Case for beer tie "overwhelming", says City analyst

A leading City analyst has claimed there is an "overwhelming case" for retention of the beer tie.

In a research note that is sure to raise the hackles of anti-pubco campaigners, Douglas Jack of Numis Securities said that beer tie opponents such as Fair Pint and the BEC report had "failed to prove that tenants are worse off than they would be as free-traders".

As well as paying rents below the commercial property market average, tenants were also getting numerous benefits that are not available to free-of-tie operators, Jack said.

These benefits included "low cost of entry; business support; training; the broadest purchasing range available in the market; bulk purchasing discounts in non-tied products and capital investment support".

Jack argued it wasn't surprising that without such benefits but with higher operational gearing pub closures were highest in the free trade sector; seven per cent of supply versus 4.5 per cent in the tenanted sector, he said.

The analyst said abolishing the tie would simply "result in a significant deterioration in investment and uplift in total pub closures".

Jack also argued that the tie's removal would see prices rise.

"The anti-pubco lobby claims that worse purchasing terms for tenanted pubs results in higher, uncompetitive retail prices relative to free trade outlets.

"However, as tenants are getting a better deal overall, they are able to charge lower retail prices, as proven by comparing the pubcos to the free-of-tie Wellington Pub Company."

The debate over beer prices recently saw the GMB union issue figures highlighting what it said was the disparity between the price of a pint in pubs across the UK.

The union said the survey showed tied pubs were charging between 7p and 80p above the average price of a pint at a free-house.

However the GMB gave as its free-house example JD Wetherspoon, a managed operator, known for its cheap prices.