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News
MPs vote to scrap forced ‘beer-tie’ pubs
MPs have voted in favour of scrapping the UK’s forced ‘beer tie’ pub model, effectively ending landlords’ obligation to buy beer from their owners.
MPs today voted in favour of giving landlords the option to forgo an obligation to buy beer from their owners.
The current arrangement means pub landlords are required to buy beer from the company – either brewery or ‘pubco’ – that owns their establishment.
However that could soon be set to change after MPs voted this afternoon 284 to 269 in favour of introducing a new clause to the Small Business Bill adding a “market rent only” (MRO) option for tied pub tenants, which would free landlords from the obligation of buying beer from their owners.
Amendments to the Bill, which still have to go through the House of Lords before they are given Royal Assent, will apply to large pubcos who own more than 500 pubs and their leased, tenanted and franchised pubs.
Opponents of the beer-tie model, who argued that it put publicans at an unfair disadvantage by limiting their stock choices and stifling competition, have today welcomed the vote.
Paul Kenny, the GMB’s general secretary, said: “MPs have voted for a clause that shows that the market rent only option is a simple, cheap to administer and market based solution that at certain trigger points would simply give licensees the choice as to whether to pay a fair rent only or stick with a tied agreement. This choice will force the large pub companies to ensure that their tied agreements – where tenants pay marked up prices for beer and other products and services – are competitive, fair and attractive to tenants.”
John Allan, national chairman of the Federation of Small Businesses echoed Kenny’s sentiment’s adding: “It is a historic day for tied publicans who look forward to a more open and competitive marketplace. The freedom to stock a wider range of beers will provide a boost to local economies while giving consumers greater choice.”
Tim Page, the Campaign for Real Ale’s chief executive, called it a “landmark” vote which would help to secure the future of UK pubs.
He said: “Allowing over 13,000 pub tenants tied to the large pub companies the option of buying beer on the open market at competitive prices will help keep pubs open and ensure the cost of a pint to consumers remains affordable. The large pub companies will no longer be able to charge their tenants prices up to 60 pence a pint higher than open market prices.”
However while many are celebrating what they see as a positive step forward for the British pub industry, the British Beer and Pub Association (BBPA), which represents Britain’s brewers and pub companies, have branded the amendments “hugely damaging”.
It argues that the beer-tie model has actually contributed to the slowing of the closure of leased pubs and that its abandonment risks “a return to far higher closure rates.”
Brigid Simmonds, BBPA chief executive, said: “This change effectively breaks the ‘beer tie’, which has served Britain’s unique pub industry well for nearly 400 years. It would hugely damage investment, jobs, and results in 1,400 more pubs closing, with 7,000 job losses – as the Government’s own research shows.
“There are serious legal and competition issues which must be faced, as it rides roughshod over what are previously agreed contracts, and creates an unworkable, two-tier market. I hope Parliament will rethink as the bill continues its progress.
“On the issue of family brewers remaining outside the scope of the Code, we have always taken the view that their inclusion is not necessary, provided that this does not result in a distortion to competition. As the Government is now saying it will not include these smaller companies it needs to ensure a level playing field throughout the legislation.”
Changes to the bill still have to be approved by the House of Lords before it can be formally introduced.
Surely the large pubco’s such as Punch/Enterprise loosing profits on sales will simply add onto rent thus removing and gains the landlord would achieve through the freedom of tie????
Hence the term ‘market rent only’. I am an Enterprise tenant and oneoif the very few that is reasonably happy with my rent and barrel discount, however it has taken 11 months of fighting to get where I am now.
I suppose that should be covered by “market rent” as long as they are charging a fair market rent the publican should be better off. I suppose the issue is what happens when the market rent is well above the average what does the publican do then? What it might do however is cause the pubcos to charge a fairer rate for the beer meaning the price per pint might even go down and then more people could afford to go out. I think that is the real issue – the price is way too high in most pubs in the South and it encourages people to stay at home. Their greed (pubcos) has partly brought this about.
Same argument with tax – reduce taxes and overall receipts will increase.
The over priced rent and beer from tied leases it what has been putting pubs out of business and large companies like punch use tenants as a cover for a property business! I say give people the option and see what happens.
I currently run a pub and pay high rent to GK, i also have a full repairing lease and pay huge sums for the beer i have to purchase. How can this be fair?
People do not know what goes on in the pub business. a break in the tie is the only way forward. They constantly say this would be bad news for the pubs and cause closures and that the tie has been in force for many years. well its not working now and with 31 closing every week we need change
Having grown up in pubs from a family perspective, and now a long standing pub property agent, I can see both sides, I really can. There may be issues in what constitutes fair maintainable rent, whether rents that are already applied to tied agreements are then uplifted elsewhere to compensate? Will there be legal and EU issues over trying to alter already written and agreed landlord tenant terms? and, there is still the option of converting to REiT’s for some of the biggest pubco’s. One thing I do know, is that the recent changes and codes of practice seem to have given way to a happy medium of rent incentives and barrel discounts that work fine. 2015 is going to be interesting so far as it either being a storm in a wine glass, or the biggest shake up since 1990. I think the importance of the recent MP yes vote was equally lost in the furore and festivity of xmas and new year, and it still needs to get via the house of lords.