Thousands of Scots pubs in the last chance saloon

"We have to do more but the market is totally unbalanced in price". Picture: Getty

"We have to do more but the market is totally unbalanced in price". Picture: Getty

3
Have your say

THE NATIONAL institution of the pub is facing further turmoil amid claims thousands could be forced to close, writes Stephen McGinty.

THE stone and brown wooden frontage of The George bar in Hamilton is old fashioned but warm and welcoming. It is here that Lynn and her husband Colin have spent 23 years nurturing what is as much a community centre as a public house.

“You know your locals well,” said Lynn. “And you worry when you haven’t seen the older ones for a day or too.” Like many Scottish pubs business is far from booming as patrons slouch off their bar stool, lulled by the cheap prices in supermarkets to crack open a can at home, but Adams is an optimist: “We’re just keeping our head above water and getting there.”

Yet on Wednesday evening Lynn Adams had something to celebrate and did so with her ­“usual”: a pint of Claverhouse real ale. Earlier in the day, while she was in the kitchen toiling over a series of pub lunches, MPs in the House of Commons voted to support an amendment to the Small Businesses, Enterprise and Employment Bill.

The presence in the chamber of the six SNP MPs, who traditionally abstain from voting on English legislation, were an indication that for Scots publicans like Adams, change is in the air.

As she explained: “It is huge. It is momentous.”

CONNECT WITH THE SCOTSMAN

Subscribe to our daily newsletter (requires registration) and get the latest news, sport and business headlines delivered to your inbox every morning

• You can also follow us on Facebook, Twitter and Google +

The amendment would end the controversial beer-tie, a clause in pub lease contracts which compels the tenant to buy beer from their landlord. In Scotland today around 1,000 pubs, or one in five, is leased from a pub company, and so the publicans are compelled to buy their beers, wines and spirits at prices as much as 90 per cent above what a “freeholder” – a publican who owns his establishment outright – could pay on the open market.

But according to Simon Townsend, chief executive officer of Enterprise Inns and Britain’s biggest landlord, the move could be “damaging to pubs, communities and the wider industry” while the British Beer & Pub Association (BBPA) warned that it could result in up to 1,400 pub closures and 7,000 job losses.

While Adams prefers not to reveal the exact prices she pays, other publicans explain that a firkin of ale (nine gallons) is available for £70 while they will be charged £120, a keg of Tennent’s lager (lowest available price £99.99) will cost £135, while a case of Budweiser, available for £15 in a supermarket could cost them as much as £30.

However, the reason these contracts are currently in place is that the major pub companies allow new landlords to rent expensive properties at discounted rates, allowing licensees to be able to break into the business without paying out a huge sum of money. Yet campaigners such as Adams believe the deals are no longer fair.

“I have campaigned for 20 years to get a fairer deal for leases and agreements. The current system is unfair because of the extraordinary prices that they charge for the products. If I was a freeholder I could go out and buy some of the products 50 per cent cheaper than I am paying just now, that is how serious it is.

“It has got to an almost unliveable stage – we have been in this wee pub for 23 years and we love it to bits and sometimes the heart rules the head; if we were more sensible and more business minded we would probably have moved on but we do love it and it is worth fighting for.”

To benefit publicans such as Adams the new amendment would have to be separately adopted by the Scottish Parliament, which she believes is likely to happen. “All six SNP MPs voted in favour for this amendment – normally they don’t vote on English legislation, but we managed to prove to them that there was a Scottish interest. I would like to think that will carry weight when we lobby the Scottish Government.”

Yet with three pubs closing in Scotland every week there is concern that while these changes may benefit some, for others it could spell a final call of: “Time, gentleman”.

The Three Bridges is a pristinely decorated establishment in South Queensferry and was previously known as The Two Bridges before the construction of the Queensferry Crossing rendered its monicker factually incorrect. The revamp involved more than just a bright new name as Stephen Billingham, executive chairman of Punch Taverns, the vast national pub company, is only too keen to explain. “We spent a lot of money on it,” said Billingham, whose firm is the largest pub owner in Scotland with 260 establishments. “And it has regenerated it as a pub and this shows our commitment.”

Talking to Scotland on Sunday, Billingham, whose company lost £57 million in market capitalisation when news of the MPs’ vote was reported earlier this week, believes the new legislation would lead to many more pub doors being locked for the last time in Scotland.

“Why is it bad? You have to understand the way linked pubs work. What you have are assets, broadly worth half a million pounds, and the lease-tenanted pub market allows people to access those assets and use if for their own business with very little capital inflow for starters. They may buy the fixtures and fittings but generally they don’t need a lot of cash to start. The way it works is that we give them the property and they pay rent, but it is a lower fixed rent, in exchange for buying beer from us, and the price of the beer they buy from us is slightly higher than they would pay elsewhere and that’s part of the deal in exchange for the lower rent.

“Now what it does for the business is that it gives guys what is known as ‘low operational gearing’, which means if the business takes a downturn we share in that downturn because they buy less beer but they are still paying the same low rent. They are also part of a larger group that supports people; we can help them with their rent. The concern is that people are paying over the odds for their beer; well they are, but do you know what? They are also getting a lower rent and we share in the ups and downs. Most of our partners go down the lower rent, higher prices route.” said ­Billingham.

“Everyone who entered into these agreements knew what they were doing when they started on day one. They knew the deal, but what they are trying to do now is change the deal en route; if this was to happen, if this legislation was to go through in England and Wales and be adopted in Scotland, it would make the offer for big pub companies less attractive.

“Why are we going to invest in a pub, refurbish pubs, spend money on them, why would we want to do that if the returns are going to be lower? All because somebody had the ability to, in the midst of their lease, come back and renegotiate the terms? What this does is put in jeopardy the £45 million a year that we spend on pubs.

“That is the risk and if you look at the UK Government, they did a piece of research which had an external economist look at what the impact of [breaking] the tie would be and they found it would lead to more pub closures. We absolutely agree – we will simply say: ‘are we going to invest in marginal pubs?’ At the moment there are a whole raft of pubs that we support and invest in, that have a different model of economic return. Why would we invest in them? We wouldn’t invest in them, so it wouldn’t be the best pub in the market, and it would ultimately fail,” said Billingham.

This deep concern is not shared by Paul Waterson, chief executive of the Scottish Licensed Trade Association (SLTA), who believes a greater degree of balance is required. He said: “It is very controversial for the implications for big pub culture, but in one sense it is very good for tenants. In England 70 per cent of pubs are owned that way, but in Scotland around 70 per cent of pubs are independent, so it is less of a problem, but it is still a problem.

“For most people the entry into the trade was through low rents, but they were told: ‘you will have to buy our products’ and that is the carrot but over the years the rents went up and up and up so that people were paying huge rents and they were paying over the odds for the products that they are selling.”

The working man’s dream of owning his own pub has long since evaporated like froth on a stale pint. When the Campaign for Real Ale (Camra) surveyed publicans they discovered that the average tenant was making between £10,000 to £15,000 per year, for a job that is consumes almost every hour of the day. As Waterson said: “Even if you are getting between £15,000 to £20,000 out of it, it is still not a lot given the big responsibility involved. These changes will help.”

Everyone in the industry accepts that Scotland, like the rest of Britain, has too many pubs, a hangover, if you will, from the days when a pub was as much a place to keep warm if your house lacked central heating. The current number of around 5,000 will continue to drop steadily each year, and while the collective state of the nation’s pickled liver might appear to make the decline of the pub a cause for celebration for Alcohol Focus Scotland, this is not quite the case. In fact it shares an interest with many publicans in its desire to see a minimum price for alcohol rather than the heavy discounting of off-licence sales.

Dr Evelyn Gillan, chief executive of Alcohol Focus Scotland, said: “Alcohol is more available than ever before with more and bigger capacity premises open for longer and selling more alcohol. This greater availability of alcohol has been associated with a substantial rise in alcohol consumption and harm.

“Our research shows neighbourhoods in Scotland with the most licensed premises have alcohol-related death rates more than double those in neighbourhoods with the fewest. Reducing outlet ­numbers, particularly in the highest availability neighbourhoods, could have health benefits for the Scottish population.

“However, much of the drunkenness, disorder and crime that happens in our town centres at weekends is fuelled by ‘pre-loading’ where people get drunk on cheap ­supermarket alcohol at home before heading out. Supermarkets are selling alcohol at such ridiculously low prices that pubs simply can’t compete. Minimum unit pricing will increase the price of the cheapest, strongest drinks sold in supermarkets and other off-sales. This will mean safer communities and fewer alcohol-related hospital admissions and deaths.”

Lady Astor once said: “I’d rather commit adultery than drink a glass of beer.” Attitudes and drinking habits have changed since the 1930s and, surprisingly, the salvation of the Scots pub may be the increasing appetite among both sexes for craft beers. While a pub on every street corner has become an image of the past, slick venues offering an array of exclusive handcrafted beers and ales are thriving, and the cocktail bar, that harbinger of excess, is making a comeback.

As Paul Waterson of the SLTA said: “Our offering has got to get better. I think there are a lot of good things going on in terms of craft beer, for a specialist market, and cocktail bars, which is something you can’t get at home. The good food we are providing you also can’t get at home. We have got to do more... the market is continuing to contract and the best will be left. The only problem is that we are losing a lot of village stock because it is just not viable, but these changes will help.’’

The final round goes to Stephen Billingham who said: “People seem to get worked up about pubs closing, but if people want pubs they will be there; if people go into pubs and drink there, they will stay there; if you don’t go in and drink there it will not be there. It is raw economics.”

SCOTSMAN TABLET AND IPHONE APPS

• Download your free 30-day trial for our iPad, Android Android and Kindle apps

Keep up to date with all aspects of Scottish life with The Scotsman iPhone app, completely free to download and use

Back to the top of the page