COMMENT: Pub rules | UKAR warning

Martin Flanagan says 10,000 pubs closed between 2004 and 2014. Picture: Contributed
Martin Flanagan says 10,000 pubs closed between 2004 and 2014. Picture: Contributed
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THE new code to protect landlords from overbearing pub companies continually seeking economies of scale is timely, many would say overdue.

The 1989 Beer Orders, forcing Britain’s then big six brewers to divest 14,000 public houses to uncouple retail from brewing of beer, was meant to bestow lower beer prices and boost consumer choice.

It is debatable whether the legislation achieved this prime purpose.

Cynics would say the law of unintended consequences was that newly emerging pub companies such as Enterprise Inns, Punch etc leveraged up heavily for a pub land-grab, installing tenant landlords under exclusive beer contracts similar to those the tenants previously had with the brewers direct.

In practice, the new boss bore a strong resemblance to the old boss. It is fair to say that Punch’s well-chronicled debt difficulties, for example, have not been an unmitigated boon for many of its independent pub landlords in beer-tie agreements.

Tenants bear substantial entrepreneurial risk. But they are often obliged to buy ales and lagers from the pubco that holds their lease at above market prices in return for subsidised rents and some other benefits. Critics say this rough trade-off keeps pub tenants under the cosh, eking out a difficult living in a rocky trading landscape.

Now, under the reforms put forward by the UK government, they will at least have an independent adjudicator to turn to in disputes, as well as a right to a rent review if they have not had one for five years.

Crucially, landlords will have access to the information the major pubcos have used as a justification for hiking rents. The adjudicator will have power to admonish and possibly fine pubcos who are found to be breaking the code.

Unsurprisingly, the pubcos have argued that this more forensic approach to the efficacy of tied arrangements will lead to reduced investment and have the undesirable counter-effect of stopping new pub companies looking for a low cost entry into the industry. Their concern for rigorous competition is, er, commendable.

Crying wolf like this has some force against the backcloth of 10,000 pubs having put the shutters up between 2004 and 2014 – about 15 per cent of the total British pub estate.

But, despite the high cost pressures suffered by the major pub operators, the government should face down the opposition.

Many factors have led to the pub closures, including the smoking ban, supermarkets using beer as a loss-leader, and the general pressures on consumer discretionary spending in recent years.

Independent pub landlords, who also pleasingly leaven the ubiquitous homogenisation of the beer industry, do not deserve to be the financial scapegoats for wider sector problems just because they are at the bottom of the drinks chain.

Banking boss tilts at a windmill

Richard Banks, the boss of UK Asset Resolution (aka the former Northern Rock and Bradford & Bingley banks), warns that if interest rates eventually rise too fast it will push thousands of its customers into arrears and slow the pace of payback to the taxpayer.

However, Bank of England governor Mark Carney has said at least twice publicly that any rise in rates from historic lows will be modest and gradual. Panic over.

Twitter: @martinflanagan8