Lord Hodgson of Astley Abbotts said the pub sector is under severe strain “for reasons quite unconnected with the brewers, the pubcos or the tenants”.
Speaking in the House of Lords debate on the Small Business, Enterprise and Employment Bill earlier this week, which includes a statutory code to regulate the pubco/tenant relationship, Lord Hodgson – a former director of Marston’s – said: “In areas of Nottingham, Leicester, Manchester, Leeds and Birmingham the increase in the Muslim population, who do not drink, leads to many pub closures.”
He said that the decommissioning of large factories, the rise of regulation and business costs, and the availability of low-priced alcohol in supermarkets were also significant factors in the decline of the pub industry.
Inevitable
“It is exceptionally hard for a publican who has put 10 years of his life into trying to build up a business to accept the inevitabilities of these tides of history. These are trends that defy King Canute, so pubs are likely to continue to close.”
Lord Hodgson, defending the beer tie, said that pub companies were able to offer support to offset the effects of these trends in the form of “operational experience and capital resources”.
“Remove the tie and you risk removing this ladder, by which many people have become very satisfactorily self-employed. No pub owner is going to invest many thousands of pounds - hundreds of thousands of pounds in some cases - in refurbishing a pub if the tenant can then walk away from supply agreements.”
'Pump and dump'
Other peers were critical of the recent record of the large pub companies. Lord Stoneham of Droxford (Lib Dem) said that the pubco model which emerged from the Beer Orders “became ever more leveraged in the boom that followed and it has become a classic pump and dump operation—some would say that this is almost a type of Ponzi scheme—and eventually it collapsed”.
And he warned: “Do not believe the rumours that are being put about that the provisions in the Bill relating to pubs will stop investment and create unemployment in this sector; it is already suffering job losses and not getting the investment that it should.”
Duty of care
And Lord Snape (Labour) recounted a personal story relating to his daughter and son-in-law, who ran an Enterprise Inns pub - the Red Lion in Longdon Green in Staffordshire. “They invested all their life savings into the pub—an almost six-figure sum. When occasionally they had problems paying their bills, the pubco stopped delivering beer, leaving them with no choice, but to buy out of tie.
"They were then fined £500 a time by the pubco. My son-in-law was badly beaten in the pub one New Year about seven years ago, and he has never worked since. In the three months that he was in intensive care, Enterprise Inns expressed a view to my daughter that they “had no duty of care to any publican”. My daughter and son-in-law eventually left the pub, literally with nothing.
"I hope that the Minister can assure us that there will be no attempt to turn back the clock and allow these nefarious practices to continue."
The bill has now reached committee stage in the House of Lords with the first meeting scheduled for 7 January 2015.