The tie's moral dimension

So where are we after last week's updated pubco/tenant report?

Let's take a step back. More than half of the UK's pubs are subject to a supply agreement called the tie. As Marston's Alistair Darby says, the right to apply the tie has to be earned.

The tie means pub owners have massive commercial power enshrined in their contracts with tenants. It means that those who operate the tie are subject to an over-riding moral obligation to maximise the chance of tenants succeeding. The country's regional family brewers have understood what this means in practice for decades. And, naturally, there is a good level of trust in the relationship.

In 2004, a parliamentary committee looked at the tied pub world — and found major faults in the way the tie was being operated by some of the larger companies. But then the report was largely ignored.

Last year, a second parliamentary committee found pretty much the same things — and said so in direct and uncompromising language. It's now set a deadline of June 2011 for change.

Looking back on what critics were saying in 2004 is depressing. For years, there has been little attention to the action needed to retain the moral authority required by the tie.

The upshot was on show at the Westminster Hall debate two weeks ago — all three major parties were identifying the operation of the tie as an issue alongside all the external issues. The concern is whether the tie is being operated by some with a commercial ruthlessness and opaqueness inconsistent with its moral obligations.

The bigger your pub company the greater the moral obligation. Every licensee going bust — or departing poorer than when they arrived — creates its own mini-whirlwind of bad publicity and individual financial tragedy.

A recession creates no shortage of failures. But major pubcos play such a large part in creating the weather it's only right that they are subject to intense scrutiny on key issues: are they fulfilling the tie's moral obligation to do their utmost to ensure licensees do not fail? Or are they, unforgivably, contributing — even only in part — to failure rates, which are too high.

A simple measure will allow a clear judgement on whether the tie is being applied in a way that creates the proper moral alignment between the interests of pubcos and tenants. Pubcos should be required to publish tenants' average length of stay on a regular, maybe half-yearly, basis. The length of tenure figure — way too low at less than four years across the major pubcos at the moment — is a living, breathing indication of whether tenants find the tie is working for them.

If the average length of tenure figure improves it's a sign the tie is being applied properly. Good companies will benefit from improving figures, bad companies will be punished by the marketplace.