Tied pub contracts 'force landlords out of trade'

 

The so-called "beer tie" operated by a number of Britain's largest pub chains is forcing pubs out of business all over the country and must be regulated more closely, a leading think-tank warned today.

Landlords in tied pubs often pay as much as 45 per cent more for their beer than independent rivals and this is putting them at a huge competitive disadvantage, the Institute for Public Policy Research said.

The warning follows statistics from the British Beer and Pub Association which show that, on average, 25 pubs around Britain are closing every week. Some 1,300 pubs shut up shop in 2010, accounting for the loss of about 13,000 jobs. While the industry has been hard hit by a number of challenges, from the smoking ban to the consumer spending slowdown, the IPPR research shows tied agents are facing a particular handicap.

In a tied pub, the landlord is obliged to buy beer from the company from which the premises are leased, even if this means paying substantially more. Independent publicans, meanwhile, are free to buy from any supplier.

About half of Britain's 50,000 pubs are operated on a tied-agent basis, with the two market leaders, Punch Taverns and Enterprise Inns each leasing more than 6,000 pubs to landlords.

Such companies argue that tied agents benefit from perks that are not shared by their independent rivals – in particular, much cheaper rents. However, the IPPR said such benefits were not sufficiently valuable to compensate for the high cost of the pub chains' beer. Tied agents were much more likely than independents to be suffering financially during the current downturn, it added.

"Thousands of publicans across Britain are being put under significant financial pressure by the beer tie and our survey of publicans shows they have suffered worse through the recession because of this," said Rick Muir, associate director of the IPPR. "The Government should act to reform the way the industry operates and give publicans greater freedom from the big pub companies."

In fact, the tied-agent arrangement has been studied in the past and escaped intervention. The Office of Fair Trading rejected a shake-up of the sector four years ago, while more recently a parliamentary inquiry fell short of calling for fundamental reforms.

Nevertheless, the IPPR insisted its research was compelling. It said 57 per cent of tied-agent publicans currently considered themselves to be struggling financially, compared with only 43 per cent of non-tied. And nine in 10 of those publicans blamed the tie for at least part of their difficulties.

The IPPR also pointed out that 46 per cent of tied landlords earned less than £15,000 a year; the equivalent figure in the independent sector is 22 per cent. Nine in 10 tied pubs make an annual profit of less than £30,000, compared with 74 per cent of independents.

The think-tank is calling for a string of reforms. It wants the largest chains to be forced to liberalise the contracts its tied agents are expected to sign, by requiring the inclusion of a clause to opt out of the tie, for example. It also wants the large operators to be forced to publish and share more information about their costs and turnover.

"The beer tie limits the commercial freedom of tied publicans, who are forced to pay more for their beer than non-tied operators," Mr Muir added.

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Finance Assistant - Part time - 9 month FTC

£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

Marketing Manager

£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

Market Risk Manager - Investment Banking - Mandarin Speaker

£45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Day In a Page

Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes
Independent writers remember their Saturday jobs:

Independent writers remember their Saturday jobs

"I have never regarded anything I have done in "the media" as a proper job"
Lyricist Richard Thomas shares his 11-step recipe for creating a hit West End musical

11-step recipe for creating a West End hit

Richard Thomas, the lyricist behind the Jerry Springer and Anna Nicole Smith operas, explains how Bob Dylan, 'Breaking Bad' and even Noam Chomsky inspired his songbook for the new musical 'Made in Dagenham'
Tonke Dragt's The Letter for the King has finally been translated into English ... 50 years on

Buried treasure: The Letter for the King

The coming-of-age tale about a boy and his mission to save a mythical kingdom has sold a million copies since it was written by an eccentric Dutchwoman in 1962. Yet until last year, no one had read it in English
Can instilling a sense of entrepreneurship in pupils have a positive effect on their learning?

The school that means business

Richard Garner heads to Lancashire, where developing the 'dragons' of the future is also helping one community academy to achieve its educational goals
10 best tablets

The world in your pocket: 10 best tablets

They’re thin, they’re light, you can use them for work on the move or keeping entertained
Lutz Pfannenstiel: The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents

Lutz Pfannenstiel interview

The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents
Pete Jenson: Popular Jürgen Klopp can reignite Borussia Dortmund’s season with visit to Bayern Munich

Pete Jenson's a Different League

Popular Klopp can reignite Dortmund’s season with visit to Bayern
John Cantlie video proves that Isis expects victory in Kobani

Cantlie video proves that Isis expects victory in Kobani

The use of the British hostage demonstrates once again the militants' skill and originality in conducting a propaganda war, says Patrick Cockburn
The killer instinct: The man who helps students spot potential murderers

The killer instinct

Phil Chalmers travels the US warning students how to spot possible future murderers, but can his contentious methods really stop the bloodshed?
Clothing the gap: A new exhibition celebrates women who stood apart from the fashion herd

Clothing the gap

A new exhibition celebrates women who stood apart from the fashion herd
Fall of the Berlin Wall: Goodbye to all that - the lost world beyond the Iron Curtain

The Fall of the Berlin Wall

Goodbye to all that - the lost world beyond the Iron Curtain