There is no doubt that this countries pub stock is suffering, the physical evidence is there before our own eyes with a significant number of boarded up pubs distributed all over the country on a fairly even basis.  The root and branch pub has been attacked from all sides via taxation, competition from the supermarkets, the health lobby and government legislation.  However as importantly they are covertly attacked from within the trade via the pub owning estates through their misuse of the beer tie, poor tenant support and overcooked rent prices to landlords.

The main companies in this market are Enterprise and Punch Taverns, who between them operate approximately 10,500 establishments according their respective web sites.  There are approximately 53,000 pubs open in the UK at the moment, so just two companies have a degree of control about 20% of the market.  While this is not a monopoly, it is unhealthy for the pub trade as a whole.  Their size means they can move slowly when it comes to change and reform and justify this by the number of pubs they have to roll it out to.

Just before Christmas there was a meeting of the All Party Parliamentary Save the Pub Group at which Simon Townsend, Chief Operating Officer of Enterprise Inns was present.  Discussed was the Industry Framework Code (IFC), a package of self regulation measures for the tied pub trade which were first put forward in draft form over a year ago in late 2011.  Drawn up by British Institute of Innkeepers (BII), British Beer and Pub Association (BBPA) and Federation of Licensed Victuallers Associations (FLVA) among others, it addressed concerns from all parties involved the licensed pub trade.

The outcome of all this activity was, in summary, an independent conciliation service for tenants, a framework to ensure that leases were fairer on tenants regarding maintenance of premises and rent reviews and finally for the pub owning companies to be accredited regarding their company codes in relation to this, reviewed periodically.   The policy document for the IFC has been circulated for over a year through various drafts and is still to be signed off as we enter 2013 despite the chair of the BBPA Brigid Simmonds telling the same meeting that it should be approved by the end of 2012, somewhat optimistic given the time of year.

It is accepted that there will be a lag before new systems can be rolled out across a large organisation, framework codes have to be translated into company procedure and policy.  Three to six months was the accepted timescale for such a roll out.  It will then take another year before the effect of these changes can be truly assessed.   The ultimate indicator of the success is money, how much is being left in the tenants pocket, how much is being invested in building maintenance and how much profit is being creamed off by the likes of Enterprise.

This is something the BBPA, which represents the pub owning companies and medium to large brewers refuses to get involved in, to quote “I have never told the department……we would redress the balance of earnings, that is not the role of the trade association”.  He is telling the truth technically, the trade association is there to look after the interests and earnings of its members who supply services, premises and drinks to the tenants themselves.

However this is shortsighted, as if it wasn’t for the pubs, clubs and bars which buy the beer, spirits, snacks, rent the gambling machines and employ the services of the BBPA’s members then the balance sheets of these member companies would be of a redder tint.  Simmonds stated that rents have been shown to have come down.  I don’t disbelieve her, but the market has dictated this, more pubs out for lease, less people with the money to fund the deposit to get into the premises, of course they have had to make things more attractive to potential tenants.

However what we is not publicised is how this reduction in rent has been counterbalanced with charges for other services and products supplied by the same company.   Enterprise Inn in 2012 announced a profit after exception of £44 million up from £24 million on the same basis the year before.  While this is nowhere near the £183 million they made before the recession kicked in, it is 730% increase in profits since 2009 at the bottom of the recession.

The money is coming from somewhere and pubs are still experiencing higher tenant turnover than is desirable, these two facts cannot be a coincidence, the hole in the pocket of the landlord is falling directly into the piggy bank of the pub co.