Friday, 13 January 2012

MPs call for inquiry into pub regulation

Which opens up quite an interesting debate. In this context it is necessary that one considers the situation of 'tied pubs'. I have to admit, at the outset, that my knowledge of the public house business is somewhat limited, however it is my understanding that where pubs are 'tied' it means that either:

(a) the pub itself may be owned by the brewery in question, with the publican renting the pub from the brewery. This is termed a tenancy.

(b) Alternatively, the brewery may appoint a salaried manager to run the pub it owns, and this form of tie can sometimes be termed a managed house.


(c) a publican may finance the purchase of a pub with a loan (usually a mortgage) from a brewer and be required to buy his beer from it in return.

The traditional advantage of tied houses for breweries was the steadiness of demand they gave them; a tied house would not change its beer supplier suddenly, so the brewer had a consistent market for its beer production.

Conversely, with what is termed a 'Free House, the publican is able to source his stock from wherever he chooses.

From Politics Home we learn that MPs have forced the Government to set up an inquiry into the regulation of large pub companies in an attempt to ease the burden on struggling publicans. In a Commons debate yesterday, Members also called for an industry-wide statutory code of practice, overseen by an independent body. (typical politicians response: set up an independent body, so yet more bureaucrats on the public purse - but I digress). The Independent and the Guardian post articles on this subject, neither of which is complimentary to the government.

It is interesting, on the face of it, that the question of tied houses would appear to be further complicated by the EU 'ruling' which states:
"Under EU rules, businesses:
  • may not fix prices or carve up markets amongst themselves.
The exact legal position viz-a-viz the EU and the UK I know not, as I know not whether there is any 'derogation' for the UK in this field where public houses are concerned. Perhaps any reader who knows something about this subject may wish to enlighten me.

Needless to say it does raise the question that, other than requiring someone self-employed, which is surely what a publican is, to comply with self-employment regulations and the requirement to pay the required taxes - be that business, personal or vat - what right anyone has, be that government or company, to regulate or impose conditions on how that individual carries on his business?

Thinking out loud, hence just a few thoughts...........


an_englishman_abroad said...

It is not only that the tied pub has to purchase the alcoholic beverages from the brewery, but this means the cost is fixed. Whilst the landlord pays the rent, he has no negotiation on the product he sells. That means he is TIED. The brewer will counter, saying the tenant has accommodation and a business at a discount. But the brewer is always looking at the turnover, and if it is higher than expected, at the rent review, the price to the tenant will go up.
I knew a person employed by a brewery, who over weekends visited pubs ensuring tenants were buying product from the brewery and were not outsourcing from supermarkets, discount stores etc. Penalty: lose the tenancy.

WitteringsfromWitney said...

aea There was a lot about a local publican who is about to be evicted that I deliberately did not put into that post......

Brew Wales said...

The problem is not the brewery-owned pubs but the pubs owned by non-brewing pub companies such as Enterprise Inns and Punch Taverns who charge their tenants more than double the price for drinks which can be bought in the free trade.

TomTom said...

This was one of Thatcher's really stupid implementations of EU Directives assisted by property developer Lord Young. It destroyed brewery businesses like Whitbread, Tetley, Boddingtons, and the great Bass which was really the business it sought to break as it was dominant.

With property prices boosted by a credit boom and business rates based on rents, just think of the £2000-£3000/week you need to clear just for Rent and Rates before paying for food and beer

WitteringsfromWitney said...

Thanks to all for the comments s far. INterestingly my local is an Enterprise venture so I understand.