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Risk of pub closures and job losses as beer-tie system ends

Parliament voted on Tuesday to bring the somewhat controversial beer-tie system to an end, much to the annoyance of the so called “pubcos” who argue the system subsidises rents and allows incomers to take on small outlets for little capital outlay. 

The beer-tie system is where the pub landlord buys stock (usually above market price) from the owner of the lease in exchange for low rent and other benefits. 

We would argue that few people benefit from the beer-tie. In an example, we saw recently a publican increased sales in his outlet owned by Enterprise. The pubcos increased the rent at the next rent review AND increased the price or the products to him. A double whammy that put him out of business. How can a pubco argue this “may be best for competition”? It is a crazy example of a system that ignores supply and demand. Who would want to work very hard, market well, offer food and new products and encourage new customers into a pub only to find that your profit margin is eaten into by the pubco increasing the price of the beer!?. In other (simple) words, the more you sell the higher your cost price please, therefore the lower your margin unless you increase prices to the customers?? Madness in our view.

As this 400 year-old system is abolished,  we hope to see that beer and drinks can be bought from any supplier on the open market which will mean more competition and steady or lower prices for customers.  But also reward for the hard working, perhaps more professional publicans. If it leads to closures of inefficient (non hard-working) publican’s outlets, then that is a natural consequence of the market system.

While some campaigners believe this is best for customers (more choice, better quality, cheaper), pub landlords will be faced with independent rent assessments potentially forcing them out of business if rent and rates are too high. 

Others, however, think this will be a 'hugely damaging decision' as described by The British Beer and Pub Association. They say the end of beer-ties could mean over a thousand pubs close and several thousand employees lose their jobs. 

The proposal is to be put to the House of Lords (however the government has indicated it will not vote against it) before it can come into force which means it may be a while away from any changes. 

What do you think? We would be delighted to hear from publicans and customers alike.

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Many thanks for your comments. If you have a private business problem and you want advice give us a call on 0800 9700 539 or email me at keiths@companyrescue.co.uk. If you are a professional advisor with a troubled client, please suggest they visit www.companyrescue.co.uk or contact me as above.


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