Pub-industry bodies slam PCA’s MRO report as ‘one-sided and opaque'

By Claire Churchard contact

- Last updated on GMT

Disappointed: pub industry bodies think the PCA report should have included responses from pub-owning companies
Disappointed: pub industry bodies think the PCA report should have included responses from pub-owning companies

Related tags: Pubs code

Pub-industry bodies have slammed a report from the pubs code adjudicator containing evidence that pub-owning businesses (POBs) are blocking tied tenants’ access to the market rent only option (MRO) and going against the spirit of the pubs code.

The report, published today, states that businesses covered by the pubs code have employed a number of tactics to make it difficult for tied tenants to exercise their MRO rights.

These include incidents where POBs have withheld information that tenants need to progress their MRO, offered tenants unreasonably high rents described as “bullish” by one independent assessor and failed to engage in meaningful negotiations, among other things.

Read The Morning Advertiser​'s story on the PCA report

Pubs code adjudicator Paul Newby has contacted the POBs about the allegations and expects to report back on this in the autumn.

However, the report does not name the businesses involved, which has angered critics.

'One-sided, anecdotal and lacking in transparency'

Brigid Simmonds, chief executive of the British Beer & Pub Association (BBPA), said she was “extremely disappointed” that the PCA’s report only contained views from one side.

“The report is one-sided, anecdotal, not evidence-based and lacking in transparency, nor does it include any views from the pub companies on how the legislation is working. It has been published despite an ongoing request from the PCA, for additional information from the six pub operators relating to the issues raised in this publication which is not due to be received by him, until the end of the week.”

She said the report ignores the fact that that the legislation was put in place to correct “a perceived imbalance in the relationship between pub company and tenant”. Therefore, the number of new MRO agreements must not be seen as the only measure of success, she said.

Simmonds continued: “Evidence shows the renegotiation of tied deals is delivering exactly what the consultation and the subsequent legislation intended.”

Challenges of new code

She said the BBPA is determined to make the pubs code work but, as with all new legislation, there are always challenges in bedding it in, such as raising awareness, interpreting the rules, managing differing expectations, and dealing with unintended consequences.

The BBPA had suggested a transitional period was necessary, but this was not taken forward.

She added: “Only the adjudicator can progress some of these issues, through taking decisions on pending cases, and publishing the guidance we all need, to move forward. In specific cases, clarification may be needed through the courts. Publications such as this are a distraction from these vital tasks.”

The Association of Licensed Multiple Retailers (ALMR) responded to the PCA report by calling for “more clarity and guidance” to smooth the process for all parties and avoid unnecessary costs for all operators.

'Delays and uncertainty pile costs onto operators'

Kate Nicholls, ALMR chief executive, said: “It is inevitable that new legislation brings new challenges and the PCA has been given a clear role to oversee its implementation. As it stands, delays and uncertainty are piling costs onto operators.”

She said that her organisation’s 2017 benchmarking report shows that nearly two-thirds (63%) of respondents see a role for the tied model. “So it is obviously vital that structures are in place to efficiently and equitably handle MRO cases.”

However, Nicholls said: “The overriding message from the report is that, more than a year in, there are still too many grey areas in the process. It needs to deliver assured, decisive action to benefit all parties in disputes. Delays in the process only create unwelcome uncertainties.

“We would welcome a more proactive and conciliatory approach from pub operators. It’s clear that there are some uncommon practices taking place and it’s important that the PCA gives clear guidance on what is legal and acceptable within the spirit of the code, and to do so at the very earliest opportunity.”

Interpretation challenges

Mike Clist, chief executive of the British Institute of Innkeeping (BII), said the pubs code is a complicated piece of legislation, and there were always going to be challenges around how it was interpreted.

“Our view is that it is the clear role of the PCA as the arbiter of the process to clarify any areas where uncertainty abounds. The delays to date in doing this are bringing stress and hardship to many of our members as they await clear guidance on how to proceed.”

However, Clist added, many of the BII’s members “have secured good tied deals with their pub companies and that many still wish to remain tied and have faith in the tied system”.

Too many delays

But he said that the code was intended to give BII members a choice and that choice is still subject to too many delays.

“We now need the PCA to take decisive action by giving clear guidance on what is acceptable and what is not and that the backlog of referrals be cleared and delays in obtaining an MRO agreement where requested shortened. It is these delays and not knowing the likely outcome for their businesses that is causing anxiety amongst our members.”

Clist emphasised that the BII is committed to helping our members understand the process and make their applications for MRO should they so wish.

“It should be remembered that we are only just over a year in to the process and that there are still a vast number of tenants and lessees of the big six estates that still have the right to apply for MRO over the next four years. As an industry we need to address the problems now or this backlog will just continue to grow and frustrate all concerned.”

Report lumps all pub companies together

Commenting on the PCA report, Greene King Pub Partners managing director Clive Chesser said: “Since the pubs code was introduced a year ago we have worked hard to act within the spirit of the code. This report does not represent the conversations we have every day with our partners and we do not agree with the methodology of grouping all pub companies together.

“We have a proven track record of supporting our partners to grow their businesses and firmly believe in the benefits we can offer with the tied model. However, we completely respect an individual’s right to request the MRO option and take our obligations as a responsible pub company seriously to ensure we offer all the support required to those who request it.”

Embrace the code

A Punch pubco spokesperson said: “We fully embrace the pubs code and the rights that the regulations afford to our tied publicans. We are determined to make the legislation work as intended and are certainly not deliberately creating barriers.

"We would invite clarity from the PCA in regard to any issues raised specifically concerning Punch, in which case we will expect these to be addressed directly with the PCA in due course."

And a spokesperson for Star Pubs & Bars commented: “This report is highly misleading and full of one sided anecdotes. It doesn't reflect the positive conversations we’re having with our licensees. We're determined and committed to make the code work, but that needs the PCA to get on with the job of adjudicating and issuing guidance.”

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