Pub workers are battling against a corrupt set of markets rigged against them.
Mark Dodds sits opposite me in a café. He looks bereft as he clutches a little cappuccino. It’s as if he was made to stand behind a bar, and he looks awkward in a chair. After sixteen years of running his pub in Camberwell, it finally closed down in September.
“We were making a profit until 2005,” says Dodds, “We were still a viable business, we just got squeezed from the top. I fought and fought but in the end I had to let go… Honestly, it’s a relief to be signing on.”
A silent crisis is engulfing our pubs, and the reasons behind it are little known. It blows like a chill across the country, sweeping in and out of the boarded up pub fronts in our inner cities all the way to our remotest rural corners where punters huddle over their pints in their few remaining social centres.
Last year sixteen pubs closed every week. To put that in perspective, that’s over two every day. In the last two years, over 1,000 pubs have disappeared from Britain’s suburbs alone.
If this was just the result of market demand, the story would be a sad one. But the real story inspires anger. Pub workers are battling against a dark, corrupt set of markets that are rigged against them. Many are going down not because they need to, but because they’re forced to.
Think of your local pub. The chances are that it will be “tied”, meaning that it is most likely owned by one of the big pub companies. That people who are actually running that pub – the “Publicans” – are forced to pay rent at prices the owners decide (dry rent) and buy beer at the prices they set (wet rent).
These pub company giants are not household names. Enterprise Inns owns 6,000 pubs; Punch Taverns owns about the same. Looking from the outside, it’s not easy to tell which pubs have ties and which don’t. They don’t have to be chains. Today over half of Britain’s pubs are tied, and it’s squeezing them into submission.
In one of the most shocking statistics, a recent IPPR report found that 46 per cent of publicans in tied pubs earned less than £15,000 a year, compared to only 22 per cent of non-tied publicans.
I’m not often disappointed by the FT, but when they reported on the decline of pubs in this article last week, they failed to tell this story.
“Tied pubs offer you promises of support and training and good beer prices, but they are often lies”, says Jonathan Mail at the Campaign for Real Ale, “It’s only after you’ve invested £50,000 of your own money that it doesn’t turn out that way, and your beer prices suddenly jump arbitrarily high.”
Mark Dodds said he had to buy £2,000 of beer a week from his pub company, when he could have bought the same amount for £1,200 from a wholesale supplier down the road. When he first took over the pub the rent was £32,000, but at the next round of negotiations his pub company wanted to more than double it. The 68 per cent hike they finally settled on, combined with another rise in the next review, bankrupted him.
“If I’d been able to keep our profits for extra investment,” says Dodds, “I could have made that pub work.”
Why would any pub company want to squeeze its managers in this way? Some say short-termism. As long as you gain the target level of return over the whole portfolio it doesn’t matter if one or two get squeezed along the way. In some cases, it may even suit companies to force the publicans out of business so the site can be sold to a property developer. That explanation is at least consistent with the free market, but it still leaves a community without a pub.
We should remember that Britain’s 50,000 pubs are more than watering holes. They are centres of our community, as Jamie Wright’s sweet film aboutThe Railway in Wales shows. Interesting IPPR research has tried to put an economic tag on the social value of a pub. By factoring in things like the equivalent cost of holding community meetings elsewhere, they found that each pub offered between £20,000 and £120,000 of community value a year. That’s on top of the £6 billion tax revenue and one million people they are estimate to employ.
This is not unrelated to the High Streets First campaign. At the moment, betting shops and pay day loan companies can move into former pubs without planning permission. “The Hope” in my constituency was the last pub on Rye Lane, now it’s a Paddy Power. Local people feel that they are losing control of the high streets they love.
Of course pubs face other challenges. Demand is falling. Competition is increasing. Supermarkets are serving a new generation more interested in intoxication than conversation. With beer duty set to go up 10p a pint in the budget on top of VAT rises, there are worries that another wave of pubs will be pushed over edge, and free holders like the Railway are also at risk. But according to IPPR’s research, it’s still the tied pubs that are suffering most.
So what do we do about it? Dodds is exploring setting up a co-operative pub chain, The People’s Pub Partnership, and it’s worth supporting. It’s also worth asking your local pub whether they are tied, and how they are being treated. With punters onside, publicans can increase the pressure on owners for a better deal.
As for policy, the Campaign for Real Ale is calling on the government to give publicans the choice to leave the tie completely at their next round of rent negotiations. Pub companies would still have a few years to make their ties attractive, and pubs wouldn’t leave all at once. It wouldn’t just help the publicans and the communities that treasure them, it would also be consistent with the free market.
Rowenna Davis is a journalist and author of Tangled up in Blue: Blue Labour and the Struggle for Labour’s Soul, published by Ruskin Publishing at £8.99. She is also a Labour councillor.