The Fair Pint Campaign

News: Fair Pint welcomes Morgan Stanley pubcos research

11th September 2008

The Fair Pint campaign sees the Morgan Stanley report, which advises investors to avoid leased / tenanted pubcos, as yet further evidence of the need to reform the leased pub market.

A Morgan Stanely report has found that 20-30% of Punch and Enterprise tied pubs may be "uneconomic", with licensees making less than £20,000 a year, or the equivalent of £3.30 an hour for a couple.

Jamie Rollo, a Morgan Stanley analyst, states that pubs are over-rented, as rents have been growing faster than inflation and pub sales, and pubco profits have been growing at a faster rate than lessees’.

In addition, he says that the beer supply tie "looks increasingly archaic", as it is “exacerbating the volume declines in tied pubs, who are unable to reduce price without taking a significant hit to their cash margins.”  As a result, the gap between beer prices in tied and untied pubs is growing.  On average tied pubs are having to sell their beer at 40p per pint more than their managed and free of tie competitors.

On the transparency of the rent review process, Rollo recognises that pubcos should project the fair maintainable rent (FMT) in order to calculate the rental value of a pub, and that in the current economic climate "FMT must have taken a step down."  However, he says that of the 2,400 rent reviews and renewals that Punch has completed since 2005, fewer than 140 have seen rents drop.

It is therefore unsurprising that tied tenants are increasingly leaving the industry, with between 14-16% of the estate now vacant, up from 12-14% last year.

Responding to the report, David Morgan, a chartered surveyor who specialises in pub rent review and a member of the steering group of the Fair Pint campaign, said:

"Morgan Stanley’s research reinforces what Fair Pint has been consistently saying.  Pubcos are demanding rent levels that are unviable given their level of profitability, and there has been little if any progress on the transparency on how those rents are calculated.  Almost every pubco rent review that I get involved with should see the rent decreased, given the current climate, but the pubcos are still demanding rent increases.  The only way that pubcos can ensure that they do not breach their securitisation covenants and justify their vastly over estimated asset values is to take an increasingly ‘bigger share of the pie’ from their tenants.

“At the same time, tied pubs are unable to compete with their managed or free of tie competitors on consumer beer price.  They have no choice but to charge 40p more per pint on average given the huge differential between the free trade and the cost of the beer to tied tenants.

“This research highlights the practices that pubcos, as property companies, are increasingly employing in order to prop up their ‘archaic’ business model.  The industry is going through a very difficult time at the moment, but it is supply tied tenants rather than their pubcos that are bearing the brunt of it.”

Download Morgan Stanley's full research report into leased pubcos from their website.


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 is calling for the upcoming Business and Enterprise Committee’s inquiry into pubcos to recommend that the Trade and Industry Committee’s 2004 recommendations be enshrined in law.

2. Punch and Enterprise collectively own approximately 28% of Britain’s 57,000 pubs.

3. To arrange interviews or for further information, please contact Hugo Legh or Sarah Hyder at Connect Public Affairs on 020 7222 3533 or

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