Liberal Democrat pub campaigner Greg Mulholland, MP, has criticised tenanted pub companies for making insufficient progress in responding to the Business Innovation and Skills committee's report on reforms to the pubco/tenant relationship.
Mulholland, speaking at the Morning Advertiser's Tenanted Pub Company Summit yesterday, said the AWP tie has "still not gone" despite the recommendations of the committee.
He said some companies "are ahead of the game" but some are making changes "kicking and screaming". He criticised the introduction of leases that scrap rent reviews but impose Retail Price Index (RPI) increases .
"RPI — that's an upward only rent review. Rents based on (trading) reality — that's not on the table."
He said that he thought the lack of transparency in pubco leases was not "accidental" and he had "no confidence in fair rental levels".
"Has anyone seen a more complex contract?" He added that too often successful licensees saw trading success rentalised. "It's a funny old business that penalises success."
Tenants are still not listened to and valued sufficiently, he argued. Mulholland said that recruitment still concerned him with "too many incidences where people are given a rosy view of the risks and level of support" from pubcos.
More generally, he complained that the industry was "too inward-looking" and referred to the Beer Orders as a "tragedy".
"Too many brewers got into bed with the pubco model," he said. "Some of these companies lost their way and lost their values."
He also argued that the creation of large pubcos had been "bad gambling" with "over-valued estates and desperately flawed projections".
He claimed that on average £50,000 was taken out of the profits of each pub to service pubco debt and support for tenants from pubcos worked out at £2,000 a pub.
Heated debate
He also questioned whether it was time to change senior personnel at certain pubcos, referring to Enterprise Inn boss Ted Tuppen in particular at one stage.
"I'm afraid the model, as operated by Enterprise Inns and others, has been a disaster for British pubs. They (Enterprise) recently off-loaded two pubs in Otley without giving local people any chance to have a say about their future, which is absolutely indicative of the problem.
"The only way I can hold him to account is the nasty letters we send to each other."
In response, Tuppen accused Mulholland of "making up" his figures on tenant support, pointing out that Enterprise had provided £30m of support over two years for 3,000 licensees which works out at £10,000 per pub.
Mulholland responded by saying that being insulted by Tuppen was a "badge of honour".
He claimed that Mulholland had failed to respond to more than a dozen Enterprise invitations to spend a day in trade.
"You've never bothered to reply, let alone tell me why not. Spend a bit of time with the majority of the industry and you'll find out what really goes on," he told Mulholland.
"From somewhere you've come up with the figure of £50,000 per pub. If you divide our interest bill by the number of pubs you'll find it is just under £30,000. It is a bit depressing when you make stuff up. We all know you are making it up but the trouble is that you're saying it to 634 other MPs and they don't know you are making it up."
Lion's Den
Alistair Darby, managing director of Marston's pub company, responded to Mulholland's comments by telling him: "I think we just need to be a bit careful about insulting people who are trying really hard to make a difference.
"I've said it before and I've said it again, it is not a sustainable business model for us to have tenants and lessees who are not making a decent living." Industry consultant Phil Dixon said: "Some of the decisions that have been taken in the past 12 months have been the right ones. There is a commitment to transparency. The situation is very simple — if people don't make money in pubs you finish up with idiots taking pubs."
Roger Whiteside, boss of Punch's tenanted division, congratulated Mulholland on "coming into the lion's den." He said there were changes happening in the sector but that he was not moving his "entrenched views".
"I feel there needs to be a prize at the end," he said. Neil Robertson, chief executive of the BII, said the industry was "on track but with lots of do" in responding to the BIS recommendations.
Paul Wigham, chief executive of Orange Sun Bars, said that you have "got to give credit where credit is due" in acknowledging the changes that are underway in the tenanted model.
Sapient Corporate Finance principal Peter Hansen said: "What the industry is struggling with — and what I haven't heard here — is the smoking ban, the downturn in the economy, and the huge duty increase.
"The reality the industry is trying to respond to is much more complicated. How can the Government help instead of actually doing more to hurt the industry?"