Commons pubs vote ‘hugely damaging’

Published: Wednesday 19th November 2014 by The News Editor

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Britain’s biggest pub landlord today warned that a vote by MPs to reform the historic “beer tie” between tenants and pub companies could result in a fresh wave of closures and major job losses.

Enterprise Inns said yesterday’s successful Commons rebellion “threatens to have serious unintended consequences for publicans and the industry at large”.

The British Beer and Pub Association (BBPA) said the vote was “hugely damaging” and that the Government’s own research showed it would result in 1,400 more pubs closing, with 7,000 job losses.

But the Campaign for Real Ale (Camra) said the change would secure the future of pubs, helping them to stay open and ensure the cost of a pint remained affordable. It was also backed by the Federation of Small Businesses (FSB).

The vote saw the Government suffer its first legislative defeat – by 25 votes – as Tory and Liberal Democrat MPs rebelled against the Coalition to support an amendment to the Small Business, Enterprise and Employment Bill.

It will mean pub tenants tied to big companies being able to demand a “market rent only” (MRO) agreement from them.

Currently, tied pubs exclusively buy alcohol products from the parent company in return for reduced rent on the premises and other benefits but there are widespread concerns and complaints about the abuse of the practice by big firms.

Liberal Democrat MP Greg Mulholland, who proposed the reform, said it would “simply bring back market forces into a sector that frankly has become grotesquely anti-competitive”.

Mr Mulholland stressed that his market rent only plans would come in gradually over five years.

It would only be triggered at key points in the cycle of a lease or tenancy, such as rent reviews, lease renewals or on the sale of the title of a property, or if there was a major change in prices or circumstances such as a cheaper pub opening next door.

This period would then be followed by two potential periods of negotiation between the pub and the larger owning company with an independent surveyor to adjudicate over any differences in opinion.

But Simon Townsend, chief executive of leased and tenanted pub operator Enterprise, which has 5,500 pubs, sounded a grim warning.

He said: “This amendment, which was not supported by the Government, threatens to have serious unintended consequences for publicans and the industry at large.”

He said a Government review had rejected the “market rent only option” as damaging to pubs, communities and the wider industry, and would lead to “widespread pub closures, significant job losses and reduced investment in the sector”.

Mr Townsend added: “We continue to believe the tie offers the best operating model for the vast majority of our publicans.

“In light of yesterday’s vote we will continue to assess all options to safeguard the interests of both our publicans and shareholders.

“In the meantime we will monitor the situation closely and await the Government’s response to this unwelcome development.”

BBPA chief executive Brigid Simmonds said: “This change effectively breaks the ‘beer tie’, which has served Britain’s unique pub industry well for nearly 400 years.

“It would hugely damage investment, jobs, and results in 1,400 more pubs closing, with 7,000 job losses – as the Government’s own research shows.”

But Camra chief executive Tim Page said: “Allowing over 13,000 pub tenants tied to the large pub companies the option of buying beer on the open market at competitive prices will help keep pubs open and ensure the cost of a pint to consumers remains affordable.

“The large pub companies will no longer be able to charge their tenants prices up to 60 pence a pint higher than open market prices.”

FSB national chairman John Allan said: “The freedom to stock a wider range of beers will provide a boost to local economies while giving consumers greater choice.”

Punch Taverns, which has around 4,000 leased and tenanted pubs, said the reform “would have significant adverse consequences for Britain’s community pubs”.

It said the Government had earlier rejected the mandatory “free-of-tie” option of tenants as it was likely to have caused uncertainty and “unnecessarily risked leading to higher levels of pub closures and job losses”.

The group said: “The Government’s own research indicated that breaking the tie would be expected to result in between 700 and 1,400 more pubs closing with 3,700 to 7,000 job losses.

“Furthermore, we believe that the amendment would be likely to have the effect of reducing pub investment, reducing consumer choice and exposing tenants to higher fixed rents, reduced levels of support and greater risk of failure.

“We are currently considering the potential impact of the amended Bill on Punch, including the implications for our substantial pub investment programme and our disposal plans.”

Shares in the group were down 9% while Enterprise fell 14% and Spirit Pub Company was 6% lower.

Published: Wednesday 19th November 2014 by The News Editor

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