Rents, not the tie, the main issue for tenants, says leading accountant

In the wake of the Office of Fair Trading (OFT) report on the pub industry a leading accountant has said it was unsustainable rents rather than the beer tie which caused tenants the biggest headache.

Mike Coughtrey, a partner at beancounters KPMG, said the tied structure was the "cornerstone of the pub industry", providing a low cost entry point for those starting in the industry, with lower risks than full ownership, "albeit accordingly not the same profit for the tenant as a free-house".

Coughtrey, who has run pubs himself, said the major issue, particularly in the current economic climate, was that in some cases the combined rent made up of the standard dry rent, the landlords margin on the tied beer and machine profits, "is not always being set at sustainable levels, making it increasingly difficult for the tenant to trade profitably and sustainably".

Those with a longer term view will be giving serious consideration to the combined rent levels, Coughtrey said, "in order to avoid the return of pub keys and the erosion of property values that follows".

He warned that landlords need responsible tenants who can pay their rents on time and tenants need a rent that provides a proper living and reward."

Yesterday the OFT published the results of its 90 day look at the effects of the beer tie following a 'super complaint' from real ale group CAMRA.

It concluded there was no competitive issue surrounding the tie and consequently it would not be referring the pub industry to the Competition Commission.

The OFT's decision welcomed by major pub-owning companies but condemned by those looking to break up the pubco model.