Time Gentlemen Please

As a result of various MMC inquiries, larger breweries were forced to sell off their tied houses. Many went to specialist pub-owning companies (pubcos). Over the years, these companies and smaller breweries with tied house estates have raised the rents of pubs to open market levels, but maintained the tie - often charging 50-100% more than a free house would pay for their wet goods.

In the village where I live in Suffolk, we have an excellent local pub (and an excellent school, but no shops). Out of a village of about 300 souls: around half a dozen are regular churchgoers; about twenty attend the WI; and around 75 frequent the pub. So it is very much the social heart of the village.

Yet it struggles to pay its way. Over the seven years to 2009, we have been through five landlords (brewery tenants) and one temporary one to provide cover when the previous incumbents did a runner leaving a trail of debt behind them. All previous tenants have lost money – it has been a financial disaster for them. The latest landlord is making more of a go of things.

In the good old days when I started frequenting licensed premises, most were tied houses – owned by the brewery. The brewery charged a pretty nominal “tied rent” and made their money by putting an inflated mark up on the beer. Everybody (except the Monopolies and Mergers Commission and real ale buffs who deplored fizzy keg beer and the lack of choice) was happy.

So it is small wonder pubs are going out of business at the rate of eight a day. At least we are fortunate in that our local authority has a planning policy that virtually prohibits change of use for the last pub in a village.

In July last year, CAMRA made a super complaint to the OFT (albeit focusing on larger pubcos). They wanted the OFT to investigate, amongst other things:

· the foreclosure of tied outlets to suppliers unable to access sales outlets directly;

· the wholesale prices paid by tied pubs for beer and other tied drinks and the level of rent paid by tied lessees; and

· the basis upon which rents for pub lessees are calculated.

Late last year OFT published its response. It said its work was "to ensure that effective competition delivers value and choice to consumers.” Its spokesman said. “Any strategy by a pub-owning company which compromises the competitive position of its tied pubs would not be sustainable, as this would result in a loss of sales. Pub-owning companies are not therefore protected from competition by virtue of the supply ties agreed with their lessees.”

The OFT concluded that it: had “not found evidence that supply ties are resulting in competition problems that are having an adverse impact on consumers.”

So what is causing the problem? The smoking ban is often cited as an issue – but most now think that is a good thing. Supermarket sales and drinking at home have affected trade. Tax increases have not helped. Attitudes to drink driving have hit rural pubs hard. But ask virtually any tied landlord what the principal problem is and he will tell you it is the level of rent and the inflated price he is paying for drinks. He can manage one, but not both at the same time.

At the risk of taking issue with such an august body as the OFT, I would point that the competitive position of tied houses is being compromised. They are closing at a rate of knots. As they do, consumer choice is being reduced. In many villages there is only one pub. Drink driving rules preclude visits to the “competition”. So, in practice, many people do not benefit from any competition at all. The pub often only has a small catchment so will struggle come what may. While rural pubs last, customers are charged inflated prices. But that is better than the alternative of the pub closing.

The last government proposed measures for to enable planners to intervene and call a pause for the community to have their say before any demolition or material change of use. John Healey, the outgoing planning minister, reminded councils that PPS4 provides tools for the authority to take account of the pub’s importance to the community before deciding on any planning application. Nick Clegg, in his statement on the “big society” said that it would give ”communities a greater say over their local planning system and saving local services such as post offices and pubs”. Let’s hope these words are followed through with actions.

Back to my village. We are all hoping the new landlord will be able to make a living and the pub will survive. (Prosper is too unrealistic a wish.) Our new landlord is more experienced than his predecessors. Trade is better true – but more importantly he has been able to take on the pub owner (a local company which values its standing in the community) and by virtue of his knowledge and experience has persuaded them to get real. To its credit, the company has reduced the rent. For our part, we are crossing our fingers, and doing our best for trade.

What will happen if the pub fails? Us locals may form a co-operative and buy it. As a pub, it is worth much less than a house – and, with a pretty tough and unequivocal local policy, our planners won’t allow it to be changed to a house if there are people willing and able to buy it and run it. What happens if you are outbid by someone who has a dream of owning a country pub? I say good luck to them, provided the pub is saved. Without a tie and an onerous rent they may well make a go of it and guarantee its future.