Press Story

IPPR's report shows around half of all the pubs in the UK are 'tied' to pub companies - with Enterprise Inns and Punch Taverns owning more than 6,000 pubs each. In most cases, pub companies let out their pubs to lessees who run their own business on long-term leases. In addition to paying rent, pub company tenants generally have to purchase almost all of their drinks stock from the pub company.

IPPRs report shows that these 'tied' publicans are much more likely to say they are struggling financially and earn significantly less than non-tied operators. It also finds that tied publicans who are struggling financially see the beer tie as one of the most significant contributing factors to their financial problems.

IPPR's survey of more than 550 publicans shows that:

More than half (57 per cent) of tied publicans say they are struggling financially, compared to 43 per cent of those who are non-tied;
Almost nine out of ten (88 per cent) of tied publicans who claim to be financially struggling identify the beer tie as one of the most significant factors in their financial problems;
Almost half (46 per cent) of tied publicans earn less than £15,000 per year, in contrast to only 22 per cent of non-tied publicans;
Nearly 90 per cent of tied pubs generate an annual profit of £30,000 or less, compared to 74 per cent of non-tied pubs; and
More than a third (37 per cent) of all tied publicans believe that within three years they will no longer be managing their current pub, compared to 22 per cent of non-tied publicans.

Rick Muir, IPPR Associate Director, said:

"Thousands of publicans across Britain are being put under significant financial pressure by the 'beer tie'. Our survey of publicans shows they have suffered worse through the recession because of this 'beer tie'.

"The 'beer tie' limits the commercial freedom of tied publicans, who are forced to pay more for their beer than non-tied operators. A recent Select Committee report shows that the higher prices tied publicans have to pay for their beer are not adequately compensated for by lower rents. It estimated that because of the discounts they can access, non-tied operators will make more money from their businesses.

"The Government should act to reform the way the industry operates and give publicans greater freedom from the big pub companies."

IPPR's report says the Government should:

require pub companies that have more than 500 tied pubs and which offer commercial full repairing and insuring (FRI) leases to, provide flexibility to lessees, including a guest beer option and an option to become free of tie, accompanied by an open market rent review;
require pub companies to make information on business costs and turnover available to potential lessees;
support moves towards greater market transparency by requiring pub companies to cooperate with the creation of a pub rents database and to publish their wholesale price lists and details of discounts paid to lessees.
support the creation of a single stronger and more comprehensive code of practice, to be supported by an independently constituted adjudicator with the ability to provide redress to lessees where the code is breached; and,
implement the recommendation from the Law Commission that unfair contract terms regulations should be amended to improve protection for the smallest and most vulnerable businesses (employing nine staff or fewer).

Notes to Editors

IPPR's new report - 'Tied Down. The beer tie and its impact on Britain's pubs' - is available in advance on request from the IPPR press office and will be available to down load from www.ippr.org

There are around 50,000 pubs in the UK.

The British Beer and Pub Association says pubs are closing at the rate of 25 per week and that there were almost 1,300 fewer pubs in Britain by the end of 2010. They calculate that with a typical pub employing around ten people, this represents a net loss of jobs of around 13,000 across the country.

The Office of Fair Trading says that publicans tied to pub companies have to pay 40-45 per cent more for draft beer than independent pubs.

Contacts

Richard Darlington, 07525481602, r.darlington@ippr.org

Tim Finch, 07595 920899, t.finch@ippr.org