Supplementary memorandum submitted by
Phil Liddell
Considering other parties are being allowed
to present further evidence to the Committee, I feel compelled
to register my thoughts and views, and evidence should it be required.
As a struggling current lessee with Admiral Taverns, I urge the
Committee to be very cautious in accepting the notion that the
Pub Companies are clamouring to change their ways. The codes of
practices being formulated by the likes of the BBPA are very gracious,
but do nothing to repair the damage done by the Pub Companies
over the past 20 years to the tenants they have maliciously
"churned", those left homeless, or stripped of their
pension fund. Nor do they attempt to redress the totally one sided
business arrangement that is the working of the modern "tied"
lease. Nor do they help the businesses that are struggling right
now—which is the majority of tied leases and tenancies.
Don't be fooled, the Pub Companies are wolves in sheep's clothing.
They have had numerous raps on the knuckles by inquiries in the
past—and have treated the findings and recommendations of
these learned committees with utter contempt. Only now, as they
see individual tenants beginning to work together, with the formation
of the IPC and the GMB backed Pub Revolution group, with the threat
of mounting a serious challenge to their bully boy tactics, do
they pretend to show reconciliation. However, as has been proved
before, it is a sham, a guise to get them off the hook again.
The same problems in the industry remain as
they did in 2004 as documented in the TISC inquiry, and certainly
haven't changed since the first sitting of your Committee in 2008.
In fact, the situation has deteriorated further. Just look at
the evidence of pub closures. Don't rely on the BBPA/Pub Co closure
figures—check out your local town for all the boarded pubs
and the "lease for sale" signs—people desperate
to leave this doomed trade, but unable to sell their business
because the business has become worthless due to the "fire
sale" of their landlords. The Pub Companies have devalued
their own leased businesses by flooding the market with "business
opportunities" available at nil premium. These are pubs in
which the previous tenants (and sometimes a number before) have
failed to stay solvent, but are now offered with "deals"
that make them viable - if only for the short term. Many pubs
currently avoiding the closed status are operating under temporary
management—just to mask closure and prevent decay. These
do not reflect the true picture of the tenanted and leased sector
which you are attempting to investigate. Don't let manipulated
figures of freehouse closures mask the fact that freehouses are
many times more likely to survive in the current economic climate
- or any other for that matter. The pubs closed by the Pub Companies
are sold as freehouses, hence distorting the figures of true freehouses
for sale. Highly respected property agent Fleurets issued a press
release in November 2009, stating that 70% of it's sales were
freeholds for Pub Cos, and that "the leasehold market has
been decimated over the last 12 months—fewer assignments
sold at prices 50% less than those pertained over the past 15 years".
Instead of accepting the tampered figures that the Pub Companies
and their lapdogs, the BBPA, produce, take a look yourselves in
your constituencies, listen to your colleagues—(my MP Ian
Lucas instigated a tenant survey which I have attached (not
printed here), similar to your own which highlighted many
of the same problems). Speak to tenants, listen to accounts of
their living hell. For all of the tenants currently operating,
there is probable three times that number who have had their fingers
burnt by the vicious practices of the Pub Companies. Some will
have only themselves to blame, but many will have been ruthlessly
exploited. The current deals being offered to new tenants and
lessees are infinitely more attractive than existing tenancy arrangements,
but are only a temporary fix—short term agreements which
will be ripped up after a set time. They are currently viable,
but will be unsustainable when they revert to the Pub Cos preferred
terms. It'll be a case of like it or lump it for the tenant—most
will become another churn statistic.
To enforce my point—look at the issues
addressed in your first report and the help offered to me since
its publication.
— Has the balance of risk between the tenant
and landlord altered in this time. No
— Have the rewards of such a risk been
adjusted in the favour of the tenant. Absolutely not. The rewards
have diminished further as a result of the economic climate, and
the refusal of the landlord to offer worthwhile help or incentives
to allow the tenant to compete in a very difficult market, and
its blinkered policy of screwing its tenants in order to keep
the cash flowing to service its toxic debts.
— Have lessees earnings increased—No
chance.
They've probably been eroded further.
— Have the major Pub Cos addressed the
machine "tie"? No
My pub company has been trying to grab the profits
from my newly installed prize and gaming machines for themselves—despite
my lease having no provision for such terms.
— Is the tied tenant worse off than one
free of tie. Of course they are.
This is a fundamental problem with the present
system, and is why CAMRA were persuaded into issuing an objection
to the OFT's first enquiry. The fact that the tied tenant has
to pay up to double the open market rate for his beers is evidence
enough. The figures in my case are:
Local Brewer Plassey, Fusilier Bitter 9g, 4.5%—retails
at £58 plus VAT Free of Tie.
Through SIBA DDS scheme—I pay £90.29,
the brewer gets well below list price of £58 (price
dependent on Pub Company). SIBA take an admin fee, but do all
the invoicing, payments etc, and the brewer delivers directly
to the pub. The brewer also has to pay SIBA a joining and an annual
fee.
Equivalent 4.5% bitter—say Marstons Pedigree,
9g through Admiral £98.31.
Carlsberg 11g—Admiral—£122.61 with
current £50 brewers barrel discount—£107.33 plus
VAT.
Bookers for six weeks around Christmas, £65.
>Wholesalers non—discounted price—£88.11.
Direct from Carlsberg, much better deals can
be agreed.
— Buildings Insurance: I challenged my
Pub Company as to their Buildings Insurance policy details following
an abortive claim. The excess was said to be £1,000 on
all claims, and because mine was under that figure, I was unable
to claim. The policy had never been sighted by myself, and I suspended
payment until the document was produced this month. I also requested
that I was allowed to source an alternative policy. Admiral refused.
I have now resumed payments, but feel I am paying over the odds
for an inferior policy to one offered on open market.
— Rent concessions, transparency and help:
non existant, or available with strings attached.
— Rent concessions were sought by myself
considering the current economic climate—although I have
been able to pay the rent and pay most of my suppliers, it has
been at the expense of my own wage. Considering my current turnover
of just over £100K annum, and a profit of virtually zero,
the current rent of £14,443, is excessive. Even considering
our previous years turnover of approx £215K, the rent is
excessive if you remove my drawings from the net profit. Net profit
has never exceeded £18K. My lease is on an upward only RPI
linked rent. Admiral and its predecessor Pyramid Pub Company,
had failed to instigate this RPI clause since the commencement
of the lease. Having discovered this oversight in 2007 Admiral
issued me with a demand for 12 years back rent and increased
the rent by over £4,000 per annum. Despite my solicitor
negotiating a more affordable settlement, I am still struggling
to pay the arrears.
The RICS formulas for rent calculations are
flawed, and in need a serious overhaul. Considering Local Authority
Business Rateable Values are based on the RICS formula, it brings
into question the setting of these figures. Mine has increased
from £2,500 to £18,500, based on 2008 turnover.
This, amongst the many other factors, will undoubtedly bankrupt
me in the coming year, unless it is drastically changed. However,
considering the far reaching consequences of such amendments to
these calculations, I doubt if the RICS will ever own up to their
mistakes, nor adjust the formulas.
For the past four months I have been earning
approximately £200 a month. This is not sustainable
in the long term. For approx 16 months previous to that I
had earned a good wage away from the pub, as had my wife, having
realised that the pub couldn't sustain a decent wage for the pair
of us, and we couldn't afford a holiday. It also ensured that
our cash flow would be maintained and we would remain solvent.
I was working 40 odd hours outside of the pub and putting
in 30 40 hours at the pub. During this time we took absolutely
minimal wages/drawings, and registered a break-even/loss on the
accounts. However, my work dried up in September 2009, furthermore,
it was debateable how long I could sustain a 80 hour week
without risking my health. My wife continues to work outside the
pub, helping occasionally, and is subsidising my wage. I am unable
to run a car through the business, and there are no other perks
that I can think of. My wife became so disillusioned with the
pub and business that she moved out last year into a private house,
so the accommodation is hardly a perk, and sub-letting is prohibited
in the lease. For the first five years tenure, I have earned on
average £2.60 an hour, my wife similar in the time she
has worked. Currently I am working for approx £1 hour.
We are unlikely to recoup our investment of £30,000 in
the business, as in the unlikely case of the business selling,
most will be paid in fees and debts. The Pub Company will demand
around £800 for dilapidations survey, around £1,000 solicitors
fees (theirs), plus the costs of dilapidations repairs. My costs
will be £1,000 solicitors fees, £700 EPC report:
to creditors; £12,000 Barclays bank loan repayment,
£5,000 back rent to Admiral, £6,000 fee if
an agent secures a sale.
I currently have an uneasy relationship with
my landlord. I have had a recent visit from my BDM, who was unable
to offer any concessions or financial help. He did offer "free
glasses and t-shirts as some sort of "olive branch"
which I'm sure will constitute a 'financial help package' in the
eyes of Admiral, and can be presented to you as the caring side
of the Pub Co. It's only window dressing though, as I hope you
realise. Maybe they want to counter my claim's, through various
media (including BBC Radio Wales recently) that they are unwilling
to help their "business partners", and are more concerned
with their fat bonuses, on par and just as immoral as the failed
bankers bonuses. The cellar Inspector appeared last week—suspicious
that falling orders through Admiral constituted "buying out"
in his eyes, rather than falling sales due to the January "slump".
I object to paying his and his colleagues wages through my inflated
charges and hefty rent. I also object to financing a BDM who cannot
offer anything more constructive than "raise your prices
to increase your profit levels" as business advice. As Wetherspoons
have proven, value for money goods are attractive to the customer
especially in time of recession. This is a company who are continuing
to expand, continuing to post decent profits, despite the current
economic climate. I also object to indirectly financing my landlord,
as should members of the Committee. Admiral have recently been
"bailed out" by Lloyds (who took on HBOS toxic debt),
to the tune of £850 million. However, the Company infrastructure
remains, the same managers and operations personnel are running
the business, the same failed business model is unaltered, the
same gross incompetence repeated, yet as a taxpayer enlisted without
choice, we are bank rolling Lloyds/Admirals financial failings.
This is a National disgrace.
I am striving to instigate initiatives to maintain
and improve business, the pub is as busy as it can be, and I have
made many financial adjustments, tried many different concepts.
In September I decided to finish with our highly popular pub meals.
The overheads had become too onerous, energy bills, wages, repairs
and raw materials had made it unviable. We have looked to economise
in every way, bills are down drastically, staff numbers have been
more than halved, and ironically, it's the IR and VAT bills which
have reduced most. I no longer pay the Revenue and Customs up
to £5,000 a quarter in VAT, Tax and NI contributions.
The general economy suffers as a result of these forced actions,
as does the local economy in reduced staffing and the suspension
of purchases of local produce. However, despite all of my efforts,
these measures do not hide the fact that we are fighting a loosing
battle given my financial and operating constraints and it is
only a matter of time before I "call time" for the last
time.
There is an ongoing systematic abuse of the
system, the exploitation of tenants and lessees under the tied
model which has been going on for many, many years. It's about
time that someone had the "balls" to do something about
it, and to do it immediately, before more lives are tainted, before
more of our National Heritage is destroyed forever, before we
loose the hub of our communities. I hope this Committee has the
foresight and courage to tackle the problem full on, rather than
compromise and pussyfoot around. I somewhat doubt that anything
will happen before a General Election, with most of you toeing
the party line, and accommodating the do-gooders. But please consider
the lives that are being ruined by this corporate exploitation,
and the position you are in to change that. Please have the courage
of your convictions.
1 February 2010
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