2nd July 2008
One year on since the smoking ban, the vast majority of publicans are in no doubt that it has had some impact on their trade. They will also tell you that it is not the real reason why pub landlords are going out of business and pubs are closing. The truth is that the major cause of difficulty for half the pubs in the country is the ‘supply tie’.
A small number of Pubcos own about half of the pubs in Britain, with the Big Three owning more than 16,000 between them. Under a ‘tied’ lease agreement, tenants have no choice but to buy all of their beer, and some other supplies, from their Pubco; must pay a profit related rent, which often has an upward only rent clause; and pay a percentage of their income from fruit machines (AWPs) to their Pubco.
The Pubcos act as middle men, selling the beer to their tenants for approximately twice the price that they buy it from the brewer, despite the fact that they never directly deal with the beer itself. Of the £2.80 that a customer pays for a pint of beer in a pub, a massive 60p goes to the Pubco, with a further 75p going to the Government and 26p going to the brewer. The remainder is used up in rent (to the Pubco again), staff and the multitude of other operating costs. This leaves next to nothing for the licensee. So many tied pubs are facing difficulties and bankruptcy as a result.
The Fair Pint campaign is calling for the Government to address this unfairness. Too many publicans are being beaten by the tie. It is time for the Government, consumers and publicans alike to seek fairness and a fair pint.
Brian Jacobs, a member of the Fair Pint steering group, said:
“Whilst the smoking ban, supermarket prices and Government duty increases have had their impact on pubs across the country, they cannot explain why busy and successful pubs are going out of business, rather than just those that are unviable in the current economic climate.
“The Pubcos behemoths are simply property companies who squeeze their tenants out of every penny that they can conceivably make, meaning that this British institution is becoming increasingly unviable due to corporate greed.
1. The Fair Pint campaign is a coalition of independent, tied landlords and industry experts that are seeking to highlight the plight of UK landlords and consumers who suffer as a result of ‘tied lease agreements’ to pub companies (pubcos). The campaign was launched in the Houses of Parliament in May.
2. The Business and Enterprise Select Committee have announced that they are going to investigate the activities of Pubcos. Details of their inquiry can be found on the Committee's webpage.