Pub groups given two years to reform

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The Independent Online

Pub companies were yesterday given two to three years to improve their business practices with their tenants on a voluntary basis or face the possible threat of legislation.

A committee of MPs, which has been investigating pub companies, or "pubcos", did, however, clear the industry of any competition concerns. After looking at pubcos that lease out properties to tenants who then buy all their beer from the pubco, MPs concluded that the beer "tie" was acceptable, even though tenants pay more for beer through pubcos than on the open market. Martin O'Neill, a Labour MP and the chairman of the Trade and Industry Select Committee, said: "We were not convinced that the removal of the tie would benefit tenants. It is likely that pubcos, as property companies, would offset the loss of income by charging higher rents."

Pubcos were nevertheless told to improve their relations with tenants, making beer prices and rent levels more transparent; giving more information on running pubs to prospective tenants; and having fair complaints handling procedures. The MPs want to see a more robust code of best practice adopted across the industry. "The industry is on a yellow card at the moment," Mr O'Neill said. "If it does not take action, I would have thought the Government would consider forcing it to."

The MPs have also asked pubcos to stop forcing tenants to use their fruit machines. At present, pubcos collect up to 50 per cent of the machines' takings and charge high royalty fees. "This is the last bit of blatant profiteering by pubcos. It is an abuse of power," Mr O'Neill said.

The report acknowledges that a number of pubcos had changed their practices, such as on upward-only rent reviews, after the MPs began their investigation. Enterprise Inns, which owns more than 8,000 pubs and is one of the largest companies in the sector, said: "We believe voluntary measures are the best way to ensure that vibrant competition is retained within the industry."

In light of the committee's findings, it has also vowed to look at contributing to the cost of independent professional advice, from solicitors and accountants, for tenants before taking on a lease.