‘Beer Tie’ vote sends pub shares tumbling, UK

After the UK House of Commons voted to end the ‘Beer Tie’ rule that forces some pubs tenants to pay more than market rates for drinks, shares in pub companies fell sharply.

The new rule would affect over 13,000 of the UK’s 55,000 pubs that are subject to ‘beer ties’, i.e. they are have to buy beer at whatever price the landlord chooses to set.

Brigid Simmonds, CEO of the British Beer and Pub Association said:

“This change effectively breaks the ‘beer tie’, which has served Britain’s unique pub industry well for nearly 400 years. It would hugely damage investment, jobs, and result in 1,400 more pubs closing, with 7,000 job losses – as the Government’s own research shows.”

“There are serious legal and competition issues which must be faced, as it rides roughshod over what are previously agreed contracts, and creates an unworkable, two-tier market. I hope Parliament will rethink as the bill continues its progress.”

“On the issue of family brewers remaining outside the scope of the Code, we have always taken the view that their inclusion is not necessary, provided that this does not result in a distortion to competition. As the Government is now saying it will not include these smaller companies it needs to ensure a level playing field throughout the legislation.”

‘Tied’ pub tenants pay lower rents than non-tied pubs, but the amount they pay for beer and other drinks is higher.

Greg Mulholland, Liberal Democrat MP for Leeds North West, who proposed the reform, said a grotesquely anti-competitive sector was in urgent need of returning to market forces.

If the Bill passes through parliament and becomes law, Mr. Mulholland’s “market rent only” plans would gradually come into force over a period of five years.

Simon Townsend, CEO of Enterprise Inn, the UK’s largest owner of tenanted pubs, said the change to the Small Business, Enterprise and Employment Bill would result in the closure of thousands of pubs and job losses.

Mr. Townsend said:

“This amendment is a disproportionate response which proposes fundamental change that is wholly contrary to the findings of the consultation, from which the Bill was drawn up,” he said. “We continue to believe the tie offers the best operating model for the vast majority of our publicans.”

National Chairman of the Federation for Small Businesses (FSB) John Allan described the Commons vote as a “big win” and a historic day for tied publicans who will be able to look forward to a more competitive and open marketplace.

Mr. Allan said:

“The freedom to stock a wider range of beers will provide a boost to local economies while giving consumers greater choice.”

“We call on Government to support today’s decision and for all parties to back publicans in their respective 2015 election manifestos.”