Pubs code 'could end market recovery'

By Robert Beale

- Last updated on GMT

Related tags: Public house

'It seems a shame the pubs code has been proposed at a point when the market is beginning to find early recovery'
'It seems a shame the pubs code has been proposed at a point when the market is beginning to find early recovery'
Uncertainty still rules the sector says Robert Beale, head of valuation service associate at Vickery Holman

The sector has experienced many significant changes in recent years with the headlines being the smoking ban, increase in taxes and the wider
general recession. As a result, alcohol consumption fell again in 2013, showing an 18% per head decline since 2004, reportedly the lowest level this century. This is also the seventh year in the past nine there has been a fall, with Britons drinking more than 7bn fewer units of alcohol in 2013 compared to that of 2004.

Such a consistent large decline in the marketplace naturally claimed many casualties with a noticeable drop in the number of active and open licensed premises in recent years. But during 2014 there appears to have been some signs of stabilisation in the marketplace and maybe even green shoots of recovery.

Trading occupiers and operators have learnt to adjust to the new marketplace broadening their offerings and appeal with revenue and profits being the clear focus.


Recovery of the marketplace coincides, to some degree, with a reduction in the large-scale disposals of pubcos although some concern must be voiced here, with rumour of further portfolio sales lined up for the first half of 2015.

Distress sales now appear to have reduced significantly compared to the early years of the recession. There is also a noticeable increase
in interest from banks in lending to the sector, although this is only a small increase from an existing small starting point.

Further positive signs are a steadying of prices from a continual and often sharp decline in values as well as the fact the majority of transactions now taking place are for outlets that are to be retained as licensed premises, unlike the early years of the recession where the majority were distressed or closed with alternative use the clear ambition.

Pubs code

However, the pub industry is in turmoil after the surprise vote by Government in November, proposing a market rent-only option (MRO) amendment to The Small Business, Enterprise & Employment Bill.

As a result, the historic tied-pub arrangement ends. The pubcos saw £400m wiped off their value almost overnight and reacted strongly claiming that the end of tied pubs would lead to a decline in investment within the industry and a large increase in pub closures.

Further amendments have since been proposed and I’m not convinced we are going to see the Bill in place before the massive ticking clock of the general election. If it doesn’t come in, will it be a priority for the next Government? Probably not. The pub companies will no doubt want to see the Bill keep rumbling on through parliament for as long as possible.

It seems a shame the pubs code has been proposed at a point when the market is beginning to find early recovery from a horrendous five or six years in the recession. No one really knows what the consequences will be.

Predictions for 2015

  • Continued slow and steady recovery of the market
  • UK alcohol consumption to show an increase in 2014
  • Values to increase across the sector
  • Continued growth in variety of owners, operators and tenants
  • Availability of finance in the sector to continue to increase
  • Some return of ‘lifestyle’ element to the industry
  • Growth in operators within the south-west from other regions
  • Plateau in number of lounge bars

Related topics: Property law, Legislation

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The article is totally wrong

Posted by Taffy,

To say that the introduction of the Pubs Code could end the 'market recovery' is absolute rubbish. If customers have more money to spend the market will react to this, MRO or no MRO. Investments will continue to be made by the Pubcos but under more structured agreements and more tenants/lessees will have the confidence (and profit) to invest on their own.
I believe that the MRO will not be taken up in many cases as the Pubcos will react and improve their offer; the MRO is the stick (and a necessary one) to force the Pubcos to reform.
Mr. Beale does himself, and his company, no good in writing this article.

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MRO or to Not MRO

Posted by Objective Observer,

We have read numerous times that lessees simply don't read or don't understand the leases they are signing.

What we have seen is the campaigners holding up the MRO model or FoT by another name as being the panacea.

What if those very same lessee's who failed to understand etc just believe the MRO will be the solution, who will to blame this time if it goes pear shaped which could be a reality.

Too many pubs seeking discounts will mean discounts falling whilst brewery charges for delivery and logistics go up.

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Make the tied model more attractive

Posted by Mick Quinn,

The MRO is simply an option. It does not mean the end of the tied model.
If the Pubcos want people to sign up to the tied model instead of taking the MRO, they simply have to make the "tie" a more attractive proposition.

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