Greg Mulholland: Raise a glass to end of the ‘pubco’ scam

Licensees and campaigners hugged each other. Many were in tears. This wasn’t just a victory, for many thousands of hard-pressed publicans it was life-changing.

In May last year, I wrote in this newspaper about the Fair Deal for your Local campaign, launched at the Roebuck pub in Newall with Clifton, just outside Otley. A former rundown Enterprise Inns pub, it had been saved by local businessman Chris Payne and partners who turned it into a thriving freehouse with excellent local beer and food.

It offered a glimpse of the potential future for so many pubs up and down the country, if the unsustainable and unethical model which saw pubs tied to large companies became a thing of the past. This so-called “pubco” system will stand as a graphic example of bad business. These large property companies went on a reckless acquisition spree, borrowing money to buy up pubs just to artificially inflate the value of the shares, based on their ability to charge hugely marked-up beer prices to their own tenants.

Punch Taverns, a company which brews no beer, made a £2.2bn profit in 10 years from selling on beer and other products to their own supposed business partners.

This bubble burst in spectacular style when the property market collapsed and the two largest pubcos became indebted by just short of a mind-boggling £8bn. The only way to claw any of this back was by charging even more excessive prices and rents as well selling off local pubs, the heartbeat of so many communities, to the highest bidder.

The Campaign for Real Ale found that 57 per cent of tied tenants had an annual income of just £10,000 and many licensees were not able to make a living at all. With the large pubcos owning thousands of pubs up and down the country, this was having a huge impact on ordinary drinkers who saw higher prices for a pint, less choice and many pubs closing every week up and down 
the country.

This is the scandal the Fair Deal for Your Local campaign came together to take on. I brought together a coalition – the Campaign for Real Ale, Federation for Small Businesses, the Forum for Private Business and licensees organisations and trade unions – to campaign for the much needed “market rent only” option.

Simply put, this option would allow tenants of the large pubcos to request an independent assessment of their rent, on the basis of being able to buy all their products and services wherever they wished.

Slowly, the campaign attracted support from MPs of all political parties as they heard the reality of the model from licensees in their own constituencies. So, on Tuesday, November 18, 2014, a day that will go down in the history of the pub sector, we beat them. The Fair Deal for Your Local campaign showed the power of campaigning and won a sensational victory. A victory for Parliament against Government, of people power against vested interests, of small business against out of control big business, of publicans and pub customers against greedy pubcos.

So what will this mean? Well, the market rent only option will ensure a fair split of profits between the big and small businesses, which will allow licensees to make a living, many more pubs to survive and will boost the economy through more investment and more jobs.

It is good news for small brewers too, with better and fairer access to the pub market. For pub goers, it will also mean a cheaper pint and lead to many public houses being bought and run by entrepreneurs like Chris Payne at the Roebuck, as well as small successful companies, like Yorkshire-based Market Town Taverns, and many of our wonderful small breweries like the Leeds Brewery and Kirkstall Brewery.

No one can ever say to me now that campaigning does not work, that politics is a waste of time. The most anti-competitive business model in the UK will now have to change. We have ended the Great British Pubco Scam. It is time to raise a glass to a more sustainable future for the Great British pub.

Greg Mulholland, MP for Leeds North West, is chair of the Parliamentary Save the Pub group and co-ordinator of the Fair Deal for Your Local campaign.