Following a government review into improving protection for tenants of 'tied' pubs, the government had rejected the 'market rent only' option. Yesterday, parliament rejected this in favour of the 'market rent' option amendment put forward by Lib Dem MP Greg Mulholland, chairman of the all-party parliamentary Save The Pub group. It is crazy that a government would go against a group that was set up to save the British pub and quite rightly this resulted in the government losing this vote.
As I understand it, the 'market rent' option will allow the publican to opt for exchanging their tenancy for an independently-assessed market rent free of tie. In layman terms that means the tenant will no longer have to buy the beers, spirits, soft drinks, legal and accountancy services, etc, through the pub company that owns their building as they often have to do currently. The prices they pay for such goods and services is often way over the market rate and therefore makes it much harder for them to run a viable business. This is also bad for the consumer of course as these increased costs are often passed on to the customer through higher prices.
The pubcos have obviously come out and said this will be bad for pubs but what it really means is that it will be bad for their business. It is no surprise that their share prices are falling substantially today. Simon Townsend, the CEO of Enterprise Inns, predicts pub closures and job losses. Well guess what. We have plenty of those already. The British Beer and Pub Association says the outcome will be 'hugely damaging'. The argument they put forward is that it effectively breaks the pub tie that has served the pub industry well for 400 years. Has it really? Now you would think that the BBPA would be a body that supports beer and pubs but what it does seem to represent are the large brewers and the pub companies.
It will be interesting to see how the pub companies now react to this game changer. Will we see a massive increase in the number of 'free of tie' pubs selling beer from the ever increasing number of UK micro brewers and less of those national brands from the big brewers? Will we see the pub companies putting pubs up for sale to reduce their massive debts now that they know they cannot get the returns that they once did from these pubs? It is all very well giving power to tenants but at the end of the day the pub companies own the bricks and mortar and they have huge debts. What CAMRA now needs to do is continue the fight to make it harder for pubs to be sold off and converted into other uses because I think it is inevitable that pub companies will continue to try and reduce their debt pile.
As with any legislation I'm sure this vote will not fix all the problems within the pub industry and the true test will be a year or two years or more down the line when we see whether it has reduced the current number of pub closures and whether we see an increase in the living standards of our much loved publicans. What I do know is that the current system was unsustainable and I do not like to see people who work so hard to make a decent living get ripped off by the very people who are supposed to be helping and encouraging them. Nothing is black and white and I'm sure there are both good and bad pubcos but I do not see why the good ones should fear this legislation.
Finally, whatever the outcome down the line, and I think more good than harm will come from this legislation for both tenants and consumers, let's all raise a glass and offer congratulations to all those publicans who worked their butts off to campaign for this along with all those MPs who voted against the government and particularly to Greg Mulholland. A job well done!