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Business Comment

We should be raising a glass to Vince Cable’s pub industry plans


Outlook To listen to the trade body for pub companies, Vince Cable’s Department for Business, Innovations and Skills has just been responsible for an innovation that will have more than 50 British pubs calling last orders for the final time.

The ministry’s dastardly plans to swaddle the industry in red tape will throw hundreds of people out of work and destroy a model system of self-policing.

Why then is the Campaign for Real Ale, among others, raising a glass that is more than half full to salute Mr Cable’s plans for a new system of regulation?

After months of dithering, the BIS has said that pubcos are going to be forced to abide by a statutory code of practice governing their relations with “tied” tenants – the publicans who have to buy their beer from the company that holds the lease on their premises in return for, perhaps, cheaper rents or other support.

These people will in future be able to request a review of those rents if they haven’t had one for five years. They will also be able to call on an independent adjudicator to help with disputes (for a small fee).

The adjudicator will have teeth, too, with the power to impose sanctions and provide redress. Tenants tied to bigger pub companies, Punch, Greene King, Enterprise Inns and so on, will even be able to request an assessment to show whether their ties leave them better or worse off overall than their tie-free counterparts.

It’s true that some of the more radical proposals have been shelved for now. But that’s not stopped the British Beer & Pub Association from crying blue murder.

Which suggests BIS might be on the right track.

The BBPA has tried to strike a populist note by warning drinkers of higher  beer costs to come, and muttering  darkly about reduced investment and support to tenants.

Here’s the thing. The adjudicator will cost about £2m a year when compared to the current system of self regulation which the BBPA says costs about £100,000. Quite the price hike, then.

However, compared to the cost of financing the industry’s debt, it’s no more than a drop in an ocean of stale lager. Punch, for example, recorded underlying financing costs on its £2.25bn debt mountain for the 28 weeks to 1 March  of £87.3m.

While the BBPA says the 50 pub closure estimate comes from the Government’s own figures, that number is still dwarfed by the mass shutdown that’s been occurring up and down Britain as a result of the industry’s addiction to suicidal levels of debt financing combined with catastrophic mismanagement.

The measures announced by BIS may ultimately save at least some pubs by levelling the playing field (a bit) between tenants – more than half of whom have been on less than minimum wage – and pub companies. We should raise a glass to that, even if it has taken a while for the pint to be poured.