive market place and the only sure way of achieving this is to give tenants the choice to opt out of the beer tie.

A genuine market rent only option, irrespective of whether the tenant chooses to take it, will mean:

• Fewer pubs will close.
• More jobs created
• More investment directly into pubs which will encourage a new breed of patrons previously put off by the cost and inconsistency of run down underperforming tied pubs.
• Dealing direct with brewers will mean greater discounts forcing more competition at the pump
• Greater access to market for brewers
• Increase revenue for the Treasury

There have been many people and organisations that have highlighted the disgraceful continuation of the ill-conceived, damaging and highly anti-competitive practices that exist in the UK pub sector. Britain, being a small place, has allowed for this insidious structure to be set up by the Pubco founders - most of who have moved on to other pastures. Along the way they have found our quaint and perhaps naive, little industry very easy to manipulate, pillage and ruin. The sector was built on community, a common heritage, love of pubs and beer and a perhaps even a sense of fun in some way. Fertile ground of course for the pubcos and their premeditated pursuit of short term gain.

Be under no illusion, the Pubco tied model is about financial engineering and not about running pubs. They employ a relative handful of staff yet have negative impact on the industry as a whole. By exploiting a loop hole in the well intentioned 1989 Beer Orders, Pubcos have evolved through huge borrowings and the extraction of vast sums of money from the industry to pay down this accumulated debt. The question that has to be asked is, why should retailers and consumers pay significantly above the market price for goods to finance the existence of a business model which benefits only a few?

My observations are underpinned by thirty years of professional experience in the pub trade. I write this document from the view point of someone with both free-of-tie and tied pub experience having operated pubs, bars and restaurants all of my adult life. Up until 2009 I operated a busy tied Enterprise Inns pub with takings of over double the national average. The pub was a fantastic asset to the local community; way ahead of its time in terms of product range, service and customer accountability. The beer tie systematically allowed transfer, without thought or consideration for the tenant in occupation, over 95% of the pubs profits to Enterprise Inns. My business never stood a chance. My pub closed its doors for the final time in November 2009 and took with it my entire life savings, destroyed my family and left a financial black hole of over £250,000. I have not operated a tied pub since.

Stephen Douglas Corbett

14 June 2013

07946 721117

I know a pub...

It sits in a hamlet off the beaten track, two miles from the

nearest sizeable settlement which in turn is ten miles from anywhere that might

reasonably be described as civilisation.

The public bar is rumoured to have a pool table and a

jukebox, but I don't know of anyone who's ventured in that side since God was a

boy.

The lounge is dark and dingy, there's little choice of beer.

Wadworth's 6X, Stella (from a can) or Natch cider (from a bottle). There'll be

a house red if the landlord hasn't already drunk it. Any of these will likely

be served in glassware that would benefit from a second pass through the glass

washer if indeed they have one.

They do not sell food.

There is no jukebox, fruit machine, television or anything to

suggest that the room has been altered in 100 years. There is a patina that

could only have been created by so many smokers over that period of time.

It is quiet enough at lunchtime, maybe two or three folk will

be in and occasionally the landlord will add his wisdom as he opens his second

bottle of wine (he is educated, ancient and autocratic).

He opens at 7.30 in the evening and often as not the place is

packed. Some folk will put their wellies on and walk 2 miles across open fields

and a golf course, braving windy, wet November weather to get there.

Why does this place work?

Is it because people have to talk to each other for amusement

because there are no distractions such as a telly?

Or is it because he has something that one rarely sees these

days: an open log fire that burns at all hours in all seasons and weathers?

Surely it's not because his "watch stops working"

now and then?