It is less than a decade ago that The Morning Advertiser (MA) began writing about the Fair Pint campaign and movement towards reform of the tenant-pubco relationship. But it feels like a century with the smoking ban, an economic recession, a coalition government, a Conservative Government and now Brexit.
The reality for the pub industry is clear though – the pubs code is the single most important piece of pub legislation since the Beer Orders. Simon Clarke, an Enterprise Inns lessee, who runs the Eagle in Battersea, south London, and Mountford, an ex-Punch tenant now running a free-of-tie lease at the Boat Inn in Cromford, Derbyshire, are part of a group of ex and current licensees who played a significant part in its creation.
The fight for MRO has not, at all times, been a clean one. A glance through MA’s online comments section illustrates the intensity of the debate.
Clarke and Mountford are pleased to meet me though. When I arrive, Mountford is helping Clarke with his cask delivery into the cellar, and they are chatting about the latest on-trend beers. It’s at this point that you realise they aren’t just outspoken campaigners, they’re landlords, running pubs and serving customers great beers.
The Eagle
The Eagle is at the end of the Northcote Road in Battersea, near Clapham Junction station. It is on a street that sums up modern hospitality in microcosm. At the Clapham Junction end is the infamous Nicholson’s Falcon pub, then you walk past McDonald's, Starbucks, Nando's, a BrewDog, a Geronimo Inns site, a couple of other managed pubs and bar venues, Byron Burgers, Gourmet Burger Kitchen, Draft House, before finally arriving at the Eagle on a side road. This is Clarke’s competition.
But this traditional public house has so far survived this changing landscape of venues. Clarke has a couple of Chesterfield sofas, creaking wood pews, font badges on the walls and books lining the shelves. It feels, oddly, like a country pub in the middle of London. It’s the kind of pub you don’t step foot into very often in this part of the city. History seeps out of it.
“It’s probably worth more than £1m as a property,” Clarke says.
Clarke tells me a pub opposite was bulldozed and turned into a stunning new block of flats. The developer must have made several million pounds with the build, he states. Clarke then waves his hands in numerous directions illustrating locations of pubs in the area that have disappeared. In a decade, many community pubs in this part of Battersea have closed.
Timeline of events
We sit in the window and begin to go through the timeline of events that led to the historic passing of the pubs code element of the Small Business, Enterprise and Employment Bill – the piece of legislation which led to the pubs code and the MRO being put on the table for licensees.
At the time of interviewing, Brexit has just happened, and we are all coming to terms with the new political landscape. Anna Soubry, the business minister in charge of the proposals, has gone and it’s unclear which minister is going to take on the central Government role of managing the new pubs code adjudicator office.
Political driving force
But that’s for the future. Mountford says Sir Peter Luff’s 2009 select committee inquiry is where the timeline begins: “We wouldn’t be where we are if it wasn’t for the BIS committee report on pub companies. That was the political driving force behind the changes that resulted in the pubs code.
Clarke claims though that you can go even further back to the case of Bernie Crehan in 2004, who won his case at the Court of Appeal against pubco Inntrepreneur on his beer tie, due to it being in breach of European Law. Indeed, MA even asked at the time if the tie was dead.
“The then-trade ministry select committee is where it all kicked off.” Clarke states.
“The conclusion of that was tied tenants should be free of tie. From a European competition law perspective, which basically stipulated that if you are going to tie someone to a product then you should get something back in return.”
Campaign groups
Then, over the next decade, things move forward. The infamous Fair Pint campaign was formed with Brian Jacobs and David Morgan and the gang of licensees and campaigners familiar to tenants – Steve Corbett, Mark Dodds, Inez Ward – with the desire to free all leased pubs from the tie. Together, they created a Utopian vision of an entirely independent pub landscape.
Between 2008 and 2013, the campaigners met all elements of government involved in looking at legislation around licensees and the tie – Labour minister Peter Mandleson, and then a succession of Conservative and Liberal Democrat ministers.
As Mountford stated, in 2009, views among politicians really began to shift when Sir Peter Luff, chairman of the Business, Innovation and Skills select committee looked into the beer tie and tenancy arrangements.
His report was critical of pubcos arrangements with tenants, and led to business minister Ed Davey in 2011 firming up the self-regulatory system with a legal code of practice. Some in the industry probably hoped this was the end of the affair. But campaigners continued the fight. This led to the Fair Deal for Your Local campaign, which called on the call for a free-of-tie ‘dry rent’ for licensees – the call that led to MRO.
Cable
Many ministers were broadly supportive of reform, but it wasn’t until January 2013 that it was finally announced by Vince Cable that a consultation on an adjudicator and statutory code of practice would take place. It was, in hindsight, the moment everything changed.
Clarke says the road to MRO started though with an early day motion (EDM) before parliament in 2007 by Liberal Democrat MPs Tim Farron and Greg Mulholland, the latter being the self-styled ‘Pub Champion’ – chair of Fair Deal for Your Local successor, the British Pub Confederation, and the Parliamentary Save the Group. His involvement earned it the moniker ‘Mulholland’s Law’.
“They tried to promote a select committee inquiry where there was legislation that would end up with a tied tenant being able to go free of tie.”
Clarke shakes his head.
“Let’s be honest, we never thought this would actually happen. Unusually, the legislation has come to finally pass through an EDM, which is incredibly rare in politics.”
Rent drop
Clarke, now one of the most famous faces of the campaign – as illustrated in being awarded the CAMRA campaigner of the year 2016 – took up the baton in 2008. That year, his eye-catching deal to get a 12% rent reduction from Enterprise Inns caught the attention of tenants and campaigners across the UK.
“We went to arbitration," Clarke says, "For the first time, someone got a 12.5% drop in rent by going to a third party. That attracted the attention of the Fair Pint founders. And they came to see us in 2009. That was about the time of the Sir Peter Luff select committee.
His business partner and co-director Dave Law, who has been the rock upon which the Eagle has sat for more than 20 years, saw the coverage of the Fair Pint campaign in the Morning Advertiser, and set up a meeting with Steve Corbett and Mark Dodds in the garden of the Eagle. Clarke, Law and the other licensees on the campaign then went on to contribute more than 14 submissions to Luff's committee.
“I got involved with Dave (Law) in 2006 as it was my local – I had taken it on with Dave after he had on several occasions tried to get the lease himself.” Clarke says.
“Eventually on the third attempt, I was doing a loft conversion next door, as I was a property developer/surveyor, and I thought ‘I’ll go in with you for a bit’ as I wanted to park my money as I knew the housing market was about to plummet – but how wrong was I about that! So don’t take any advice on property from me!”
“So I thought, I’ll put money into this pub. We knew what money we were making in terms of sales, so we thought there must be a decent living.”
Clarke then claims: “This was only to find Enterprise was taking 80% of the net profit that the pub made, and we were getting 20%.”
Close to leaving sector
Mountford's story is more dramatic – and although he is still running a pub with his wife, Lorraine, he came close to leaving the sector as a Punch tenant.
“I haven’t got a problem with Punch though,” Mountford says, “it’s water under the bridge.”
Mountford is one of many licensees who claim to have lost their pubs due to rent reviews and subsequent hikes. Four years ago, his pub, the Rising Sun in Middleton, Derbyshire, saw a rent review result in an increase of 60%. In November 2011, he had issued a section 26 notice to Punch calling for a new lease and rent from June 2012, which would result in legal proceedings between Mountford and Punch, but also security of tenure and right to renewal. In March, Punch issued legal proceedings against Mountford.
In June 2012, after private arbitration between Punch Taverns and Mountford, his pub was put on the market.
As a result of his experience, he passionately supported a statutory code of practice, and to free licensees from the beer tie and the self-regulatory system of arbitration that existed until this summer.
Mountford laughs when I ask if he sees himself as controversial in his views. “Not at all. I’m a Tory-voting former GMB representative for tied tenants.”
Unfair bias
He takes me through his situation at the Rising Sun, as he saw it. The rent increase of 60% would have reduced the income to less than £10,000 per annum. He claims Punch’s profit from wet sales had increased by £50,000 a year – trebling turnover.
“Basically, whatever you want to call it, they were making £85,000 and I made £20,000,” he claims.
Clarke nods and illustrates through the Eagle’s accounts why he was against the beer tie – and why he has submitted evidence time and time again to every parliamentary investigation.
“If we bought 350 barrels a year," Clarke says, "they are making from us £150 a barrel – so that’s £85,000. We’re making £24,000 – so £109,000 overall.
“So I make around £12-15,000 a year with Dave (Law) – and I’m fortunate to have a second income as a surveyor.”
“If I had been free of tie – I reckon I would be making about £55,000 and we would be earning about that amount between us, so roughly double what I am currently - around £22-25,000 each.”
Clarke states this is just good business sense.
He said: “We would then have had the opportunity to reinvest, and have a much wider collection of beers to sell too. And that’s our unique selling point – we were CAMRA Pub of the Year last year, and we’ve always been the shortlist.
“We were front cover of the Good Beer Guide last year – cask beer is what it’s all about for us – yet we’ve only got access to about a 10th of the market.”
Rents issue
The issue of fair rents – or how ‘fair maintainable trade’ is arrived at is another bugbear for campaigners.
“David Morgan describes it as smoke and mirrors.” Mountford claims, “it’s hard to find the documentation or it doesn’t exist.
Clarke nods: “Millions of tenants see it as a ‘buying shoes in the sales’ mentality – at beginning of a rent review a proposal is put forward and then if it drops, they see it as a good deal, even if it isn’t.”
It was due to the prohibitive costs of self-regulatory arbitration that many campaigners argued so hard for a statutory code. Clarke should know as a RICS surveyor.
“If it goes to arbitration you have to pay for a surveyor, that’s £10,000. If you go forward it will cost you another £10,000 and then if you lose it will be a £30,000 cost. This is how it is sold to you.
“It’s too high risk – and then you’ll try and do a deal at a nil-increase when, in fact, it should have gone down. In some cases it should have halved, we’ve seen that.”
“I could only fight it because I was a surveyor and I knew how to do it – although I didn’t know how they surveyed pubs. But Dave helped explain to me how it works.”
And as both of Mountford and Clarke point out, single licensees will be on an average £15,000 salary. They have no savings to fight the battle.
But will the pubs code really be a panacea? Will pubcos still be able to raise rents significantly and the new adjudicating process see it as fair? How will evidence be judged?
Clarke says: “What will happen now is that they have to put in a proper rent assessment in accordance with the code and give you a ton of information – but this will still be lacking. It won’t have the comparable evidence in it which it needs to have.
“But it will be fairly big.
“They want to know what its level of sales are. Look at footfall, south-facing beer garden, main street, etc. Look at benchmarking against similar businesses turnover in the area.”
Mountford says: “Costs are typically the only thing we have to use. Next door to us, we have a pub that was bought by a wealthy individual that spent £2m doing it. But he could run that at a loss.
“So costs aren’t the best comparable for other pubs in the area. And the formula for setting rents is still too easily abused.”
PCA cases
The acid test is coming. The first cases are now arriving in front of the newly appointed pubs code adjudicator (PCA) Paul Newby. Mountford and Clarke have numerous qualms about Newby, due to his previous employment with property agent Fleurets, who works with pubcos as well as tenants.
“How can he be fair when he has shares in a company that profits from pubcos?” Mountford says.
Clarke then offers his view relating to RICS code of practice. The way he sees it, Newby shouldn’t have the job because of his conflict of interest with Fleurets. For now though, Newby is still in place – although new minister Greg Clark has said he will look at the situation around the appointment.
Managed houses
One of the biggest concerns is that the pubs code will actually kill off the whole tenanted and leased model as pubcos switched to a managed houses model. Is this a concern for campaigners?
Mountford agrees: “We have always accepted as part of the pubs code that there will be managed houses as a result of the MRO and pubco models.
“It may well be that Punch legacy under Duncan Garood may well be with Harry Ramsden’s and managed houses.
“But I would argue that to make that pub a success it doesn’t need to be a Harry Ramsden’s – it needs to be free of tie.”
Clarke says: “We just want the situation for free-of-tie tenants to be fairer. If that means there is going to be less of them because they’ve got to go through more loopholes, and they will be less naïve, then yes, there may be more managed houses.
“But then it will also be less abused tenants, which is a success.”
Considering the past few years, who knows what the future holds. But one thing is guaranteed: the days of Clarke’s and Mountford’s campaigning for pubs are not over just yet.