The British Beer & Pub Association (BBPA) has defended pubcos after they came under attack for their treatment of tenants in a report from think tank the Institute of Public Policy Research (IPPR).
In its report, Tied Down. The beer tie and its impact on Britain’s pubs, the IPPR reported that 46% of tied pub tenants earn less than £15,000 per year, more than twice the proportion among free-of-tie licensees, while 32% have not received information on and read their pub company’s revised code of practice.
The report urges Government to legislate on the pubco/tenant relationship. For example, requiring pub companies with more than 500 tied pubs offering commercial full repairing and insuring leases to “provide flexibility” to lessees, including a guest beer option and an option to become free of tie, accompanied by an open market rent review.
In response, the BBPA, which represents most major tenanted pub companies, said: “We will look at the report and its recommendations carefully, but the recent survey we commissioned jointly with the Independent Pub Confederation shows that awareness of the new codes of practice is already very high among licensees, and rent is being clearly explained to tenants.
“These positive figures are even higher for new entrants, so we feel the industry is moving in the right direction. This survey also showed that 78% of new lessees and tenants under took pre-entry training before taking on a tied pub.”
The BBPA said its members invested more than £250m into supporting their tied estates last year. “We need a thriving tied sector, as tied tenancies and leases still provide a low cost entry into operating a pub without the capital required to buy a freehold.”
The trade body also urged people to take into account the “wider picture” of the problems faced by pubs.
“Since March 2008, we have seen a 35% increase in the tax on beer – this is a central reason why so many pubs are under pressure, as 50% of their wet sales are still beer. Pubs are also some of the most highly regulated businesses in Britain, and this is adding hugely to operating costs.”
Despite the IPPR's calls for Government action, Panmure Gordon analyst Simon French said: "We still view legislation against the tied pub model as unlikely and reiterate our Buy recommendation on Enterprise Inns and Hold recommendation on Punch Taverns."
Meanwhile, Association of Licensed Multiple Retailers strategic affairs director Kate Nicholls said the report was a “welcome contribution to the ongoing debate”.
She added: “If we are to have a healthy, thriving tied sector then we need to ensure that it works as a business proposition and that all sides earn a fair share of the profits arising from the business.
"Whilst the proportion of tied lessees earning less than £15,000 pa has fallen – down from 67% in 2008 to 46% today - it remains far too high.”
