Examination of Witnesses (Question Numbers
125-139)
MR ROB
HAYWARD, MR
NICK BISH
AND MR
JOHN MCNAMARA
9 DECEMBER 2008
Q125 Chairman: Gentlemen, welcome to
this second session of the Committee's inquiry into pubcos. I
always begin by asking witnesses to introduce themselves but today
my question has a bit more point than normal because I am genuinely
not quite sure what your organisations do. Let us take you one
at a time, if I may, and start with Nick Bish from the Association
of Licensed Multiple Retailers. Could you explain who you are?
Explain to me why pubcos are no longer retail members of your
organisation and whether this means that you no longer represent
pubcos.
Mr Bish: I will gladly do that
and I am glad to be here, and thank you, Chairman and the committee.
ALMR, the Association of Licensed Multiple Retailers, was formed
15 years ago at the bottom of the last bad time of recession we
had but immediately and more importantly post the Beer Orders
when the nature of the industry changed dramatically. We characterise
ourselves as the only national trade body solely dedicated to
representing the interests of multiple and bar operators and,
uniquely amongst other trade bodies, we do not represent any landlord
interests, and certainly do not articulate them. We do feel that
we have a national role in promoting `the pub' and licensed retail,
and in that can be compared with others, but we do not represent
landlords. We do have national companies within membership but
two-thirds of our members are derived from small independent companies
operating 50 or fewer pubs, bars, restaurants under their own
branding, so small owned companies.
Q126 Chairman: That is on a fully
managed basis?
Mr Bish: Those are on a fully
managed basis. Of our total of 91, the rest might be mixed; some
totally leased or tenanted, but our total membership owns or operates
15,500 pubs and bars, which is about a quarter of the national
pub estate. Looking at the managed estates, we believe that we
represent about half of the managed pubs and bars and through
them of course the employment that they represent is about 125,000
employees—so managed and small.
Q127 Chairman: That helps a lot.
We turn to Mr Hayward. The BBPA is a very grand title but of course
you do not actually represent individual tenants, do you?
Mr Hayward: No, we do not. The
British Beer and Pub Association represents really I suppose three
different sections of the industry: one is companies that are
pure brewers, people like Carlsberg, which as the committee will
know only too well own Scottish and Newcastle; secondly, pub companies,
those companies that are set up specifically to operate estates
with varying structures; and then also we do have an overlap here
of what we generally term family brewers and that would be regional
brewers, the likes of Fuller's, Wells and Young's, et cetera,
and also significantly people like Marston's and Greene King.
All those companies will have not only a brewing side but managed
houses, to which Nick Bish has already referred, and also leased
estates of varying sizes, from somewhere 2,000 properties downwards.
Q128 Chairman: Finally, Mr McNamara,
that leaves you as the professional body for the individuals,
as I understand it. That is what distinguishes you from the BBPA.
Mr McNamara: The BII, formerly
the British Institute of Innkeeping, was formed in 1981. Its main
remit is to raise standards to help people be more professional.
We do that by delivering qualifications through our awarding body
and we also do that by providing all members with support services,
information, guidance and support. We publish a monthly business
magazine which is full of business-building ideas. Our sole remit
is to professionalise and to help people in their enterprise,
in their business. As you say, we do have individual members from
across the whole spectrum, both front-line operators and people
who work for corporates as well. We are fairly uniquely placed
in the industry with representation from all sides.
Q129 Chairman: So the only one of
the three that receives direct funding by membership fees from
pubcos is the BBPA?
Mr Bish: We do receive funding.
After the last committee, the nature of the relationship between
ALMR and certainly Punch and Enterprise changed and they became
what we call a supplier associate because in addition to our partner
pub companies, we have an associate membership category of brewers
and lawyers and professional people who keep our industry turning
over, as it were.
Mr McNamara: Membership subscriptions
come from individuals. We do have support from members as well,
about 50 of those across the board; we have 15,000 individual
front-line members, most of those running their own enterprises
and some now just not from bars, but from restaurants and hotels
as well. We have on top of that 30,000 or so provisional members,
people who have taken their first professional exam coming in
to the industry. We hope that as they develop their careers they
will become full members. About 25% of our income is from membership
and 75% is from awarding; we are a national awarding body delivering
qualifications from level 1 to level 4.
Q130 Chairman: There is no money
coming from pubcos, as far as you are concerned?
Mr McNamara: Some pub companies
sponsor tenants and lessees as they come into the industry for
their first year's membership and they give them either full subscription
payments or they pay half the subscription, depending on the agreement
between them.
Q131 Mr Binley: Can I clarify this?
Is there nobody coming from pubcos at all for training and development?
Mr McNamara: Each pub company
has its own policy. Some pub companies obviously run their own
training departments.
Q132 Mr Binley: I understand that
but is there anybody coming to you from pubcos for training and
development?
Mr McNamara: If they do our qualifications,
and many of them do, we charge a processing fee for those qualifications,
and that would come through in the normal course of an entry for
an examination.
Q133 Mr Binley: I am finding it rather
difficult to get an answer to my question, Mr McNamara. Do the
pubcos pay you directly for training and development of any kind?
Mr McNamara: We are an awarding
body, so we are not a training provider, Chair. We do not actually
offer trainers out in the field. We operate through 500 examination
centres, some of which are FE colleges, some are companies that
have trading partners. If they take one of our qualifications,
we charge a processing fee for that qualification, just as City
and Guilds would or Edexcel, for example.
Q134 Mr Binley: I note you have not
answered my questions on three occasions.
Mr McNamara: I am trying, I am
sorry.
Q135 Mr Binley: Do they pay you directly
for any training or development activities?
Mr McNamara: The answer is no.
I am sorry; I thought you were talking about qualifications.
Q136 Mr Hoyle: We can take it that
Mr McNamara is the good guy and are the other two the bad guys?
Is that the easiest way of saying it?
Mr McNamara: You may very well
think that.
Chairman: I am sorry to labour these
points but it is very important to understand exactly where the
three of you are coming from. That was helpful.
Q137 Miss Kirkbride: Could any of
you comment on whether you think the code of practice is working
well. We will start with Mr Hayward?
Mr Hayward: I think it is working
reasonably well. Following the last review in 2004, we instituted
a series of changes to our own code, which we have identified
in our evidence. We have identified those parts where we made
changes and those parts where we did not. What has arisen, as
I think the questioning indicated, is that we have the overall
code in terms of its operation and we then leave it to individual
companies to make their adjustments to their specific processes
in terms of their actual agreements with these leased tenants
in one form or another.
Mr Bish: ALMR would say that the
pubco model does not work well and is not working very well at
the moment, and particularly because it operates in a declining
market. It was invented about 15 to 18 years ago and since then
there has been mostly a bull market of increasing property values
and increasing prosperity in the nation. Recently, we have seen
a decline. The way that the pubco model works is divided between
those. You will be aware that in a rental system, the so-called
dry rent, money changes hands, and incomes to pubcos is based
on the beer that they sell and tied to their lessees. In a declining
market the income that they get from beer declines and the tenant
will find it more difficult to sustain the dry rent because their
income is also declining as business is going down, with the result
that the lessee, the tenant, is squeezed. I am not saying entirely
that the pubco does not share the pain, because obviously they
are losing income on their beer, but, to answer your question,
it is not working because in a declining market rents and agreements
are based on a five-year period and this seems not flexible enough
to cope with, as we are all observing, a steep, some would say
potentially catastrophic, decline in the economy.
Q138 Miss Kirkbride: Does Mr McNamara
agree with Mr Bish?
Mr McNamara: I guess our membership
is split; about 35% of our members are freehold, so they do not
have the issue. As a professional body, we clearly are in business
to support, help and guide in any way we possibly can people to
survive in business. There are loads of factors, not just the
fact that businesses are under pressure and part of that pressure
is the fact that they have to pay rent every month. They are also
under enormous pressure from outside factors, including taxation,
smoking bans, regulation and extra burdens on them as any small
business is going through. As a professional body, we stand there
trying to equip people to survive in a very challenging environment.
Paying rent is one aspect of that.
Mr Hayward: May I come back because
I think I misheard Julie Kirkbride's question? Was it in relation
to pubcos or codes? I thought she was referring to the code when
I gave the answer.
Q139 Miss Kirkbride: The code, yes.
Mr Hayward: You said `the code'
as against the pubco itself. One or other of us clearly misheard
the question.
Mr Bish: I heard `pubcos'
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