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Pubs in peril

June 6, 2013 4:21 PM

GMB have been in touch to explain how financiers are wrecking Britain's pubs, and to ask for support for their campaign to liberalise the trade. Here's their message:

"I am writing to you on behalf of GMB tied pub tenants members. I am asking you to support Option 3 in the draft statutory code for tied pubs currently out for consultation by Department for Business, Innovations and Skills.

The property companies that own over half of Britain's pubs charge sky high rents to tied tenants of pubs to pay interest on massive financially engineered debts. These debts are held mainly by bondholders in offshore tax havens.

Interest payments on these huge debts have to be paid each week before the tenant pours a pint and regardless of whether s/he can make ends meet or not.

To pay these sky high rents a pint of lager is on average 80p per pint higher and ale is 65p per pint higher than justified by inflation and like for like changes in taxes since 1987. This is pricing pubs out of the market and they have closed in droves.

The common view that shareholders in the pubcos own a pub business is wrong. In fact the shareholders don't own a pub business; they own a holding company which invests in and manages pub securitizations.

These securitizations are the infernal machine that is closing pubs. It is the same infernal machine that drove Southern Cross care homes to the wall.

In 2009 an Office for Fair Trade report concluded that the average tied lessee is being overcharged by pubcos by around £12,000 per annum or £230 per pub per week, after higher "wet rents" and lower "dry rents" are factored into the equation.

GMB and others have campaigned for Parliament to legislate to free pubs from this infernal machine before it destroys them all.

In April the Department for Business, Innovations and Skills published a draft statutory code for tied pubs for consultation. The consultation is available to view online at https://www.gov.uk/government/consultations/pub-companies-and-tenants-consultation and will run until 14 June.

GMB welcome the conclusion by BIS that pubcos will overcharge tied tenants for rents unless they are prevented from doing so.

GMB is in favour of Option 3 the "freedom option". This offers tied tenants the ability to buy products from the open market and pay a fair market rent for the building.

GMB consider that the other two options will allow pubcos to put up rents by the backdoor by overcharging for products tenants are tied to buy from them.

This is what the consultation document says on option 3:

"Option 3: Mandatory free of tie option with open market rent review

All pub owning companies with over 500 pubs would have to offer a free of tie option with open market rent review. This would apply at the next rent review point for current leases and for all new leases. Each licensee would be able to choose to be either tied or free of tie. This is in addition to the statutory code and adjudicator from option 2.

The rent in the free of tie offer would have to be based on Royal Institute of Chartered Surveyors guidance. This would ensure that there was a genuine free of tie option rather than one involving an unrealistically high free of tie rent."

I am writing to you to ask you to respond to the BIS consultation as follows: by email

pubs.consultation@bis.gsi.gov.uk, or by post

Pubs Consultation, Consumer and Competition Policy , Department of Business, Innovation and Skills, 3rd Floor, Orchard 2, 1 Victoria Street, Westminster, LONDON ,SW1H 0ET

I would also like you to make representation to your local MP to support the free of tie option 3 when the matter comes before Parliament later this year.

We will likely only get this one chance to save your local pubs.

We need local elected politicians of all parties to make their voice heard loud and clear in favour of a free and open market. This will enable the pub tenant to be free to buy products at open market prices and to pay a fair market rent for their pub or stay tied to the pubco if that is better."