Member News
By Lord Razzall - 28th June 2009
Some publicans felt the market would not stand large price increases, so they kept their prices down and headed to bankruptcy
Lord Razzall
Liberal Democrat peer Lord Razzall sets out the concerns behind his question to ministers in the House of Lords about the Supply of Beer (Tied Estate) Order 1989.
There can be no doubt that the pub business is in crisis. Around 25 public houses close in the UK every week.
There are many contributing factors – cheap drink in supermarkets, the smoking ban, drink/driving laws - but a major contributing factor has been the operation of the Supply of Beer (Tied Estate) Order 1989, known generally as the '1989 Beer Orders'.
The Beer Orders restricted the number of pubs a brewery could own to 2,000 and broke in many cases the link between the publican and brewer.
The old brewery tie has now become a property company tie.
When tied for supply to brewers, both public and brewer had a common interest in alcoholic (and other) drinks.
However, the modern tie between the tenant and property company is one where the property company seek maximum return on their property through rent and acts as a broker or third party in the supply line of beer to the pubs.
The brewers are required to discount their products to the pub-owning property companies. So the brewers lose out as they were barred by the Beer Orders from owning more than 2,000 pubs each (at present Punch and Enterprise own around 8,000 each) and have lost control of outlets for their beer production.
And the tenants have lost out as rents were increased from brewery protected rents to open market rents. However, the open market pricing was not applied to the cost of beer that the property companies saw as extra revenue to repay their vast overheads.
Customers of the essentially quirky tenanted estate of public houses in the UK have lost out as the publicans charge more for their beer to cover the higher rents and beer prices from the property companies.
Some publicans felt the market would not stand large increases, so they kept their prices down and headed to bankruptcy. Some publicans increased their prices to meet the new cost and as a result of competition with supermarkets and big chains they priced themselves out of the market, lost their customers and closed down.
This situation should not be allowed to continue.
Dods Parliamentary Communications Ltd