Wednesday, 19 November 2014

The day after the night before

I expect there have been a lot of sore heads in the pub industry today. Campaigners, who have spent years trying to challenge the power of the major pub companies (pubcos), might have woken with headaches after celebrating defeating the government over pub rents and the beer tie; pints were eagerly consumed first in Whitehall before the party continued at a south London pub.
Meanwhile, in the board rooms of pubcos, executives are likely to have been rubbing their foreheads in anguish, watching as their share prices plummeted; at one point Enterprise Inns' shares dropped 17 per cent and Punch Tavern's slumped 11 per cent. It must be worrying times for both companies, especially as each is laden with more than £2billion of debt.
The reaction to the vote, which will mean pub tenants tied to pubcos will be able to demand a market rent option (MRO) and buy alcohol from providers other than their pubcos, who often charge a far higher rate (up to 70%) than the open market, has been predictably split.
The campaigners are joyous; the pubcos and their supporters, on the other hand, are despairing. They have spent much of the day predicting apocalyptic levels of pub closures and a vast numbers of redundancies. It is certainly true to say that these are uncertain times and it is hard to be sure of what will ultimately happen.
For the campaigners, yesterday’s vote is an enormous success. These are not professional political lobbyists or campaigners but publicans, or former publicans, trying to challenge a system they see as grossly unfair. Along the way they have been supported by organisations such as Camra, who believe the vote ‘will help keep pubs open and ensure the cost of a pint to consumers remains affordable’ and the Federation of Small Businesses who claimed today the result would be a ‘boost to local economies while giving consumers greater choice’. Greg Mulholland MP, who has spearheaded the campaign in parliament, was understandably in an effervescent mood after the vote and received plaudits from his colleagues – such as Tim Farron – for his not insignificant efforts.
The British Beer and Pub Association, on the other hand, has been predicting doom in the industry as a consequence of the vote. There is barely a news programme on which its chief executive, Brigid Simmonds, hasn’t appeared today. In each appearance she has repeated the claim that the government’s own research shows ‘1,400 more pubs closing, with 7,000 job losses’. The piece of research she is referring to is this by London Economics, commissioned by the Department of Business, and she is certainly quoting it selectively. It actually predicts the closure of between 700 and 1,400 pubs, with the consequent jobs losses of between 3,700 and 7,000. Ms Simmonds has only referred to the top figure.
The London Economics study only consulted pubcos to make its predictions, each providing a sample of between '300-400 anonymised pubs'. It is fair to say that pubcos have a vested interest in this debate and there appears to have been little effort to gauge the opinion from any other side in the exchange.
The report also finds one more reason why pubs might close that hasn't been much mentioned by the BBPA; that several of the stakeholders it interviewed believe the UK is 'still operating excess pub supply of approximately 6,000 pubs'. Definitely a gloomy prospect, but not one that can pinned on Tuesday's vote.
And finally, Ms Simmonds fails to take into account that pubcos have already declared their intentions to dispose of huge numbers of pubs. For example, in their 2013 annual report, Punch Taverns, owners of more than 4,000 pubs, say they want to focus on their core business of 2,990 pubs. Their plans for the non-core division - compromising of 1,106 pubs - is to dispose of them 'over the next four years'.
Enterprise Inns, meanwhile, wanted to dispose of £70million worth of pubs by the end of September this year. It may well turn out that both firms use yesterday's vote as cover for their already declared intentions. Of course, 'disposing' of pubs doesn't necessarily mean they are going to close; but supermarket chains must be rubbing their hands with glee at the prospect.
Contrastingly, according to a survey published in 2013 by the Federation of Small Businesses, 88 per cent of tied pubs said they would be better off if they operated under a ‘fair rent’; 74 per cent said they would spend more promoting their business; 74 per cent said they would hire more staff and 65 per cent said they would cut the price of beer.
Another frequently repeated claim from Ms Simmonds is that the beer tie has been a success in this country for almost 400 years. This doesn't stand up to much scrutiny. Fifty-seven per cent of tied publicans struggle on less than £10,000 a year. Of Enterprise Inns pubs - they have more than 5,000 - they had 579 'business failures' in one year according to their 2013 Annual Report; down on previous years but nothing to boast about. These are not symptoms of a system working well.
And I have lost count of the numbers of tenant publicans who have contacted me personally to tell me about their suffering; struggling under unimaginable amounts of debt caused, seemingly, by the unreasonable demands of pubcos, themselves trying to shift their own debt mountain. Many of these tenants - all, without exception, hugely hard-working people desperate to run good pubs - have now lost their pubs, their homes, their livelihoods, their health. Pubcos have consistently failed to respond adequately to their concerns; it is their lack of action that has led to this turn of events. 
They won't give up of course. The lobbying campaign by the pubcos and the BBPA against these changes has been huge and they have well placed - and immensely senior - allies to almost the top of the Conservative Party. They will hope the government finds a way to drop this amendment. But,  if these changes lead to the demise of the pubco, they need only look in the mirror to find the founders of their own downfall.

Monday, 17 November 2014

Will MPs finally vote to challenge pubcos?

Parliament has been treading water for some months now; MPs spending more time grinding teeth, impatient for the next General Election, than actually participating in worthwhile debates.

But tomorrow, MPs have an opportunity to vote for something which might actually make a difference to the lives of thousands of publicans across the country, who claim to have been suffering greatly under the pubco ownership model (for background on this fiendishly complicated issue, see here).

For finally, after years of campaigning, scores of MPs from all parties are set to back an amendment to the Small Business Bill, which will put a 'market rent option' for tenants of large pubcos on to the statute books. This means that landlords who lease their pubs from the biggest pub companies – those which own more than 500 establishments – will be able to have their rents independently reviewed to ensure they are fair.

And the amendment, tabled by the campaign's parliamentary champion Greg Mulholland, Tory Brian Binley and Labour's Adrian Bailey, could also see tenants able to buy their beer from any supplier, rather than be compelled to buy exclusively from their owners at a marked up price.

The issue's complexity has been its worst enemy for it deserves more headlines than it has garnered. The closure of a local pub is frequently a local tragedy; a community loses its heart, a neighbourhood is deprived of a meeting and sharing place. The mass closure of pubs which Britain has witnessed in the last couple of decades is a huge national shame; a vital cultural seam that threads through our whole national consciousness has been neglected and allowed to decay by governments of all colours. In the ten years after 2002, more than 10,000 pubs have closed, a huge number of which were tied pubs.

If passed, the changes might mean some relief for tenants struggling to live on barely £3,000 a year, and those battling not to end up like Stoke Newington's Kirsty Valentine, forced out of The Alma after a rent dispute. It could curb the practice of churn, which sees tenant landlords forced out of their pub, only to be replaced within a couple of weeks.

Getting to this stage has been a slow old process and, for a time, it seemed the coalition might run out of sufficient parliamentary time to pass any legislation. And even now, despite the recommendations from endless committee reports and reams of evidence, the government has resisted these measures when it eventually outlined their proposals to tackle the pubco issues. While Vince Cable proposed a statutory code for pub companies, campaigners have argued it would remain toothless regulation without this ‘market rent option’. 

While, this option has big support amongst publicans and tenants, the pubcos themselves have lobbied hard against the such changes, with eager support from the British Beer and Pub Association. The latter, quoting widely a widely discredited report, claim the measures could lead to more than 1,400 pubs closing and the loss of 7,000 jobs. It's worth remembering that even if this were true - and for such a dire outcome to emerge it would require the wilful and self-destructive connivance of the pub owning companies - this is actually at slower rate than the current rate of 31 pubs closing every week, according to CAMRA. I do wonder who the BBPA imagine they represent; pubs or pubcos?

Support for the amendment is strong on the Labour benches and has wide backing among the Conservative benches - curiously not including Burton MP Andrew Griffiths, who has been something of an ally of the pubcos - and the Liberal Democrats. Victory for the campaigners must feel unnervingly, worryingly close. But, the government could still defeat the rebels and it has to make its way through the House of Lords; so this long-running saga has some way to go yet.