There has been a huge focus on the hospitality industry – and particularly pubs – in recent months. Many are struggling and there have been a number of closures as pub landlords find they can’t operate profitably anymore and have to give up their businesses and homes.
Now I am not naïve enough to believe that there haven’t been significant changes in people’s drinking patterns and behaviours and in the viability of some pubs, but what does worry me is when I see a pub which would undoubtedly work if it were a free house, unencumbered with high product costs, closing down and then within a short time being turned into flats and retail space, or a nice country pub with a car park, beer garden and bowling green getting levelled and a dozen houses being erected in its place.
The pub is something that is unique to the UK. It is at the heart of all our soap operas and research has proved that rural communities with a pub at their centre as a hub are happier and healthier as a result. In my opinion, losing a pub which is perfectly viable as a free house pub because it is worth more as a property with change of use is a tragedy.
I have also watched with interest the growth of retail premises being turned into bars and bottle shops, very often by a local micro brewer. The irony is that many are opening in towns where local pubs are being closed down, supposedly because they are not viable. When you talk to the operators of these retail outlets, they say they tried to buy the local pub but were priced out by local developers who based their bids on a change of use plan that was far more valuable than the building continuing as a pub.
But that is the situation we find ourselves in, with many of the large, regulated pub companies being property companies first and foremost and treating their estate accordingly. The fact that their properties sell beer is a bit of an inconvenience to them!
To be clear, there are four main types of pubs in the UK:
Managed houses owned by an operator with a manager in place on a set salary. Most are high volume food and drink outlets in prime locations.
We then have the Free Houses where the publican, landlord or landlady is the one who owns the pub outright or has a commercial mortgage and can buy everything they sell on the open market and with considerable savings in many cases.
There is the regional brewer tenanted estate where the tenant has an agreement in place with the brewer, pays rent and buys the beer and a number of other items they sell, through the brewer. This model was originally a good one where you were tied to buying the beer from the brewer who owned the pub and you were your own boss on all the other lines you sold, but this tie has expanded over the years to be a Frankenstein’s monster of an agreement that covers far more than beer and becomes a significant income stream for the brewer as well as the rent from the pub. On the plus side, most of these regional brewers still treat their pubs as a shop window for their products and the publicans are, on the whole, treated as valuable partners.
We then have the 6 big pub companies who were regulated against because it was felt they were not treating their tenants fairly and so we saw the Pubs Code and adjudicator introduced in 2016.
Two of the biggest owners do not brew beer; they are retailers, and many have large debts caused by overexpansion before the crash in 2008. They have an estate of roughly 9,000 tenanted pubs in the UK and it is these pubs I’m most worried about; I would suggest they are the ones in greatest difficulty at the current time. Their tenants are paying high rents and eye-watering prices on all the products they are obliged to buy through the pub company because of the tie in their agreement.
My point is a simple one – despite their supposed reluctance to interfere with the market, the Government has already recognised the issues around these big pub companies by regulating against them and introducing the Pubs Code. If we are not going to lose many more perfectly viable pubs because they are worth more as housing or retail units, then they need to act now. The Pubs Code and its adjudicator have been a complete failure and I would suggest that it’s time for a BEIS review of the sector and its issues aimed at sorting this problem out, because if they don’t, they will be losing large parts of our heritage because the sites are more profitable as flats, retirement homes or retail units!