Fair Pint 'would not lead to higher rents'

May 19, 2008: The Fair Pint campaign has issued a rebuttal of the Campaign for Real Ale's declaration that the removal of pubs' supply tie would be counter-productive and lead to higher rents.

Fair Pint argues that rents would, in fact, be more likely to decrease, not least because substantial parts of the tied estate are already at free market rental levels.

Where rents do increase, however, Fair Pint says, this will purely be as a result of the extra profitability that a removal of the tie would bring, and would not outweigh the other potential benefits.

It says rent would be calculated by using the industry-wide and adopted profit test method which assesses the fair maintainable trade (FMT) of a pub for an average hypothetical tenant (not necessarily the current tenant). The FMT is then used to calculate the gross profitability of the pub, from which the operational expenses are deducted. What is left over (the divisible balance) is split 50/50 between the pubco as rent and the tenant as operational profit.

This method would, says Fair Pint, encourage lessees and pubcos to work in true partnership, and maximise potential profit for both parties.

Steve Corbett, of the Fair Pint campaign, said: “We welcome CAMRA’s observations and are pleased to see there is much common ground. It seems that the only substantial difference between CAMRA and our campaign is CAMRA’s belief that the removal of the supply tie would lead to increases in rents.

“It would appear that CAMRA have not recognised that, at worst, the rent may increase by 50% of the extra discounts which a tied tenant would enjoy were they free of tie. For example, the ability for landlords to sell 200 barrels at an extra £60 a barrel as a result of being free of tie could not transmit into a rent increase of more than £6,000, probably much less if the (Trade and Industry Select Committee) recommendations are enforceable

" That would mean that the tenant would be better off by at least £6,000 a year. This is real money that tenants need to ward off the effects of higher fuel and wage costs. They need the fairness of freedom to survive.

“On the marketing of real ales, we recognise that cask conditioned ales have fallen by more than 50% over the last decade and we are aware that CAMRA is concerned that work needs to be done on the choice of ales available.

“We would welcome the opportunity to sit down with CAMRA to allay their fears on both of these important issues, so that we might work together to resolve the current inequitable position in which pubcos and their tenants operate.”