Beer Orders to be revoked

The Beer Orders that have controlled the pub industry for more than a decade are to be revoked by the Government.

Competition minister Melanie Johnson has announced the Orders, which were introduced in 1989, will be revoked in a bid to cut unnecessary regulation.

The Department of Trade and Industry (DTI) said recent market developments mean the Beer Orders have "outlived their usefulness".

"The former situation where brewers were able to prevent proper competition between pubs and restrict consumer choice has changed radically," Ms Johnson said. "The Beer Orders have served their purpose. It is time to remove them from the statute book."

But she assured the trade the Government would "remain vigilant in its pursuit of anti-competitive practices within the beer industry and would not hesitate to tackle restrictive agreements or abuses".

The Government will now focus on competition within the market.

Industry reaction to the news has been mixed. The British Beer and Pub Association said it was a pat on the back for the trade.

Spokesman Mark Hastings said: "The final demise of the Beer Orders shows that the customer is now getting great value and choice. The beer industry is now truly a competitive market and we don't need the Government to interfere."

But the Society of Independent Brewers said small brewers were left vulnerable by the Government withdrawing one regulation without making provision for another.

Chairman Paul Davey said: "We find it extraordinary that Melanie Johnson can revoke the orders that gave small brewers the only legal opportunity to sell their products into an almost completely closed market. To suggest the Beer Orders have served their purpose is absurd as we increasingly find we cannot sell our beers."

The Campaign for Real Ale has predicted the move will mean the loss of hundreds of community pubs and small brewing companies.

Spokesman Mike Benner said: "The revocation of the Beer Orders will send shock waves through the industry as there will be nothing to stop large brewers and pub chains tying up huge chunks of the market, restricting access to smaller brewers and smashing consumer choice."

Licensee Gary McClure, from the Old Kings Head, Broughton-in-Furness, Cumbria, said: "The Government is playing into the pub companies' hands. Now a pub company can have as many pubs as it wants - it's another kick in the teeth."

But City analyst Douglas Jack of WestLB said he did not think the move would lead brewers to buy back pubs. "With few exceptions, brewers will continue to make beer and pub companies will run pubs," he said.

What are the Beer Orders?​

The Beer Orders may well be being revoked by the government, but what exactly are they, and how have they affected the trade?​

The Beer Orders required brewers to:

• reduce the size of their tied estate to their permitted maximum (2,000 plus half the highest number of pubs over 2,000 held by the brewer since July 10, 1989) by November 1, 1992
• not tie their tenants and tied loan clients for any alcoholic drinks other than beer
• permit their tenants and tied loan clients to buy one brand of cask-conditioned beer and (as amended in 1997) one bottle-conditioned beer of their choice on the open market rather than through the brewer (the so-called "guest beer" provision)
• to publish wholesale prices
• not refuse to supply beer except in certain circumstances
• not sell pubs with clauses preventing them being pubs in the future
• make brewery tied loans repayable by the recipient on not more than three months' notice without penalty.

Changes in the market​

The Beer Orders changed the landscape of the British brewing and pub trade when they were introduced in 1989. Before then, the majority of the 60,000 pubs in the UK were owned by a select few - the giant brewers such as Bass, Courage and Whitbread.

Pubs were the cash-cows of those key players and such was the brewers' domination of the industry that the competition authorities launched an investigation.

The Beer Orders, a direct result of that government probe, ruled that the brewers had an unfair grip on the trade and placed a limit on their estate size

This changed everything.

Brewers sold rafts of pubs, presenting a market entry to aspiring pub bosses who rushed to buy them. Scores of small tenanted and managed pub companies sprang up, such as Commer and Surrey Free Inns, followed by the super pub companies such as Enterprise Inns, Pubmaster, and later Punch Taverns.

The balance of power swung away from the brewers as pub companies started to squeeze better beer prices from their suppliers.

Banks and financial institutions like Nomura realised the opportunity and suddenly pubs were financial instruments. This investment saw almost all of the major brewers splitting their brewing and pub operations completely to increase profit.

With this transformation in the market all but complete, the DTI yesterday (Wednesday) decided to axe the very legislation that had started it all.

Reaction from industry figures:​

"The Beer Orders have become a bit of a mockery and in a way revocation is the only way to start again - but there should be competition guidelines brought out. People should have parameters to work to."Bill Sharp, the National Parliamentary Committee of licensees​

"Last year they removed the pub ceiling of 2,000 on the industry so this was really a piece of bureaucratic tidying-up. We regard it as a good thing. It enables us to acquire bigger packages of pubs. It was always a little unfair in favour of the specialist operators who could buy whatever they wished. It now means the market is open, as it should be."Neil Gillis, managing director of Greene King Pub Company​

"It seems the Government has caught up with how the industry has restructured itself over the years. The commercial reality has moved on and the advantage of offering a wider choice of beer to the public has become clear. Well done to the Government - eventually."Nick Bish, chief executive, the Association of Licensed Multiple Retailers​

"It's a completely backwards step. A pub company with 5,000 pubs could offer licensees just one beer, the situation could be worse than it was originally. It will take away the rights of free traders. I wrote to the Office of Fair Trading and said that tying licensees would restrict consumer choice and could increase prices."Tony Payne, chief executive, the Federation of Licensed Victuallers Associations​

"The Beer Orders have failed completely. The market share of the remaining four major brewers is now even larger than the six original brewers the Orders were aimed at. Now the Beer Orders have gone, a major pubco could buy a brewery and we'd be back to the position we were in in 1989."Michael Turner, managing director, Fuller's brewery​

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