By Marcus Leach
The Forum of Private Business is urging all MPs to back a Parliamentary motion calling on the Government to free landlords from being held to ransom by pub companies imposing restrictive ‘tied’ arrangements on them.
While industry codes of practice have been introduced in recent years they are voluntary and have not removed the hold many pub companies have over their tenants, who often find themselves tied in to unfavourable contracts and subsequently struggle to control costs.
In September the not-for-profit Forum’s Senior Policy Adviser Phil McCabe sat on the panel of the Parliamentary Save the Pub Group and passed on its members’ experiences.
“Seven years after the first inquiry took place and it is clear that pub industry self-regulation is not working to prevent large pub companies from mistreating landlords,” said Mr McCabe.
“We need tougher regulation and a more robust code of conduct, overseen by an adjudicator that gives them a genuine free-of-tie option, greater protection and allows the British pub to flourish once more.
“We are calling on all MPs who care about local pubs in their constituencies to sign this motion and to urge the Government to take up the committee’s recommendations without delay.”
The Early Day Motion (EDM) has been tabled by Greg Mulholland MP, Chairman of the Group, and calls on ministers to embrace recent recommendations made by the Business Innovation and Skills (BIS) Committee on Pub Companies.
The Committee found that pub industry self regulation has failed and recommended the Government introduce a statutory code of practice, including a condition that over a period of time all new lessees should be offered a free-of-tie lease with an open market rent review based on Royal Institute of Chartered Surveyors' guidance. Further, it called for an adjudicator to oversee this code.
The EDM, which pushes for a consultation timetable outlining how the proposed reforms will be implemented to be announced without delay, highlights the previous Government’s commitment to reform the industry via legislation.
It also notes that twice as many pub tied pubs are closing as free-of-tie pubs, and calls for a guest beer option for lessees who chose to remain within tied arrangements.
The motion argues that these measures would help prevent the closure of many community pubs by making rent fairer and allowing tied licensees to buy beer and other products on the open market at competitive prices, stimulating the pub industry and the UK’s economy in the process.
“The market has so clearly failed and the pubs sector has been stifled and it is time to free it up allowing the British pub to thrive once again. It is possible to draw parallels with the banks in this country, who have behaved in a similarly irresponsible manor, for example the pub companies overvaluing of their estates and borrowing against it much like the banks speculation and ‘gambling’, which went so wrong," speaking after the EDM was tabled, Mr Mulholland said.
“I hope to see as many as my Parliamentary colleagues as possible supporting this EDM, to portray the considerable concern with the current situation and the need for the Government to legislate, based on the recommendations of the Select Committee.
“The Save the Pub Group and I will of course be continuing to work with the Government to ensure a timetable is brought forward for legislation to be introduced to bring an end to the currently unsustainable situation.”
‘Real time’ figures from the Forum’s market analyst, the Data Works, suggest that the number new pub start-ups has steadily declined over the past five years, with most new pubs that have launched located in the South East of England.
According to the data, the greatest concentration of pubs in the UK is in the South East, followed by the South West, the North West, East of England, Yorkshire and the Humber and London.
The next largest number of pubs is in the West Midlands, followed by Scotland and then the East Midlands, Wales, the North East and finally Northern Ireland.
However, the largest concentration of pubs owned by large pub companies is in London, followed by the East of England, the South East, the North West, and then the West Midlands, East Midlands, South West, North East, Yorkshire and the Humber and Wales.
Most of these pubs are small sale businesses employing mainly 1-10 employees. The majority operate with a turnover of between £90k and £1 million.
Almost half of all pubs in the UK employ 1-5 staff, a quarter have 6-10 employees. Approximately one eighth employ 11-19 staff and the same 20-49.
Around half of UK pubs turn over between £90k and £400k, over a quarter between £400k and £1 million and approximately one eighth between £1 million and £2.5 million.
The Campaign for Real Ale (CAMRA) is also lobbying the Government to back the BIS Committee’s recommendations, supported by a number of organisations including the Forum.
In 2009 the Committee found that 41% of pubs cited the price of ‘tied products' as the single biggest drain on their cash flow — more than any other financial worry.
Steve Corbett of the pressure group Fair Pint urged MPs to sign the EDM and also write to the Business Secretary, Vince Cable.
“We want MPs to sign up to the motion but also to write to the Business Secretary Vince Cable asking him to implement the BIS Select Committee’s recommendations, which would give publicans the chance to become free-of-tie.
“This would breathe much-needed life into a pubco-ravaged sector and should be done as a matter of urgency.”
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