Pub Companies - Business, Innovation and Skills Committee Contents

Written evidence submitted by Michael Bell


Thousands of column inches have been devoted to the way that pub companies have literally run the British Public House into the ground. This paper is more of a cry for help for the thousands of otherwise well-run tied pubs in this country.

Since my original submission in 2004, I have been involved as a founder member of Fair Pint and have recently suffered a blatantly biased rent review at the hands of Enterprise Inns. There is no code of conduct that could ever have saved us, even if it had been as watertight as possible.

Without dwelling at length, the case revolved around the fact that my wife and I took out a large mortgage to pay for the creation of a hotel upstairs above our (Enterprise) Pub. The lease clearly states that the effect of our works should be disregarded. In other words the income from the hotel should be deducted from the turnover before assessing the rent. This is as opposed to just disregarding the cost of the works - a figure £50,000 - £60,000 less a year

At the time Rob May was both the head of the RICS arbitration panel AND head of rentals at Enterprise Inns (A title euphemistically known as "Rent Boy"!) Mr May held both these posts, right throughout the length of our arbitration and right up until a week before the 2008 Select Committee enquiry at which point he was forced to stand down in his (unpaid) RICS role. Not to do so, would have been seen as a serious conflict of interest. Also the whole choosing of the arbitrator was flawed from the start and we simply didn't stand a chance, so "buttoned-up" was the case. The result being an over rental by as much as £25,000 a year - the difference between success and failure. Mr May's "fingerprints" were all over the case.

This massive over-renting coupled with the extra rent levied by the tie, means that, despite the fact that we have been pioneers throughout the last quarter century, our income continues to fall annually. Because of this heavy penalty we are unable to keep the pub in the standard that Notting Hill demands and so we lose out to better-funded freehouses who can borrow (even in this day and age) to fund their improvements.

The tie has long ceased to be the valid tool that it once was and simply must go. UK products WILL stand up to overseas competition, the general public can see through all the smoke and mirrors of "reassuringly expensive" and other such epithets. The British Public is going more and more for "local". Which means value for money - no transport costs and above all NO PUBCO COSTS.

We simply do NOT need a middleman between the brewer and the licensee. British pubs need massive investment if they are to survive. This can never, ever be achieved under the pubco model. Greedy brewers, large and small, saw this as an opportunity and hived off their pubs into property arms. Now all they are doing is feeding their massive debt caused by their overspending.

Pubs MUST be offered first to the individuals that are running them. Pubs MUST be owner-run. If brewers are not happy, then they shouldn't have sold off the pubs in the first place. The problem is that the sort of "free spirit" that makes the British pub a success, does not want to have someone who has failed miserably at running the pub themselves, telling them what to do and overcharging them in the process..

There can never be fairness, no matter how thought through the "codes of conduct". Dissolution of ALL pub companies is the only solution and the best way to achieve this is to simply limit the tie to brewers and then only to those products that they actually brew themselves. Just as it always was. This would leave us with managed (tied) pubs and freehouses - nothing else.

Pubcos continue to divert criticism towards the Government but it is they that are taking most money out of every pint. All the Government does is limply try and defend its position when what they should be doing is getting to the root of the problem. This problem will NEVER go away until the pub company model is put to rest.

Previous Select Committees have given these parasites enough rope to hang us all.

We need action NOW and "freedom" for pubs is the only solution.


The parallel between the care home scandal and pubcos is uncanny. I read a newspaper article and substituted the word pub for care home and it clicked. Greed, securitisation, no direct interest in the inmates etc and, if I ever hear the words "duty to the shareholders" again . . . . . . .! A pub shouldn't have shareholders except for those that are prepared to get behind the bar and give their investment oxygen or spend heavily as customers. Hospitality is a VERY personal; thing. It is impossible to be mine host at arms length.

Financially the Government cannot afford to have

—  (1)  Mass unemployment from closed pubs. Remember its about 1000 employees of Punch and Enterprise VS about 100,000 in their 13000 pubs.

—  (2)  Communities falling apart.

—  (3)  Large amounts of funds leaving the UK economy (to overseas bondholders).

—  (4)  Also taxes from individual operating freehouses are bound to be greater than those paid by the two vultures and their struggling pubs (with their lack of customers due to over-pricing).

Pubcos make absolutely NO contribution to society - (Unlike banks - and its not often we can say that!). It has now got to the point where they have sucked everyone - breweries, licensees and the public - dry.

(Tied) pubs are too expensive and people are simply drinking at home. Due to an antiquated lease, I sell twice as much untied beer as tied and its all down to pricing. £1 a pint less - at the same gross profit % incidentally - is VERY compelling. It helps get people out of the house - even in Notting Hill.

We need a two-pronged attack

Supermarket beer is too cheap, (tied and some greedy freehouses') pub beer is too expensive and only the Government can narrow this inequality. Even the APPBG's Humphries thought that some sort of VAT mechanism should be levied on supermarkets. Brian Jacobs even had the perfect VAT solution (in-store purchase vs home delivery), but no one listened. I know it wasn't mentioned at the meeting with Angela Eagle. It's a complicated subject, and someone needs to join up the dots for Government.

Apart from the odd benign freeholder - we have now got to the point where there is no room for even the leased or tenanted models and certainly not if tied as well. This is the point where pubs MUST be owner run if they are to survive. No intermediary landlord can afford to pour money into upgrading pubs. It is now, more than ever, a lifestyle thing - 7/52, that's the lifestyle! Freehouses work - think Wetherspoons. Leased pubs don't. See recent reports on Punch in the City Press. Only their Spirit (managed house) sector is doing anything. We keep reading "tenanted and leased pubs are in the doldrums" - and it cannot get any better with a desperately overstretched middleman (never a woman) in the loop. This has become a property issue. Where property prices are declining, so are pubs and even London and the Home Counties are only just about holding up. Which ever way we look at it, the UK is in for years and years of minimal growth and stagnant property prices. The ability to be able to work from home is the one hope we all hanker after. If that home is a pub, it WILL survive - especially if it fairly priced and if it is the only ray of sunshine in an otherwise stagnant community.

—  (1)  If pubs are to survive they have to diversify - especially into Micro Brewing.

—  (2)  To diversify, they need funds.

—  (3)  To get funds they must own the freeholds.

—  (4)  So all pubs should be sold to OWNER/OPERATORS. ie Individually or to managed house groups/brewers.

—  (5)  To enable this, pubcos MUST be removed from the mix (before they drag us all down with them).

Jon Moulton said it, Guy Hands said it. "The pubco model is long dead" - so why keep it alive?

I simply do NOT subscribe to the notion put about by some (that should know better) that if the tie goes completely, then the foreign brewers will come flooding in. There are some VERY good small UK lager brewers and they sell very well. This is what competition is all about. Beer should be a local thing anyway - a bit like vegetables, Transport costs will soon level the playing field.

Just think. When pubcos have gone, we will look back in absolute amazement at our complacency and to why we allowed it to go on for so long. All we do is pussyfoot around ridiculous "codes of practice". We are dealing with desperate people here and frankly, their gloves have long since been lost. Their only hope is that they lead us round in circles until the property market improves - dramatically - by which time thousands more pubs will have gone.

Being in the Portobello Road, I meet a lot of tourists. The British pub is what they come here for - even if the Government doesn't appreciate it. A Britain without its pubs would be as about attractive as a Europe without its café culture or the Caribbean without its beaches.

This has been going on since 2004 and it's the slowest AVOIDABLE train wreck in our history.

FFPA sees a world of owner/publicans who will be able to borrow: to improve their pubs, to close the price gap between pubs and supermarkets and to diversify into other areas such as micro brewery, store, cinema and post office, but we cannot do it without your help.

GOVERNMENT MUST ACT ONE WAY OR ANOTHER - procrastination is not an option.

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Prepared 6 October 2011