Phil's Diary September 27, 2009

Twenty years ago the pub industry found itself in a state of shock. It was stunned that a Tory government could, after more than a century of cosy cooperation with Britain's brewers, come up with a piece of legislation that would force the Big Six to sell off 11,000 pubs and trigger a divorce between production and retail.

The expressed aim of the 1989 Beer Orders was to reduce the price of beer which, according to the Monopolies & Mergers Commission report earlier that year, had risen faster than the rate of inflation because of the 'complex monopoly' of a vertically integrated industry.

In the event, not only did the price of a pint at the bar carry on rising, but the Beer Orders had the totally unforeseen consequence of creating the conditions for a new breed of giant pubco on a similar scale to the Big Six. They still contracted tenants to buy beer and other goods from them and, worse, the business model relied on not only rental income but on the margin the pubco could make on selling that beer on to the licensee.

For some months now a Business and Enterprise select committee has been investigating this situation in order to determine whether it should be referred to the Office of Fair Trading.

If the OFT gets involved it will again put the tie and pub ownership into question, generating further uncertainty against a backdrop of economic turmoil. Will it go so far as to recommend outlawing the tie? Or will it stop at merely tinkering about with lease agreements?

The trade has, belatedly perhaps, decided to try to get its own tied-house in order in the hope of staving off legislation. The other day, in a rare display of unity, industry organisations, pubcos and pressure groups met to thrash out a solution.

Industry-watchers waited with bated breath for what might have been a historic declaration. But nothing emerged. The various parties have returned to their constituencies to think about various options. Which they are keeping under their hats.

It's likely that the industry's natural caution and conservatism, combined with conflicting interests, will prevent if from doing enough to persuade the government that it's adequately addressing the situation. And it's likely the government, of whatever persuasion, will feel obliged to force some sort of change, though probably not this side of the recession.

The future remains just as unpredictable as it was in 1989. Which at least makes it interesting.

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