Phil's Diary October 15, 2009

The end of the tie?

Can’t say I’m gobsmacked but the pub industry’s attempt to present a united front on the question of the tie has fallen to pieces. Mediation has collapsed and a new body has been formed, called the Independent Pubs Confederation (IPC), to pursue a fairly radical reform of the tied house system – but crucially it does not include the British Beer & Pub Association, which represents Enterprise Inns and Punch Taverns.

The IPC, which includes the Association of Licensed Multiple Retailers and the BII as well as the likelier suspects, wants all lessees to be offered the choice of whether they are tied or not, and that no tied tenant should be worse off rentally than if they were free of tie (exactly how that’s achieved is yet to be worked out).

Bearing in mind it’s Enterprise and Punch licensees who’ll be most affected by this, the formation of IPC marks a dramatic split in the pub industry. But the big question is, does it mean the end of the tied house system as we know it?

Truth is, the business model on which the Punch and Enterprise empires have been built is, in the conditions of recession, already looking decidedly shaky. Great lumps are falling off it. Earlier this week Punch reported a 31 per cent fall in profits and a £660m mark-down in the value of its estate. More pubs will be sold off in the coming year.

Change has got to come. I’m not sure the pubco model is viable at all. But the traditional direct tie between brewer and tenant, without the middle person taking a cut of the profits, still has plenty of legs.

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