Up to 30% of beer-tied pubs uneconomic, warns analyst

As many as three in 10 Punch and Enterprise tenanted or leased pubs with a beer tie may be "uneconomic", with licensees making less than £20,000 a year, a City analyst has warned.

The beer tie forces landlords to buy their beer directly from the pub's owner and affects the amount of rent they pay.

In a research note, Jamie Rollo, a Morgan Stanley analyst, said this model "looks increasingly archaic", as it is "exacerbating the volume declines in tied pubs, which are unable to reduce price without taking a significant hit to their cash margins".

"We estimate licensee profits were under £20,000 in 17% of Enterprise's pubs and 28% of Punch's - £20,000 generally being the minimum level to make it worth running a pub," the research note said.

Rollo said this equates to £3.30 an hour each for a couple, excluding benefits of accommodation above the pub.

The Fair Pint group, which has been campaigning to abolish the beer tie, seized on the report to once again demand a reduction in rent for tenants.

David Morgan, a chartered surveyor and member of the steering group of the Fair Pint campaign, said: "This research highlights the practices that pubcos, as property companies, are increasingly employing in order to prop up their ‘archaic' business model.

"Almost every pubco rent review that I get involved with should see the rent decreased, given the current climate, but the pubcos are still demanding rent increases."

In a statement, Punch said: "We always been transparent about our rent review process which is clearly outlined in our BII accredited customer charter.

"We have always said that we will not conduct a dialogue with Fair Pint through the trade press and would urge any of our licensees, who have concerns about the rent review process, to discuss this with us directly."

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By Daniel Thomas

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