Commentary: A problem that is not small beer

Grand Metropolitan revolutionised the market for pub tenancies during the Eighties. It replaced rolling one-year agreements with 20-year leases, which was all fine in the days of rising pub property prices and steady beer sales. Much has changed since then and many leaseholders are falling by the wayside. But who is to blame?

Individuals who freely sign on the dotted line are ultimately responsible for their side of the agreement. In legal terms, shareholders of Grand Met are entitled to disregard the protesting publicans at the company's annual meeting yesterday. But the shareholders might also ask themselves whether it is in their own interests to cleave to such legalism.

The trading picture for the UK's 70,000 or so pubs is far from rosy. Beer consumption, now down to 1971 levels, is continuing to fall. Moreover, Inntrepreneur, the pub group that Grand Met jointly owns with Courage, has a particular problem. The failure rate of its 20- year leases is running at a high level, and its balance sheet had to be shored up last year to prevent banking covenants being breached.

Grand Met argues that a 9 per cent failure rate for its leases is small compared with a normal tenanted estate. But these pubs are better than average.

Like a property company, Inntrepreneur's eyes are fixed firmly on rents rather than trading. As a result, publicans are in danger of becoming an expendable commodity. If Grand Met does not ease off the rental accelerator, it faces the real danger of seeing a small issue escalate into something far more serious.

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