The Public Liability Insurance Blog

Plight of the pub: Attention turned to tied pub schemes

English pubIt’s starting to look like 2013 might very well be the year of the pub landlord. Those that have weathered the storm that is a pub-hostile market so far have recently seen signs that there is in fact light at the end of the tunnel.

The government is turning its attention to “tied pubs”, individual pubs which are owned by a larger pub company and that are forced to buy supplies from the owning entity at a generally marked up price. This purchasing agreement tends to only benefit the pub company as opposed to the individual pubs and as a result, according to the BBC, approximately 50% of all tied pubs in the UK currently make a mere £15,000 a year.

As far as the government is concerned, these large pub companies have blown it. Their business practises have been on the radar for some time now and they have had their chance to get their act together. Tolerance for such shady deals and borderline cartel behaviour is fading fast and this could be excellent news for tied pubs across the country.

The measures introduced will save pub tenants £100m a year according to the Department for Business, Innovation and Skills. The proposals include a new code of practice addressed to pub companies owning more than 500 pubs and will be enforced by an adjudicator. It aims to make sure more pubs are able to stay in business.

Still a hostile market

Running a pub has been a risky venture for a long time. We understand that there are plenty of things that can scupper the running of a pub and we sell tailored policies to try and address this. It's a risk to run a pub without the current market conditions chipping in to make things even more difficult.

The commercial reality is that pubs have been growing increasingly difficult to run in a profitable way. Large chains offering discounts and vouchers to grab customers can end up pushing out smaller establishments that don't have such high marketing budgets or resources and a high tax on alcohol means margins are further squeezed. In addition to this, it can be difficult to introduce traditional customer grabbing events like live music sessions thanks to harsh licensing laws around entertainment.

At the end of last year, we had a look at how difficult it can be to run a pub whilst the beer tax escalator policy was being debated. Thanks to the 2013 budget, the beer tax escalator has been dropped and a whopping 1p has been knocked off the price of beer, but even with this move the environment is still difficult. Just because it has stopped getting worse does not lessen the fact that it’s already difficult and has been for quite some time.

A line of business that needs protecting

The pub has been hailed as the cornerstone of British society. Whilst this might initially be seen as a criticism that we are a nation of drunks, beneath the surface what it is referring to is the number of sporting and cultural organisations that use their local pub as a collective meeting place, a meeting place that costs them nothing to hire and in turn fuels the economy.

Without the local pub, or the local pub being replaced by more homogenous masses-chasing mega-chains, this country could lose something crucial to its very culture. Companies like ours can help pub owners protect their pubs from insurable risks, but there are some much greater general risks that come from external market forces that we can't help with.

Thankfully there are the early signs that there are people with a say in how things are run that are starting to take the plight of the pub seriously. There is still a long way to go before the pubs are in the clear, but there is at least light at the end of the tunnel.

Written by Richard King for YOUR Insurance, a specialist broker that wants to help you protect your pub.