Vince Cable unveiled fresh plans to save the British pub today, saying he would clamp down on large companies that he believes exploit individual freelance publicans.
The Business Secretary said there will be a new code of practice, backed by a “powerful” watchdog, after years of complaints that pubs go bust due to harsh terms imposed on tenants by the property landlords that often own the lease on the pubs.
Tied pubs are required to buy supplies, at higher prices than they could get elsewhere, from pub companies and pay rents that critics say are inflated. Pub industry insiders have long argued that the companies act with no care for their tenants, inviting them to sign contracts they do not understand, and risking their life savings for the dream of running their own pub – a dream that often becomes a nightmare.
Half the tied pubs in the UK earn less than £15,000 a year, the Consumer minister Jo Swinson said yesterday. The Department for Business, Innovation & Skills said it hoped that the new proposals would help to save pub tenants £100m a year. The code will apply to companies that own more than 500 pubs, it said.
Thousands of UK pubs have closed since the credit crunch and recession. Mr Cable said: “We gave pub companies every chance to get their house in order. But despite four select committee reports over almost a decade highlighting the problems faced by publicans, it is clear the voluntary approach isn’t working.
“Pubs are small businesses under a great deal of pressure, many of which have had to close. Much of that pressure has come from the powerful pub companies, and our plans are designed to rebalance this relationship.”
The new adjudicator, yet to be appointed, would have the power to enforce the code, investigate breaches and deal with disputes with the ability to impose sanctions and fines.
The move was not met with cheer in the trade. Some say privately that the tied pub industry has now cleaned itself up, and that non-tied pubs are closing much more quickly without the support of a strong landlord.
A spokesman for Punch Taverns, the largest pub operator in the UK, said: “We remain confused by the Government’s attitude to pubs. This year’s Budget provided much-needed support to Britain’s pubs, but the Government is now proposing a state-backed pubs quango. A founding commitment of the Coalition was to reduce regulation, but ministers now seem intent on wrapping Britain’s pubs in red tape.”
Mr Cable said: “The number of pubs has declined from 70,000 in 1980 to approximately 50,000 today – 18 pubs (net) are closing every week. Whilst the financial crisis has brought into stark relief the slow process of sectoral decline, it is undoubtedly the case that the activities of the major pub companies, with their highly leveraged business model, have intensified the crisis.
“Although some pub companies behave well, the evidence I have received makes it clear that in too many cases tenants are being exploited and squeezed, through a combination of unfair practices, lack of transparency and a focus on short-termism at the expense of the long-term sustainability of the sector.”