NEW STUDY BY GMB SHOWS THAT 232 PUBS OWNED BY 7 PUBCOS IN THE WEST MIDLANDS REGION HAVE CLOSED IN THE LAST 3 YEARS

GMB calls on government to break up pub company cartels charging pub tenants up to 80 pence over the wholesale price of a pint of beer and to stop them driving pubs out of business.

A new study by the GMB shows that 232 pubs, with freeholds owned by just 7 ‘pubcos’ in the West Midlands region, have closed since December 2005. In the area of the former county of West Midlands 151 such pubs closed making the area the highest in the West Midlands for the number of these pubs closing. This area covers Birmingham and the other Met Boroughs in the region. It was followed by Staffordshire, Hereford and Worcester and Warwickshire. The breakdown of pubco closures by county in the West Midlands region are shown below.

In the UK as a whole over the same period a total of 1,131 pubs belonging to these same ‘pubcos’ were closed.  These pubs, 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 Pub Company, and S & N Pub Enterprises. 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.

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 £700million every year, or over £50,000 per pub  to service that debt with much of that money going offshore. See Note 5 below.

Number of pubs belonging to 7 pubcos closed since December 2005 by county in the West Midlands Region

Paul Kenny GMB General Secretary said ‘An unintended consequence of legislation to loosen the tie between breweries and pubs to free up the market for the benefit of consumers has been the growth in pubcos who are operating as a cartel in the industry.

These pubcos, which own 25,000 pubs, are piled up with billions of pounds worth of debts. They are overcharging pubs by up to 80p a pint 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.

GMB are calling on the government and MP’s to revisit this legislation. 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.’

Steve Corbett a tied publican who is a member of the  Fair Pint Campaign said ‘Publicans tied to ‘pubcos’ are suffering badly from a combination of high rents and outrageous wholesale prices charged by ‘pubcos’.  This is causing pubs to close and jobs to be lost at a rate that it is totally unacceptable. It was never intended that half of the countries pubs would end up in the ownership of such a small number of property companies. For too long there has been no one standing up for the interests of individual publicans and pub users and the voice of the sector has been dominated by trade associations representing the property companies and the brewers.

 The Fair Pint Campaign has been working hard to change this situation and we welcome the GMB’s involvement in the fight to save pubs and jobs.   It’s vital for pubs, consumers and communities that the Government listens to the GMB and The Fair Pint Campaign and immediately moves towards breaking up the destructive ‘pubco’ cartel.”

Contacts: Paul Maloney GMB 07801 343 839, Steve Corbett at The Fair Pint Campaign 07831 886  737, Steve Pryle: 07921 289 880 or Rose Conroy : 07974 251 823

Notes to Editors

1The information on closures  comes from CGA Strategy who maintain the only continuously updated database of the GB on trade and tracking of licensed premises. The database is updated daily using a combination of research sources including retailer estate lists, brewer/supplier account listings, technical services data, account data from supply companies, desk, telephone and field research (3,000 phone calls and 1,000 venue visits every month).

2 The information on closures is from the same source as used in the All Party Parliamentary Beer Group Community Pub Inquiry, October 2008.

3 The closure figures do not take into account the transfers between pubcos that occur when they sell off parts of their estates.

4 The definition of closure used is when they cease trading. However if it later reopens under new management the same record is used so it will not show up as a closure in this data.

5 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.