Analyst: BBPA reforms could prevent inquiry

14-Oct-2009 - Last updated on 27-Aug-2011 at 06:34 GMT

Jack: CC inquiry not a foregone conclusion

A City analyst has questioned whether any licensees, outside of the "tiny vocal minority", have signed up in support of the Independent Pub Confederation.

A City analyst has questioned whether any licensees, outside of the "tiny vocal minority", have signed up in support of the newly formed Independent Pub Confederation (IPC).

Douglas Jack of Numis said that the end of the pub mediation process undermined share prices — with Punch down 16.6% yesterday — with the market presuming a Competition Commission referral is now the likely outcome.

However, Jack believes that the British Beer and Pub Association's (BBPA) new Framework Code of Practice on the Granting of Tenancies and Leases, could be sufficient to prevent a further inquiry.

The code, agreed with the BII and the Federation of Licensed Victuallers Associations, calls for the removal of upwards only rent clauses, greater transparency across the board and a procedure to deal with complaints (Pubcos set out 'fundamental reform' plans).

The BBPA's agreement falls short of banning the beer tie but Jack believes this would be "counter-productive" in any case.

The IPC (Pub trade back at loggerheads) includes key consumer, tenant and brewer groups such as Fair Pint, Association of Licensed Multiple Retailers, the Campaign for Real Ale (Camra), Justice for Licensees and the Society of Independent Brewers (SIBA).

The IPC is calling for all lessees to have the option of going free of tie, new guidance on rent valuation, greater transparency on rent setting, removal of RPI-linked and upwards only rent clauses and a scrapping of the AWP machine tie.

"This group still seeks the removal of the beer tie even though it would be likely to result in higher retail prices, reduced product range, lower investment and a higher pub closure rate," said Jack.

"It is questionable whether this group has any signed up licensees outside the usual, tiny vocal minority."

Jack added that the Office of Fair Trading (OFT) would decide the outcome by next week — expected Thursday 22 October — with one of three options: no need for change, further work by the OFT (6-9 months), or Competition Commission (CC) review (2-3 years).

"If a CC inquiry occurs and results in the beer tie being abolished, the bottom 20% of pubs would be most adversely affected," he said. "By the time this occurs, Punch Taverns should have exited its tail and paid down at least another £1bn of debt.

"For Enterprise Inns, a CC review would be worse, occurring at a time when it has to refinance bank debt."