News & Updates

U.K. Vote Allows Pubs to Opt Out of Buying Owners’ Beer

Source: The Wall Street Journal | By: By Razak Musah Baba and Ed Ballard

LONDON—It looks like last call for a 400-year-old British rule requiring many pubs here to buy their beer from the large companies that own them.

Shares in Britain’s largest pub companies fell sharply Wednesday after lawmakers voted the previous evening to allow “tenanted” pubs to buy their beer on the open market. The change would let publicans opt out of the “beer tie,” a centuries-old system that critics say force publicans to overpay for beer.

Around a third of U.K. pubs are run by tenants of one of the big pub companies, the largest of which include Enterprise Inns PLC andPunch Taverns PLC. Pub tenants are required by current rules to buy their beer from their owners, some of which brew the beer themselves. Others act as a middleman for the beer, buying it wholesale and selling it on to their pubs.

The amendment passed in Britain’s House Commons by 284 to 259 votes, despite opposition from the U.K.’s Conservative-led government. It still must be approved by the House of Lords before passing into law. Any significant changes made in the U.K.’s upper house need to be voted on again by the Commons.

Proponents of the amendment say it could lower prices pub operators pay for their beer.

The changes “will stop the pubco rip-off of hugely marked-up beer prices and excessive rents,” said Liberal Democrat Member of Parliament Greg Mulholland, who championed the amendment.

Shares in Enterprise Inns, the largest pub owner with over 5,300 pubs, fell 17% in London.

“We continue to believe the tie offers the best operating model for the vast majority of our publicans,” said Enterprise Inns Chief Executive Simon Townsend.

Shares in Punch also fell 17%. “We are currently considering the potential impact of the amended Bill on Punch, including the implications for our substantial pub investment program and our disposal plans,” the company said in a statement.

Stocks of other pub firms, including Greene King PLC, Spirit PubPLC, and Marston’s PLC, fell on Wednesday.

About 13,000 pubs could be affected by the amendment, estimates Goodbody, a Dublin stockbroker.

“Over the last decade many thousands of pubs have been lost as big pub companies have squeezed them out of existence with sky-high rents and beer prices,” said Campaign for Real Ale, which lobbies for community pubs.

The British Beer & Pub Association, a trade group of brewers and pub owners, defended the beer-tie system, saying it has “served Britain’s unique pub industry well for nearly 400 years.” Removing it would lead to job cuts and force 1,400 pubs to close, the industry body added, without elaborating.