Pub Companies - Business and Enterprise Committee Contents

Memorandum submitted by The Federation of Licensed Victuallers Associations


  To say that the on-sales section of the licensed trade is struggling is an understatement. Public houses are being boarded up on a regular basis, many of which will never re-open.

  Not only are many of our members losing their life savings but also their homes. The British public are now losing the only venue where they can go and relax in a safe environment.

  Nobody in Parliament accepted the damage the smoking ban would cause to the trade when we requested segregated smoking areas with updated ventilation. The non smokers who we were told would now flock to the public house or club never materialised.

  Increased energy costs are now a major part of a public house/club expenses which also affect our customer's spending power.

  Supermarkets are being allowed not only to sell alcohol products cheaper than in 1986 but in certain instances below cost.

  Beer duty above inflation introduced by the Treasury can only add to the disaster. Many licensees are under the impression the government is no longer concerned about the future of the community and rural public houses and the essential services it gives to the public ie places to meet in a warm and friendly atmosphere, reasonably priced meals, millions of pounds raised for charities and sponsoring of local amateur sports teams.

Has the Licensing Act 2003 had an effect on competition within the market?

  Whilst the flexibility of opening hours has allowed public houses to compete with night clubs to stay open longer the majority of community and rural public houses only want to open until midnight, something they would have accepted rather than the full cost of the implementation of the 2003 Act.

  It is the supermarkets who have benefited by applying for and being granted licences to stay open during their full trading hours.

  Previously supermarkets had all their alcohol in an area they had to segregate whilst open for other business out of licensing hours. Now every part of the supermarkets has alcohol on sale with special offers, some selling at a loss.

To what extent have revisions to the framework Codes of Practice met the Committee's concerns?

  Following the 2004 inquiry the Federation of Licensed Victuallers Associations sought and gained meetings with the British Beer & Pub Association to review and update their Code of Practice. It was on the understanding that the new code would be accepted by all their members.

  The new "Codes of Practice Framework on the Granting and Operation of Tied Tenancies and Leases" was introduced in November 2005 and has successfully been used on behalf of our members with companies affiliated to the BBPA.

  The area of the code which concerned our members is the amusement machines which is not fully explained as to how many bites the company receives ie site rents and tenants share which they rentalised and how little licensees actually receive.

  The Federation of Licensed Victuallers Associations is represented on a British Institute of Innkeeping Committee which is reviewing and achieving improvements in not only National pub company codes but also regional brewery companies before they receive accreditation of their codes.

To what extent are the codes applied by the Pub Companies?

  There have been a number of occasions when the codes have not been fully implemented but when brought to the attention of a present or more senior member of the company the decision has been reversed.

  Codes of Practice Framework on the Granting and Operation of Tied Tenancies and Leases (Second Revision November2005)—Item 4 Material Changes/Exceptional Circumstances. We are pleased to say that this code agreed with the British Beer & Pub Association and others agreed with the British Institute of Innkeeping are reducing rents and giving assistance to licensees experiencing difficulties through no failing of his/her own.

Is there a need for further regulation of the industry?

  There is no doubt many licensees would like to see the tie removed and whilst we can understand their views we are concerned by the implications of the removal of the tie.

  If one reads the second paragraph of the summary of the Second Report of Session 2004-05 by the House of Commons Trade and Industry Committee they will understand our concerns if the tie is removed—"We are not convinced that the division of the wholesaling and property functions of pubcos, ie the removal of the beer tie, is advocated by many witnesses, would necessarily benefit tenants. We felt it likely that in the absence of the tie pubcos would exercise their contractual right to raise property rents to compensate for the loss of income from beer sales. Indeed, if brewers were free to supply all public houses on a wholesale basis it is possible that major brewing companies could achieve a dominant market position to the detriment of individual public house operators."

  The Federation of Licensed Victuallers Associations has always promoted the view that all tied licensees should receive a share of the discounts the pub companies gain and that this should not be rentalised.

  When Grand Met introduced the Inntrepreneur lease in the 1980s it led to many financial problems for their licensees until a Courage takeover of the Inntrepreneur Leasing Company who then brought in discounts that were written into the lease.

  We believe freedom of tie (which has the support of many licensees) would lead to the Pub Companies and Regional Breweries implementing the clause which allows them to seek a market review of the rent within one month of the release of the tie.

  The new rent would be based on discounts at present achieved by the Pub Companies. Discounts would be dramatically reduced by the brewery when negotiating with thousands of licensees rather than a limited number of companies.

  Where a licensee signed an agreement with a single brewery to get the best deal available they could then be tied for their drinks which would lead to a reduction in the selection of drinks for their customers.

  Supply agreements in the free trade would have strict conditions in them which must be adhered to or penalties may be imposed.

  If the pub companies lost their tie licensees would be dealing with a property company who would have a different agenda and they would lose some of the benefits that are available at the present time.

  It is our opinion that the introduction of any further regulations to the industry would only lead to extra costs on the licensed trade which as previously stated is already struggling.

  What the Federation of Licensed Victuallers Associations requires for our members is a share of the discounts achieved by the pub companies and managed house section of the regional breweries being given to all tied licensees plus a fair share of the machine income which is not rentalised.

September 2008

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