The British Beer & Pub Association has confirmed it will not seek to overturn the inclusion of a mandatory market rent only option in the pubs code, and accepts it will now become law.
However, the group is urging the Government to include a clause allowing pub companies to seek assurances from tenants that, in return for investment, they would not seek an MRO option for a specified period of time
BBPA chief executive Brigid Simmonds told M&C Report she also wanted assurances that brewing pub companies would have the right to insist tenants do not buy their competitors’ products.
She said that although the pubcos were considering legal action she thought such a costly and time-consuming option would only be used as a last resort.
Simonds reiterated her calls for a third duty cut, saying it is the best way to “restore some of the confidence that the MRO debate has shaken within the industry”.
On the future for tenanted pubs following MRO, Simmonds said: “There will be an evolution of the tenanted pub model. We will see more managed pubs and inevitably fewer tied pubs. But I still think it will lead to pub closures.
“I agree with what many of the analysts say that you are not going to see the same investment in pubs if the pub companies think their tenants will go free-of-tie in five years’ time.”
Simmonds said the BBPA was also seeking to ensure the threshold of 500 tied pubs was retained and said removing “true franchise deals” and temporary agreements of less than 12 months from the code was also a priority.
Andy Slee, external affairs director at Punch, told M&C Report the company would not make any decisions on future operating models until the bill had gone through the House of Lords.
He said: “There is a huge amount to digest and to discuss. What is being suggested is a seismic change to the industry. What the Government have said is that they want to make it workable so we want to understand exactly what that means.
“We are also still talking to them about Tenancies at Will, which remain in the code despite very clear arguments being presented to the Government that it is illogical and unhelpful for all concerned.”
Asked how the company’s relationship with tenants would have to change if MRO was introduced, Slee said: “We would have to work harder at communicating the benefits of the tie. We are making headway on this, particularly at our roadshows, but it would be incumbent on us to make it more widely known how much support is available to tenants.”
BBPA chairman Jonathan Neame also spoke about the pubs code at last night’s joint BBPA/All-Party Parliamentary Beer Group reception in Parliament.
He said: “The BBPA has consistently argued during this time that the tied business model has stood the test of time, was evolving fast and would continue to evolve; that there were many and varied reasons, such as lifestyle changes, that had caused the challenge to licensees AND pub owners in recent years; and that statutory intervention was inappropriate for fear of the unintended consequences. We all remember the Beer Orders you see … and seen the impact of that unfold over 20 years.
“But we recognise that this House has now supported an alternative thesis and has voted for radical change.
“Let me re-assure those here tonight, in case there is any idle speculation on this point, that the BBPA is NOT seeking to overturn the MRO and realise that this will now become Law.
“However, we do have a few pleas:
“1. The Bill, as drafted, is not perfect and we would like to see some, relatively - emphasis on relatively, before I set hares running! - minor amendments, to provide greater certainty for those investing in the sector. I recognise that pub owners are not the most loved beasts in the jungle, but the fact is that they do invest in the region of £200m in to the tenanted pub sector every year is surely to be welcomed and encouraged.
“They are saying that the current drafting is too uncertain for them to continue to do so at the same level. This is not scaremongering, but genuine. Whether you believe this is a hiatus or becomes a long term reduction, I call on everyone to work constructively together to make amendments to give them more confidence to do so, without changing the substance of the MRO.
“2. Please do not tamper with the 500 pub limit, as this will cause huge uncertainty and potential damage to the Family Brewers.
“3. If the duty and other tax cuts have stimulated confidence, then the New Clause 2 has reduced it. Thus we will redouble our call to the Chancellor to give us a hat trick of duty cuts in the next budget and hope for your support!
“4. From all sides of the debate I think there is a recognition that tied pub partnership CAN – and in our opinion DOES - work for mutual benefit of pub owner, licensee and consumer. But the gauntlet has been thrown down to “Prove it!” Our challenge and my hope is that over the next few years, the benefits and successes of this business model -of which there are many, - will become apparent once again.
“5. What the campaigners have achieved is remarkable and unexpected. But, for all the apparent polarisation of this debate, this industry is unique in that the needs of brewer, pub owner, licensee and consumer are aligned and necessitate a close working relationship.
“Whilst there are some that will advocate driving a further wedge between participants, I think the majority will see the benefits of finding a path to reconciliation and so establish modern, professional, transparent business partnership that stimulates existing licensees and attracts the next generation of entrepreneurs to our sector.
“Given the importance of this debate, can I also express the hope that we move to a more constructive dialogue about the issues rather than the personalities, that we aim to defuse this current atmosphere of hostility.”