Pubco shares rise after OFT report

The country's two biggest tenanted and leased operators saw share prices rise yesterday after the news the Office of Fair Trading was to take no further action on the beer tie.

The news from the OFT boosted Enterprise Inns shares by 23% to a closing price of 147p, while Punch saw its share price rise 14.8% to a price of 97p.

The OFT said it had "not found evidence that supply ties are resulting in competition problems that are having an adverse impact on consumers" in response to the super-complaint lodged by the Campaign for Real Ale.

The OFT said there was "generally effective competition" between pubs and it did not believe that the beer tie contributed to higher prices or prevented pubs offering wider choice to customers.

Punch boss Giles Thorley said: "In these challenging economic times, Punch continues to work hard to assist its partners and to increase transparency across its business.

"We welcome the OFT decision and sincerely hope that all industry bodies can work together to protect the future of the British pub which is in all of our interests."

An Enterprise spokesman said it was "delighted" with the news but vowed to avoid complacency and press ahead with addressing some of the "legitimate" issues raised by the BEC.

"The tie has now been reviewed no fewer than 25 times since 1966, 21 in the UK and 4 in the EU. On every occasion it has been concluded that the tie was fit for purpose.

"For many decades the tie has provided a low cost of entry to the pub industry for committed, entrepreneurial licensees who are unable to afford to buy a pub of their own."

Sustainable rents​

Meanwhile, KPMG partner Mike Coughtrey has argued that the tie itself is not the problem but sustainable levels of rent are.

"The tie itself is not the key issue, indeed the tied structure is 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 freehouse," he said.

"The issue, particularly in the current economic, is 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, to avoid the return of pub keys and the erosion of property values that follows.

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

• For full coverage and reaction read: OFT will take no further action on pubcos​​.