- Has it served its purpose?
- Is it now fatally damaging growth and investment in the sector?
- Can the service offered by the pubs code adjudicator (PCA) justify the millions it costs?
- Are the tenanted and leased estates of the big six companies in a better place than they were in 2016?
The main controversial aspect of the pubs code was the last minute addition of the market-rent-only (MRO) option.
In complaints about ‘The Tie’ in the last century it was all about the limited choice of brands but in this century it was the price publicans were being forced to pay for their tied products, especially beers and cider.
Many, particularly long serving publicans, felt they were being exploited by pub companies.
The mistake with MRO was this: If I apply for say a Greene King pub then Greene King will probably have maintained that site for decades. There is, in my view, something not quite right here – in essence I can, at the first opportunity, replace Greene King by MRO to go ‘free of tie’ and bring in a company like Molson Coors/ Carlsberg etc who have never spent a penny on the pub.
Undoubtedly there have been improvements in pre-entry awareness and BDM activity, however I did warn in 2015 to beware of the ‘unintended consequences’ of the pubs code. One of the benefits of being old is you have seen it all before, i.e. the actions pub companies take to avoid the impact of legislation.
Looking at the number of leased and tenanted pubs under the pubs code in 2016, former MP, and one of the main advocates for pubco regulation, Greg Mulholland reckoned it was 13,000, while the British Beer & Pub Association suggested nearer 12,000.
So lets say 12,500, but by 2024, this had fallen to 7,983 - a fall of 36%!
The BBPA claim the total number of pubs in the same period has fallen by around 9% - just over 50,000 to 46,000.
Yet the number of pubs in the below 500 companies (and outside the code) has remained basically the same at 2500.
So the impact of the code has been to reduce the big six’s tenanted and leased estates by over a third and accelerate the growth of ‘Manchises’ i.e. so called ‘self employed’ managed partnerships.
Tenants’ security
But let’s look at the good news! How many publicans since 2016 have enjoyed MRO?
Answer: 394, just over 3%! But how many of these are still trading? As we know some pubs e.g. Britons Protection in Manchester, which went MRO faced legal battles with horrendous costs, only to have the pub taken back off them at the first opportunity. In the end they gave in and it is now a managed partnership site.
Another 717 MRO applications (2023) over 6% resulted in the publican remaining in a tied relationship hopefully on better terms that they had previously enjoyed.
Over 50% of tenants and lessees enjoyed protected agreements in 2016. That number is now 2,676 (33%) and decreasing.
The pubs code has not undermined tenants’ security it has obliterated it!
In 2023/24, Stonegate, Admiral, Greene King, Marston’s and Punch let 2,152 sites with only 6 i.e. 0.002% having protection! Star (Heineken) was the exception with 48 out of 516 L&T sites protected but still fewer than 1% overall and invariably these are sites where, to their credit, Heineken have invested heavily and understandably come with a waiver that prevents MRO basically being exercised for 10 years.
Pubcos have refused to renew leases without a fight for more than five years and the very publicans who campaigned for legislation have found to their dismay their leases were no longer valued anywhere near the amount they were before the pubs code.
And let’s have a look at individual complaints.
Before the pubs code, all tied publicans had access to PICAS (Pubs Independent Conciliation and Arbitration Service) which now costs £250 + VAT to register a complaint and you get it back if the complaint is upheld, which in the vast majority of cases they have been. This no longer applies - so does the current PCA look at individual cases?
The answer is an emphatic no. In a statement last month to MP Cat Eccles – Stourbridge, the PCA said it cannot intervene in individual cases, so what does the PCA do?
Well, it has a staff of 12 including Fiona Dickie, the adjudicator. I was frankly astounded at the criticism of the service they offer with pubco representatives and anti pubco campaigners all in absolute total agreement.
Allegations include: they rarely answer the phone, they don’t appear to respond to emails. Chris Wright, a prominent anti-pubco campaigner actually stated he had sympathy for the pubcos considering the amount they are paying as the service is quite shocking.
Denied opportunities
The pubs code levy for one pubco, adding compliance staffing costs is according to my basic calculator around £700,000 annually just for one MRO last year (2023/24). Could this be better spent?
One of the major downsides of the PCA/MRO is that it has denied opportunities to entrepreneurial tenants who can see a site where, with investment, they could restore an outlet back to greatness – but they need a 10-year agreement to repay their capital spend.
Those 10-year agreements are simply no longer available and though the tenant would happily waive MRO in say a ten-year lease with no rent review, they cannot, as there is no facility to allow them to do this. So if Sir Keir & Rachel Reeves are all about investment and growth then this legislation has stifled that almost completely.
How much does the 12 strong PCA team deal with? Well in 2023/24 there were 17 cases all in the main out-sourced to the Chartered Institute of Arbitrators. I’m not sure how much work there is for 12 people to outsource a case at one every three weeks?
On individual cases the PCA, according to an MP, recommend people to contact the BII Helpline, which is managed by the highly respected and very knowledgeable former BII CEO Mike Clist.
Now I managed the same helpline for three years on a part time basis dealing with well over 200 enquiries a year. Mike does even more than that now with over 500 a year but one person dealing with five hundred or twelve with seventeen it’s a bit of a difference.
One area the PCA has failed to address is ‘dilapidations’, which in my mind is a scandal with ridiculous sums being levied on outgoing licensees. When challenged, the PCA did produce a fact sheet but when I offered info from a whistle-blower from a major company who claimed ‘morally corrupt practices’ the PCA were not concerned at all.
Marston’s has moved a chunk of pubs to an agreement where they do all the repairs but dissatisfaction in this area is still at 59% - the previous PCA was far more active in this area but the incumbent PCA appears disinterested.
I have to say I still think we need a binding code for the over 500s but I would prefer one administered by maybe the BII with the likes of Kate Nicholls (UKH), Steve Alton (BII) and Andy Tighe (BBPA) and others supervising the matter.
The tenanted and leased estates in England and Wales in the big six companies have been decimated by the pubs code and the current financial levy is a ridiculous burden on the sector.
The Secretary of State has the power (SSBE Act 2015 Section 66) to terminate the current pubs code. It’s time to exercise that. It has had its day and we need to think again!
