In context: protections for tied pubs
The only way to ensure pubcos do not exploit their tenants is for the Scottish Government to introduce a robust code of conduct, which must be detailed, universal and comprehensive to avoid misinterpretations – Colin Wilkinson, managing director of the Scottish Licensed Trade Association
Labour MSP Neil Bibby launched his Tied Pubs (Scotland) Bill at the beginning of February. Obviously, backing pubs and beer sounds like a vote-winner, but what is the actual purpose of the bill?
Bibby says he wants to “reset the relationships” between tied pub landlords and tenants and make rents and leases fairer for licensees. The bill would create a statutory pubs code to regulate the relationship between tied pub tenants and their pub owners, with an independent adjudicator to enforce the code, similar to the one already in place in England and Wales. The intention is to make sure that no tied pub tenant is worse off than one who is free of a tie.
The bill has support from the Scottish Licensed Trade Association, the Campaign for Real Ale (CAMRA), GMB Scotland, the Federation of Small Businesses, the Scottish Tourism Alliance, the Pubs Advisory Service, Tennent Caledonian Breweries and many small brewers.
What is a tied pub?
Tied pubs go back to the 19th century, and earlier in some areas, when breweries began to buy pubs to ensure they had a guaranteed market for their products, but it has expanded to cover a significant proportion of British pubs today. The number of fully independent pubs has increased in recent years, but a House of Commons report in 2017 noted there were 14,700 pubs owned by pub companies (pubcos) – 30 per cent of pubs at that time – and 11,000, or 23 per cent, owned by breweries.
Unlike a free house, where the publican can buy beer from whoever they choose, a tied pub is required to buy their beer from the brewery or the pubco which owns the premises. Whereas some bars, known as managed pubs, are run directly by the pub owner as chains, with managers appointed by the company, others are run as independent businesses, where tenants lease the pub and have full responsibility for it, but with the requirement to source beer from the owner as part of the tenancy agreement in return for cheaper rent. It is the latter that this bill aims to deal with.
What’s the problem?
The tenanted tie pub model gives pubcos a great deal of power over the business as they both own the building and supply the main product. There is no protection for publicans against price rises and they can’t shop around if the beer from that company is poor quality or becomes too expensive. It can also create a monopoly and less choice for consumers, and disadvantage smaller, independent breweries. According to the 2018 MCA Pub Market Report, 26 per cent of respondents who had seen turnover falling in the past year blamed the beer tie.
What is the situation in England and Wales?
The UK Government passed the Pubs Code Regulation in 2016 aimed at regulating the relationship between pub tenants and large pub-owning businesses. Applying to all companies that own 500 pubs or more, the legislation put in place the principle that tied pub tenants should not be any worse off than if they were free of a tie. It gave pub tenants the right to a rent assessment if they hadn’t been assessed for five years and to request a switch to a free-of-tie, market rent-only (MRO) option at specific points such as when the rent was being reviewed or the lease was up for renewal. It also appointed an independent adjudicator to resolve disputes and investigate abuses.
The six biggest tenanted pubcos covered by the code in England and Wales are the Ei Group (formerly known as Enterprise Inns), Greene King, Punch Taverns, Marston’s, Admiral Taverns and Heineken-owned Star Pubs and Bars, which between them own more than 13,000 pubs, well over a quarter of the current total in the UK.
How is that working?
Not that well, it seems. The situation in England should give some warning of how important it is to make sure the bill achieves what it is intended to. The pub code has been criticised for having loopholes that are being exploited by the powerful pubcos to prevent people changing to an MRO and there have been calls for it to be improved. These tactics include allegations of threats of eviction, lengthy delays of years and expensive legal battles following requests for an MRO, unreasonable conditions attached to the new lease, ‘market rents’ set unreasonably high and a lack of action by the adjudicator. According to a Guardian article last year, of 739 applications for MRO tenancies – far fewer than expected – only 57 resulted in an MRO. The UK Government launched a review of the code and adjudicator in April 2019 and the results are still to be published.