1 IN 3 PUBS IN MAJOR PUBCO ESTATE CHANGED HANDS IN PAST 3 YEARS AS TENANTS GIVE UP STRUGGLE TO MAKE ENDS MEET CLAIMS GMB

15^th April 09

Closures of West Midlands pubs, just thin end of wedge as union repeats call for pubco cartel to be broken up to stop 80p per pint overcharging to save Britain’s pubs

A new GMB analysis shows that 374 pubs owned by Punch Tavern’s in the West Midlands have changed hands in the 3 years since 2006. These 374 pubs changed hands on 833 occasions.

Table 1 shows that only 41 pubs changed hands (11%) because lease agreements came to an end. Other reasons for change include 148 pubs (39.6%) where tenants gave notice, 90 pubs (24.1%) where the retailer/tenant business failed, 102 pubs (27.3%) where tenants chose to abandon their lease and 24 pubs (6.4%) which were repossessed because of debt or the tenant has bought out of lease conditions. 182 pubs, with 283 changes, had short term tenants.

Table 2 shows that 224 or more than half of the pubs (60%) which changed, changed hands at least twice in this period. A total of 79 pubs changed hands four or more times.

For Britain as a whole GMB analysis also shows that of the Punch Taverns ‘tied tenant’ estate of 8400 pubs, a total of 2,682 pubs changed hands in the 3 years since 2006. This is 32 % of the entire tenanted estate of this company. These 2,682 pubs changed hands on 5,766 occasions over the same 3 year period.

Table 1 - Analysis of reason for changes Punch Taverns 2006-2008 West Midlands

*Individual pubs can change for multiple reasons.

Table 2 - Analysis of changes by the number of changes Punch Taverns 2006-2008 West Midlands

Earlier this month GMB published data that showed that In the UK as a whole over the same period a total of 1,131 pubs belonging to seven ‘pubcos’ were closed (See Note 1).  The tenants are obliged to buy some or all drinks they sell in the pubs from the pubcos at inflated prices. For example, they are charged up to 80 pence per pint more than they could pay for the same beer in the normal wholesale market.

Paul Kenny, GMB General Secretary said, “A lot of tied pubs no longer have regular tenants. This GMB analysis show at least a 32 % “churn” in the Punch estate.  This  high level of churn is not unique to Punch and will be replicated in other pubco estates. The churn shows that the number of closures in the big pubcos are the very thin end of the uneconomic wedge in this sector and that the level of business failures is high because of unrealistic rents and wholesale beer prices charged by ‘pubcos’.

The big seven ‘pubcos’, which own 25,000 pubs, are piled up with billions of pounds worth of debts. They are overcharging publicans by up to 80p a pint as well as driving up rents in order to pay the interest charges. It is this overcharging which is killing the pubs and driving them out of business. The ‘pubcos’ are blaming everyone else for the problem and not looking at the damage they have caused through their own greed. (See notes 2 and 3 below)

The high number of short term tenancies shows that pubcos are finding it increasingly difficult to find long term tenants. The short term tenants are not willing to invest to stay in the business.   

Rents need to come down and wholesale prices need to be cut. GMB members who are tenants are asking the union to look at what action is needed to secure these changes. GMB want to see the cartel broken up. (See Note 4)”

Steve Corbett, a member of The Fair Pint Campaign and a tied tenant with Enterprise Inns, said: “GMB is really starting to get the heart of the problem for UK pubs.  For too long the ‘pubco’ bosses and their trade representatives, the BBPA, have been hiding the damaging level of pub failures in their estates.  These figures from GMB will be all too familiar to those inside the pub sector but hopefully they will come as a shock to MP’s and business leaders.  The Fair Pint Campaign welcomes and supports the involvement of GMB and we’re optimistic that the Government will listen carefully and take action urgently to deal with the ‘pubco’ cartel.”

End

Contact: Paul Maloney, GMB Senior Organiser on 07801 343 839, Steve Corbett at The Fair Pint Campaign on 07831 886737 or GMB Press Office: Steve Pryle on 07921 289880 or Rose Conroy on 07974 251823.

Notes to Editors:

1        The numbers of closed pubs revealed last week by GMB, run by tenants tied to the landlord, are owned by 7 pubcos  - Admiral Taverns Ltd, Enterprise Inns, Fuller Smith & Turner, Greene King, Marston's, Punch Taverns, and S & N Pub Enterprises. 

2        The ‘pubcos’ have been driving up wholesale beer prices for their tenants by as much as 8% each year.  In the first months of this year, with inflation falling rapidly, Enterprise Inns increased their prices by a further 6%.  The two main ‘pubcos’ owe more than £8billion in debt and their accounts show that they need £700 million every year, or over £50,000 per pub  to service that debt with much of that money going offshore.( See Note 3).

3        Pubcos’ high leveraged business model is based on securitization. There is around £20 billion of debt in the sector and the two largest pubcos are struggling to service their debt of about £8.5 billion. Most of the debt repayments are fixed at a rate which is very high compared to the current cost of capital, typically 6 %.  Punch and Enterprise’s published accounts clearly showing that together Punch Taverns and Enterprise Inns need £730 million a year to meet their debt obligations, much of which is paid to offshore bondholders. £730 million divided by the number of tenanted pubs owned by Punch and Enterprise equals about £50,000 per-pub per-year. Pubcos therefore need to maintain current levels of short term income to meet their obligations and to stop their business model collapsing.  Despite the current recession, pubcos are continuing to raise beer prices and rents forcing many of their tenants out of business. As more of their pubs close and fewer people want to take a tied lease the pubco are trying to get more income out of fewer and fewer pubs. Like the banks, pubcos have been caught out by over leveraging and securitized debt.  

4        GMB is calling on the government and MP’s to revisit legislation on the ownership of pubs dating from the 1990s. The aim should be to break up these cartels to enable pub landlords to buy their beer from breweries and wholesalers at real and competitive prices. This measure would have a lot more impact than changing the rate of taxes in the forthcoming budget. Britain’s pubs survived two world wars. They cannot survive being made to be cash cows to pay off the debts of the property companies and brewers that so clearly don’t have the interests of pubs and consumers at heart.