UK: Government moves to stamp out pub company 'abuse'

By | 22 April 2013

The government is planning to put in place a code overseeing the system

The government is planning to put in place a code overseeing the system

The UK Government has unveiled plans to establish a statutory code overseeing the relationship between pub companies and their tenants in a bid to stem closures. 

Under the proposals, published today (22 April), an independent adjudicator would be appointed to enforce the code, investigate breaches and hand out fines to pub companies, the Department for Business Innovation & Skills (BIS) said. Business Secretary Vince Cable said: "It is clear the voluntary approach isn't working."

The plans are subject to a consultation, which closes on 14 June. 

The move has come about after nearly a decade of scrutiny of the UK's beer tie system. Under the model, pub-owning tenants agree to buy beer through the company which they lease the pub from. The system is regarded as a low-cost way for people to enter the pub trade, but tenants have complained of high beer prices and rent levels, as well as bad treatment by companies.

BIS said today that the new plans would stop pub companies, known as 'pubcos', abusing the system.

Cable added: "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 plans could also boost the growth of small brewers as more pubs gets access to 'guest' beers, he added.

However, the British Beer & Pub Association (BBPA), which represents the majority of pubcos, said it is "fully prepared for the model to be tested". Chief executive Brigid Simmonds added: “BBPA members are determined to tackle problems where they exist, as we have been doing, through the system of self-regulation that the industry has set up.”

Among the companies being consulted over the plans are Diageo, Anheuser-Busch InBev, SABMiller, Molson Coors and Carlsberg.

Expert analysis

Beer in the United Kingdom

In 2011 beer sales remained weak due to the ongoing and growing consumer concern about government spending cuts on jobs and incomes, which continues to constrain consumer spending. Total volume sales of beer declined by 5%, a more dramatic decline compared to the previous year and slightly sharper than the review period total volume CAGR. This was due to ongoing beer tax increases in March, with beer seeing excise duty increased two percentage points above the level of inflation at 5%. This tax...

Sectors: Beer & cider, Soft drinks, Wine

Companies: Diageo, Anheuser-Busch InBev, SABMiller, Molson Coors, Carlsberg

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