Opinion: pressure on pubcos has intensified dramatically

The pressure on pubcos has intensified dramatically, says The PMA Team.

Pubs Minister John Healey's insistence that the major tenanted pubcos voluntarily offer a free-of-tie option and/or a guest beer provision for those tenants opting to retain the tie comes as a major surprise.

He has effectively adopted the findings of the Business Innovations and Skills Committee (BISC) report — and gone further by threatening to introduce a second Beer Orders if his own suggestions are not adopted in the next 12 months.

He has short-circuited the remote prospect of a negative Office of Fair Trading report or a Competition Commission inquiry by changing Government policy in a way that tenanted pub companies will regard as their worst nightmare.

Some will wonder just how much political traction his proposals will have given a change of Government is very likely.

It seems to me that another tipping point in the debate has passed and this was evident in this week's Question Time debate in Parliament organised by Camra.

Lost patience​

It's as if the major political parties have lost patience with the pubcos based on what they regard as on-going prevarication in some quarters.

What we have is a Labour Minister supporting the findings of the Conservative MP-headed BISC committee — but looking to be even tougher.

MPs of all parties seem to regard the re-balancing of the pubco/tenant relationship firmly in favour of tenants as a crowd-pleaser and vote-winner.

The issue has become quite feverish. For the major tenanted pub companies the stakes have been raised.

If they ignore the Healey request they risk legislation but buy some time. If they fall in line meekly the commercial risk is considerable.

I think it will be very hard indeed for the major pub companies to rentalise their beer income fully.

It would be the case that too many rents will look far too toppy — and tenants would never get the discounts that the major pubcos earn by dint of their scale.

Being made to offer all tenants a free-of-tie option is a recipe for further discord with tenants.

Tsunami of bad publicity​

Imagine the logistical and reputational nightmare involved for a company like Enterprise Inns as it seeks to re-cast rents across several thousand pubs opting to go free-of-tie.

Imagine the potential tsunami of bad publicity as tenants inevitably argue that new rents just aren't reasonable.

It seems to be the case that the regional family brewers are not the intended target for Healey's free-of-tie demands.

Camra, which seems to hold considerable sway within Government, is already signaling that companies with less than a 1% market share should be exempt.

Most commentators were expecting marginal but helpful measures from Healey when he was appointed Pubs Minister in early February.

Dramatic pressure increase​

Today's report confirms rumours that the highest echelons of Government had become alert to the alleged iniquities of the relationship between the major pub companies and their tenants.

Many thought this issue would go away in the fullness of time as politicians inevitably lost interest. Healey's demands represent a dramatic and unexpected ratcheting-up of the pressure on the major pub companies.