Pubcos vs Licence Holders – the battle continues

Pub Companies (known as Pubcos) have come in for critisism from the government’s Business & Enterprise Committee over the way in which they treat tennants and generally do business, especially regarding the price of beer, rent setting and terms of payment.

Widley reported in the press we comments from the Committee and from Pubcos themselves seeking to defend their actions.

This will come as no suprise to those who have been in the trade for a while, since the rise of the Pubcos to dominance after the so-called “Beer Orders” were issued in 1989 to break the dominance of the large brewers.  Of course this did not have the desired effect since the demise of the bigger brewers left a gap in the market which the property-based Pubcos were able to take advantage of.

Always a controversial issue the tied house system operated by the Pubcos has been the subject of official investigation no less than 14 times since 1997, including on for occasions by the EU.  Neither groups acting on behalf of the licencees, local MPs, or changes in competition law seem to have had much influence on the state of the market.  The FT blog seems to sum up the mood.

This leaves many in the industry wondering why we seem to have swapped one seemingly unfair and contoversial system for another.  People my well wonder, but the answer seems far from simple.

Some factors which could be an influence on how the market had delevloped :

1. When  the 1989 reforms were made there was little attempt to analyse who or what might take over the position of the brewers in owning and pubs – it was generally assumed that tenants would buy out their own pubs, but this did not happen
2. The forced sales by brewers, who were legally forced to sell properties, created the ideal opportunity for property companies to move in to the market
3. Rising property prices – the property boom made pubs an attractive buy for investors interested in increasing captial rather than long-term running profits
4. Many tenants were unable or unwilling to buy the pubs they operated, some did not have enough cash, others lacked a formal business with which to operate – problems which did not affect the Pubcos

Is this business model destined to continue ?  Nobody is quite sure at the moment, standby for some more legislation and possibly some action by Pubcos to bring light to their side of the argument.

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