Friday, 29 March 2013

Consult or be damned ...

Well, it's only taken the best part of a decade, dozens of hearings, a veritable mountain of evidence and countless contributions to the pubco debate, but the long-awaited government consultation on a statutory code to regulate the pubco-tenant relationship is upon us.

As I and many others have said, this will be a once in a generation chance to put the largest sector of the pub market into an equitable state. Lined up on one side will be the pub owning companies (both brewers and non-brewers) and on the other their respective tenants.

Its terms of reference have yet to be formally announced but one that must be included is the over-arching principal that recent committees and parliamentary debates have determined: that a tied tenant should be no worse off than a free of tie tenant.

For this to succeed the pub trade will have to convince our political masters of the current imbalance between landlord and tenant in the industry. The former will claim their business model is both fair and sustainable, whilst the latter will claim the opposite.

For me it's quite simple, when 66% of tied tenants earn less than £15,000 a year for their endeavours and most pubcos and tied pub owning brewers earn some four times as much from the same pubs there is a patent and inescapable imbalance. (I would venture the current parlous state of tied pubs is probably a major factor in the fact that 85% of pub employees earn less than the Living Wage, so if for no other reason than ensuring there is a more equitable division of profits to allow thousands of pub workers' pay to be lifted to this level, then there has to be change).

Not until the entrepreneurial skill and labour of the tenant is perceived to be of equal value to the capital commitment of the landlord and this is codified in strict regulations with a powerful adjudicator able to enforce them will the ailing tied pub sector be something we can all be proud of and not remain the current shabby example of sharp practice and unfettered greed on the part some landlords, that quite frankly as a veteran of the industry I am quite ashamed of.

Already the doom-merchants and nay-sayers are trotting out their customary warnings and some from quarters that would surprise you. For instance the operations director of the Federation of Licensed Victuallers Associations (FLVA) seems to think a free of tie option for tenants would be unworkable as he seems to think that the average pub tenant will not have the wit or resource to screw as good a deal out of drinks suppliers as their landlords. Obviously Mr Caffrey from the FLVA has never heard of buying groups or crowd-purchasing.

To his credit, however, he does point up the absurdity of limiting the effects of any regulation to those companies with estates in excess of 500 pubs. He is quite right to say "there should be one rule for all". So that's another over-arching principle to add to the list, no escape for small estates who can be just as ruthless as their larger counterparts. Besides which, even parliament cannot be thick enough to think that clever corporate lawyers and accountants aren't already working on ways to split the large estates into sub-500 sized parcels to avoid regulation.

Of no surprise to this writer is the usual clap-trap from Brigid Simmonds, the mouthpiece of the British Beer and Pub Association (BBPA) who claim to represent all pubs and brewers in the UK. The BBPA is a misnomer if ever there was one, as they represent not pubs and publicans but pub owning companies (some of whom brew beer, some who don't). She warns of "unintended consequences" of seeking a free of tie option for tied tenants ... I'm just wondering what those may be? Are such veiled threats the last resort of some of her incorrigible members? If so the battle may already be won for tied tenants as there is a mood afoot in this country that is distinctly set against bullies and corporate fat cats.

She goes on to tell us "it is vital for the trade that the tied model works well as a successful business model for both partners" ... it's a bit late for that love; after all the major pubcos have had more than enough time to prove the equability of their business model. Unfortunately for them, successive Business and Industry committees have seen the evidence from both sides and come to the quite natural conclusion the current business model of high property rents and even higher tied product gouging pricing is not working for the tenants.

Ms Simmonds says "it is not in their [pubco] interests for it to be abused" - perhaps she should have a quiet word with her organisation's tied pub owning members as many of them have been abusing the traditional tied model for nearly 30 years. Apparently the BBPA is "fully prepared for the model to be tested as part of the consultation" , no doubt they will be, for it's definitely in their interest for as little movement from the status quo as possible.

So the battle lines are drawn and it's now up to the thousands of tied tenants in the UK who think and can easily prove they are constantly on the shitty end of the pubco stick to have their say. It behooves all tenants (tied or free of tie) to contribute to the consultation and counter what will, no doubt, be a well-orchestrated effort by their respective landlords to attempt one final feat of legerdemain and avoid regulation and change.

I say both tied and free of tie tenants as the implications for both (and the free-trade sector of the pub industry) cannot be escaped ... for one, a truly free-market rent structure and drinks pricing environment where even the traditional "back street boozer" can generate sufficient income for its licensee to live on and who knows maybe even invest in the future of the national pub estate.

So dear reader, if you're a tied publican or you drink in a pub owned by one of the more rapacious pubcos then urge your host to have their say. The current state of affairs cannot continue with thousands of hard-working publicans forced into penury at the hands of morally bankrupt landlords and to do nothing to ensure future generations of publicans get a fair shake of the stick would be an abrogation of their responsibility that no excuses such as "I don't have the time" or "I don't do politics" will forgive ... unless, of course, you are happy with your lot, in which case spare a thought for many of your colleagues in the trade who are being systematically ripped-off. 

Remember when the well of "bottom end" tied pubs finally dries up who do you think your landlord will turn on next?

For a more succinct version of this piece ... look at this short message:

Friday, 22 March 2013

They think it's all over ...

Further to my post (yesterday) ... I got an "answer" from Toby Perkins ...

... it's time that all the political parties gave the UK's drinkers, pubs and brewers an unequivocal answer and not the usual half-answers ...

Thursday, 21 March 2013

Ooh it pains me to say but ... cheers George!

So it would appear that Mr Osborne has at last seen sense and taken note of the overwhelming chorus of discontent from the UK's pubs and brewers and not only scrapped the iniquitous beer duty escalator but chucked in an extra penny a pint reduction in base beer duty.

I'm no fan of this chancellor (or to be fair most of his predecessors) but it would appear that he is not as economically illiterate as I have accused him of being. Perhaps the voices of small businesses have been heard in the hallowed halls of the Treasury ... with a £2,000 break on employers' national insurance contributions he is at least trying to help business in these difficult times.

For most publicans, it won't be a way of funding extra staff (which is what he wants), as most licensees I know are operating at minimal margin and this NI holiday will go towards existing bottom lines.

He also has to be congratulated for cancelling the next fuel duty rise ... at least suppliers (both wet and dry) to the pub trade will not have that excuse for rises in their products

Good news for companies and sole traders alike with the increase in personal tax allowance to £10,000 and reduction to 20% for corporation tax in 2014 ... again a welcome boost to struggling licensees' pockets.

In an unusually conciliatory mood I have to congratulate Enterprise Inns for quickly announcing their intention of passing the duty drop on immediately (to bloody right as this cost them absolutely nothing)... I don't think my old "friends" (not) in Burton at rival pubco Punch have made any such promulgation.

When the hoo-hah and industry-wide back-slapping has died down perhaps it will be pertinent to remind ourselves that this 1p drop in duty will still leave Britain's drinkers, pubs and brewers suffering the second highest duty level in Europe. Remember CAMRA reckoned (pre-budget) that £1 of the price of every pint goes to tax and duty in the UK ... so let's not carried away with celebrating that we'll only pay 99p per pint until the next budget.

The scrap the beer duty escalator campaign has all but been won ... I say "all but" as Toby Perkins indicated prior to the budget that Labour (who if you remember introduced the beer duty escalator) would might have to retain it if they come to office after the next general election. I have twice asked him if Labour would re-introduce it should they get their hands on the purse strings ... but have yet to have a reply.

If one assumes that Perkins, Balls, Milliband et al aren't feeling politically suicidal then perhaps we can rest easy on that one ... but resting on our laurels over the other issues that affect the pub and brewing industries is not an option. Reform of business rates, reduction in the rate of VAT for the hospitality sector, stopping the off-trade running irresponsible pricing policies (via licensing law not minimum pricing) and regulation of the pubcos must remain at the top of our industry's political agenda.

I have a sneaking feeling that we're all going to pay a lot more after the next election but until then I shall be spending my new found "duty wealth" and tax allowance down the pub ... any pub ... don't care which, but most certainly not the supermarket ... cheers for now!

P.S. Sorry to all you cider-makers, vintners and distillers ... I guess the well ran dry ... maybe next year?

Monday, 11 March 2013

Hobby Horses ...

I know I've been banging on about it a bit ... alright then a lot ... but it's gratifying terrifying to have ones own 'amateur' calculations confirmed by the 'professionals' in the industry ... in October 2012 I extrapolated some figures from BBPA regarding diminishing tax takes for the Treasury ... as the Wine & Spirits Trade Association (WSTA) reports that it has calculated that alcohol duty collected for 2012/13 will be £500m less than expected, while estimated duty received in 2017/18 will be £3.4bn less than predicted due to the impact of high taxes on the alcohol industry, according to its research.

The WSTA says that "the tax structure is such that each additional increase in rate now risks reducing rather than increasing the absolute amount of tax raised." 

I only mention this as my original figure was based on the CAMRA estimate of total tax collected per pint of £1 includes VAT ... so if the WTSA comes up with just duty collected being down half a billion pounds this year ... what is the likely total tax take implication?


and the Treasury's Estimate of Scrapping the Beer Duty Escalator?


Net Loss to the Exchequer?


Net Loss All Tax by 2017/18?


... and that doesn't include knock on costs of unemployment caused by the continuing closure and loss of 18 pubs a week.

So I've still only got one question for Georgie Porgie ... "still think the alcohol duty escalators are a good idea?". A fiver says this won't dissuade the Treasury from announcing the retention of the beer duty escalator on March 20th.

Nurse! Meds! Stat!

Thursday, 7 March 2013

March Newsletter

The How To Run A Pub March Newsletter is now available to view online here

To get future editions delivered directly to your inbox ...

Wednesday, 6 March 2013

Free App ... from How To Run A Pub

Easy to use and Free !
It's harder and harder to make a profit from pubs these days ... if you're considering taking on a pub this year one of the things you'll need to do is fully understand how much profit (or loss) a prospective pub business is going to make.

I've added a free to download and use application on the How To Run A Pub website that helps you does just that ... click here to go to the website.

It's really easy to use ... and more importantly it's absolutely free

Tuesday, 5 March 2013

New episode of BBC's "Toughest Place In The World To Be ... "

Given the government response to the debate on Early Day Motion 703 today in Parliament to scrap the beer duty escalator ... which to precis was "Stuff Off!" ... it got me thinking of yet another program idea for the BBC.

In a moment I'm going to ask you to close your eyes and imagine the voice of the woman who does the continuity announcements on BBC2 or 'er off the M&S adverts "... this isn't any ordinary advert, this is an M&S advert".

Of course this isn't going to work unless you've seen the trailers for the new series of "Toughest Place In The World To Be ..." , which kicks of with a taxi driver in Delhi. Nonetheless I'm going to pretend you have, so shut your eyes and imagine that silky voice for a couple of tics.

We'll all be living in tents soon ...
Good, got it fixed in your head. So through the open tent flap that is BBC2, the trailer begins ... shots of an obviously English fireman beating out a bush fire, a clearly terrified London cabby trying to navigate through the melee that is rush hour Delhi and finally cut to an English pub landlord.

The voice-over tells us that "Same job, different world, three Brits do their ordinary jobs in extraordinary places, Toughest Place To Be returns with a pub landlord in Britain this Sunday 9pm BBC2 ..."

For in 2013, Britain surely must be one of the most difficult places on the planet to do the job of, and earn a living as a bar owner. If s/he's not tied up in one of the most highly regulated licensing and health & safety regimes in the world, then s/he will be subject to extraordinary and punitive duty regimes, certainly at least, in terms of Europe.

Not content with gold plating every directive from Brussels, whilst many of our European colleagues enjoy the rule of governments who're not quite such sticklers for every regulatory and legislative edict from the technocrats in Strasbourg, we have a government that is somewhat deaf to the plight of publicans.

Deaf to calls for reform of the ludicrous way that pubs are assessed for various taxation, such as the bizarre way business rate valuations are undertaken for pubs as opposed to other retailers, or the industry-killing, above inflation beer duty escalator.

This government seems to not just have lost touch with its electorate, but seems to have lost touch with reality. The Eton frat-boys are intent on gouging even more out of our struggling industry, increasing VAT, the introduction of Late Night Levies and the proposed implementation of minimum unit pricing for alcohol, a freeze on business rates' valuations ... just how much blood do they think they can squeeze out of us?

Friday, 1 March 2013