London Economics Pubco Report – ‘Flawed and Biased’

 

Save The Pub

London Economics ‘research’ as fundamentallyflawed, biased and a suspiciouswaste of £40K oftaxpayers’ money.

 

 

All-Party Parliamentary Save the Pub Group

 

February 2014


 

 

 

 

Summary

 

 

There are several fundamental flaws with the London Economics report produced for BIS: –

·         The report is based on information provided only by the pubcos with no verifiably independent research and no consultation.  

 

·         They have measured pubco viability not pub viability!

 

·         A complete failure to understand the situation tenants and lessees are in – and the law (e.g. Landlord and Tenant Act 1954 Part II) which means that just because a pubco receives a lesser share of pub profit, they cannot simply evict the tenant and close the pub – as they have to honour the lease or tenancy.

 

·         A complete misunderstanding of the pubco economic model – and factual errors in consideration and conclusion.

 

·         Misreporting of industry statistics and evidence

 

·         The report is based on ‘confidential data’ supplied by the pub companies who are actively and desperately lobbying to try to prevent the Government taking action.

 

 

Introduction

The London Economics Report for BIS: A report not based on real research with key fundamental flaws.

The London Economics document commissioned by the Government is fundamentally flawed. Indeed, the premise on which it was constructed was flawed, as it judges the effect of intervention purely from the eyes of the pub company and does not look at the actual effect of intervention on the actual viability of pub businesses. 

The deeply flawed and biased report from London Economics fails the very basic test of academic rigour, nor is it actually research. It is analysis based on evidence that can be independently validated; it is a series of calculations, made using data and false and inappropriate assumptions supplied by the very companies who are facing Government intervention.  It displays a fundamental lack of understanding of the leased pubco model and factual errors and conclusions that appear to expose a clear agenda; the question is, ‘whose agenda is it?’.

It is also important to note that London Economics has nothing whatsoever to do with the London School of Economics. One of the people consulted believed that he was being contacted by the London School of Economics!

The methodology used by London Economics fails simple tests of academic rigour; the question is whether this is by incompetence or by design. Either way, the report reflects very poorly on them, if indeed it was intended to be a piece of independent, objective and helpful research.

The suspicion must remain that the report was commissioned in a way that was inevitably designed to result in negative – though clearly flawed and unsubstantiated – conclusions about what reform would do.

The Save the Pub Group issued a Freedom of Information request on 19th December 2013 due to this important information needing to be in the public domain and the rather suspicion circumstances around its commissioning and the rationale – and actual brief – behind it.

 

The brief and costs of the research are now in the public domain, but there are still unanswered questions, so the Save the Pub Group has now made a further FOI request to BIS dated 6th Feb 2014 asking for all correspondence and documentation held that relates to the suggestion of commissioning and study and to the London Economics research and report itself.

 

Key Flaws in the London Economics Research

Below are five fundamental flaws with the work; reasons why it should be disregarded.

1)    The report is based on information only provided by the pubcos and with no actual research and no consultation.  

The report’s “Acknowledgments” section states that:-  “London Economics would like to thank the pub companies who supplied us with confidential data, Compass Lexicon and FDI Consulting who helped us to access the data, Kate Nicholls of the Association of Licensed Multiple Retailers and her membership [including two pubcos with over 500 pubs each] who provided insights into key assumptions, Andy Tighe at the BBPA (British Beer and Pub Association: the pubcos’ spokespeople) who provided key assistance, and Phil Dixon from PICAS / PIRRS whose views were both informative and very enlightening.”

How can it possibly be the case that this purportedly “independent report” simply took evidence from those with clear conflicts of interest due to their relationship with the pubcos?  Why has LE only spoken to participants of self-regulation and opponents of reform and not spoken to the Federation of Small Businesses, the Forum of Private Business, the Campaign for Real Ale (CAMRA) or any of the other seven tenant organisations involved in the ‘Fair Deal for Your Local’ campaign?  We can be sure that this is not by accident; indeed, had the brief been shared with all sides of the debate, the consultees would have been different and the outcome more credible.

Although London Economics charged BIS £26,000 for ‘fieldwork’, they did not undertake any actual fieldwork or any real research of their own; nor did they look at relevant evidence supplied in consultation responses to Government or from other stakeholders.  No wider consultation was undertaken.

The overwhelming response to the Government’s survey, by contrast, unequivocally reiterates the duty on Government to urgently intervene and effectively address the unfairness in the relationship between pub companies and tenants, with 96% of respondents supporting the Government reforms.

London Economics approached three participants of the organisations ‘managing’ the self regulatory regime, the Pubs Governing Body, all of which are pro self regulation, but no participant of Fair Deal for Your Local who are pro statutory regulation and the Government proposals.

The ‘Pubs Governing Body’ (PGB), formerly called PICAS (Pubs Independent Conciliation and Arbitration Service – despite the impression given by the name PICAS is not bound to operate in accordance with the Arbitration Act 1996). PICAS was set up by as a body to consider breaches of the Framework and Company Codes, the self regulatory regime. All the members of PICAS are now members of PGB. Despite being invited to join the Federation of Small Businesses and Independent Pub Confederation (with nine member organisations) declined to join as the PGB could not confirm that their objective was to meet the same commitments as outlined by Government – namely to deliver ‘fairness’ and circumstances where ‘a tied tenant would be no worse off than if they were free of tie’. The view of the Federation of Small Businesses and vast majority of Independent Pub Confederation members is that self regulation touches on some peripheral issues whilst deliberately being guided away from the main issue that is the root of the problems in the pub sector, the balance of risk and reward, pub owning companies are quite simply taking more than a fair share of a pubs profits leaving the tied licensee severely disadvantaged.

British Beer and Pub Association (BBPA) – Have director membership the PGB board and have financed setting up self regulation and the PGB, It is thought they run the PGB with the sole intention of diverting attention from anything that might provide meaningful or material reforms – BBPA’s membership includes five of the six pub owning companies that it is proposed would have to comply with a statutory code of practice. The organisation do not support statutory reform or a mandatory Market Rent Only option. In addition to the five companies that will be required to comply with a statutory code, BBPA members include practically every other pub company and small brewer – all of which are against statutory intervention.

Association of Licensed Multiple Retailers (ALMR) – ALMR have director membership on the PGB board, despite having never agreed to any version of the Framework Code. Greene King (the sixth pub owning company that it is proposed would have to comply with a statutory code) are members of the ALMR.

Phil Dixon – Heavily involved in self regulation. Involved in the setting up and an advisor to the PGB. Openly against statutory reforms proposed. Stated in the press the current proposals to regulate the pubco tenant relationship would be “even more destructive that the Beer Orders of over 20 years ago”. Mr Dixon is not a supporter of statutory regulation or a mandatory Market Rent Only option.

2)    They have measured pubco viability not pub viability!

The report is based on a false assumption, that the viability of an individual pub business is the same as the viability of the pubs they own according to the pubco model, which it absolutely is not.

Essentially – and extraordinarily considering that this is an expensive piece of work commissioned by Government of a research agency – London Economics has wrongly assumed that a pub is more likely to close if the tenant/lessee makes more money and the pubco less from the pub, when the reality is clearly the other way round.

The report’s biggest weakness is that it fails to understand that the proposed reform is a reallocation of profit from landlord to lessee.  No one has ever questioned that pubcos would have to reduce their excessive share of pub profits. However, the report without supporting evidence says this transfer would change the viability of individual pubs.

The greatest single flaw is that their evidence base is crooked, at the heart of this so called research is that the fundamental principle BIS acknowledged in the consultation is that there is a need to achieve a fairer split of pub profits[1] and it is precisely the unfair amount of rent and profits from over-priced beer prices taken by pubcos that is leading to the huge levels of tenant failure.

Research undertaken by the Federation of Small Businesses in Autumn 2013 has shown that currently 79% of tenants feel that their pub owning company was taking more than a fair share of the pub’s profits.

This is something that has also been shown by the findings of successive Select Committee reports and CAMRA’s 2013 survey on the disgracefully low levels of income of licensees of the large companies.[2]

This is previously what led many tied pubco pubs to close – shown by the extraordinary level of ‘churn’ of pubco tied pubs (a level concealed from public scrutiny by industry vested interests).

Punch figures leaked in 2009 showed that they expected, even then, that around a THIRD of their pubs would  churn in three years i.e. that a third of their entire leased estate would see their lessees leaving. Only last year Enterprise Inns financial reports revealed they have 1,463 lessees in occupation for less than 12 months, given Enterprise were not actively purchasing pubs in that period, it follows these pubs were previously occupied and vacated before being re-let. 1,463 pubs amounts to around 25% of the 5,720 pubs in the Enterprise Inns estate (referenced from Enterprise Inns Interim Results 2013 page 14) which suggests an anticipated churn rate of around one quarter every year.

Applied to the 15,000 pubs in ownership of the ‘big 6’ pub owning companies, this amounts to a potential 5,000 tied publicans A YEAR going bust and vacating their pubs, with a significantly greater wider effect on jobs, with BBPA figures on the economic impact of pubs suggesting one pub on average generates ten jobs.

So the simple reality – and obvious from the reality on the ground with the level of pubco pub churn, change of use, supermarket conversions and demolitions – is that the part of the pub sector where there are far more pub business failures than any other is the tied pubco sector.

It is also self-evident that continual ‘churn’ – the routine opening and closure of pubco tied pubs – damages the reputation of a pub, loses custom, and undermines its future as people find somewhere else to go (an effect acknowledged in the LE report but not linked to this aspect of pub failure) – so each time it becomes harder to build up the business again and convince people that the pub will survey and not close yet again, so this pattern has a direct impact on pub viability. 

Allowing the tenants to take a fair split of the profit they earn through the market rent benchmark would make many more pubs viable and would lead to many fewer pub closures (temporary and permanent), not more. In fact the single thing that would stem pub closures would be application of the Market Rent Only option – which is precisely what the much more credible research from the Federation of Small Businesses showed. Currently, with no action at all, we are seeing 26 pubs a week closing that is just under 1,400 a year closing as a relative certainty, based on recent history – not guess work  without legislation. The London Economics prediction there might be 1,600 with legislation means a difference of 200 – more or less the same.

If a pub is servicing pubco debts but the licensee and family are reliant on benefits, amassing huge debts to HMRC and other creditors, is the pub viable? It’s clearly not viable for the operator or the public purse, so we are looking at a very distorted concept. If a Government-commissioned report into the financial state of the pub trade is going to be given confidential information by pubcos, why wasn’t it given the churn rates? Why, indeed, did it not request them?  Surely the number of currently failed & failing businesses is crucial to such research. Why is the continued health of the pubcos of such importance but the health of thousands of small businesses, which actually employ the people in the sector, is completely ignored?  Where is the examination of what would happen if companies such as Enterprise Inns and Punch Taverns (described as ‘zombie’ companies) were replaced by competent, properly-run companies? What closure estimates would the same figures come up with if the cost of servicing debt was replaced by the cost of paying a likely mortgage on the same properties?  The assumption that currently viable tied pubs will continue to be viable in the future is flawed, with disproportionate increases in costs.  The large pub companies have been divesting a significant number of pubs in recent years and there is no indication that this will not continue in the future.  London Economics should have introduced a further scenario of “what the outcome would be if the status quo were maintained with continual divestments by the large pub companies in the future”.

3)    A complete failure to understand the situation tenants and lessees are in – and the law (the Landlord and Tenant Acts)

 

Just because a pubco receives a lesser share of pub profit, they cannot close the pub – as they have to honour the lease or tenancy.

 

The Landlord and Tenant Act 1954 Part II offers, amongst other things, a degree of protection from eviction for tenants. However, the terms of tied agreements allow pub owning companies to circumvent this by limiting tied product choice and over inflating tied product price to unsustainable levels, running the tenant into business failure. The ultimate goal is to obtain vacant possession that then allows the pubco to close the pub and seek redevelopment permission on the grounds of non-viability that they in fact created.  

 

Why does the report fail to recognise this critical piece of law governing the industry – which means that a Market Rent Only option would give tenants greater protection from being forced out by their pubco and hence prevent many closures where they are currently being deliberately forced out? This is a further basic error in the methodology of the report. It is staggering that a piece of research commissioned by Government would fail to recognise such a basic piece of the legislative framework governing the trade.

 

 

4)    A complete misunderstanding of the pubco economic model – and factual errors in consideration and conclusion.

The analysts have based their work on the false assumption that the pubcos are responsible for pub maintenance and investment.  (Fully-repairing leases pass all the responsibility onto the tenant and the vast majority of agreements are on full repairing terms) There is no mention in the report of the standard types of agreements in the tied pub sector.   

How can it be that these analysts are basing their work on the misassumption that the pubcos are responsible for pub maintenance and investment? (Mistakenly they seem to be analysing the brewery-tied ‘tenanted’ model – generally applied by the smaller pub-owning companies such as traditional family brewers unaffected by the Government’s proposed statutory code- not the pubco tied ‘leased’ model). This again is a fundamental  mistake to have made. 

 

The Independent Family Brewers of Britain – none of whose 29 members own more than 500 pubs – have clearly spelled out the difference between these two models in a letter sent to BIS on 4th November 2011. In the letter, the IFBB made explicitly clear that the traditional brewery tie operated by family brewers was fundamentally different from the pubco leased model that has done so much damage to the pub sector. It stated:

 

“Leases from pub companies are different in law and in practice from Traditional Brewery Tenancies.”

 

Yet London Economics clearly don’t understand this – and have written their report believing that pubco leases are the same, with similar benefits.

 

Table 1 in the report posits that between 5% and 14% of pubs will close directly as a result of any kind of regulation rising to 20% for the strongest regulation.  In the case of tied pubs this is a minimum of 11% to 36% and up to 35% to 50% “in scope of code” which (it must be assumed) means half the pubs in estates of over 500.  A series of highly questionable assumptions underlie these dramatic predictions.

Section 1.1 on page 1 of the report has identified longerterm factors at play [the introduction of the smoking ban, competition from supermarkets, increased alcohol consumption at home, etc.] as contributing to the demise of pubs.  Surprisingly, disproportionately higher beer prices charged by pubco pubs have not been identified as one of the longer-term causes of pub closures and yet increasing pubco beer prices as well as rents must play a fundamental role in determining the viability of pubs. 

5)    Misreporting of industry statistics and evidence

Considering that this is a report commissioned by Government, by a company who purport to be a professional research consultancy, the inclusion of a further key factual error based on publicly-available information on licensees’ incomes is extraordinary – and disgraceful.

Page 2 asserts that “recent evidence suggests that tied tenants also face a higher probability of financial distress, with 46 per cent of tied publicans earning less than £15,000 a year, compared to only 23 per cent of freeoftie tenants.”  This is an old 2011 figure, with respective 2013 figures according to the CAMRA/CGA survey that 80% of tied publicans earn less than £15,000 p.a., with 57% earning less than £10,000.  By underestimating the percentage of tied licensees in financial hardship at 46 per cent, the authors of this report have grossly overestimated the ability of tenants to provide a financial cushion to enable a business as usual scenario. With the proper facts in place, the business as usual scenario far from being the safest option for job retention is likely to result in the greatest number of closures because the viability of a pub should be judged on its viability to an operator rather than its viability to a pub owning company.

6)    The report is based not on independently verifiable evidence – but on ‘confidential data’ supplied by the pub companies who are actively and desperately lobbying to try to prevent the Government taking action.

The use of confidential and unpublished data unverified by neutral sources demonstrates a lack of transparency and destroys the credibility of the report.  It could have been made up.  Considerable evidence supplied to BIS since 2004 shows, for example, that licensees do not benefit from the economies of scale provided to the largest pubcos.  Section 3.3.1, “Collection process”, on page 15 of the report explains the sample size used and the basis of data collection.  It states only that LE was given anonymous sample pub information representative of each pubco’s income and geographical spread.  This cannot be verified and, given previous documented attempts by pubcos to provide misleading data, it could be reasonably concluded that this data is unreliable.

No mention is made of the category of pub: wet-led or dry-led.  Pubcos will likely earn more revenue from wet-led than dry-led pubs so it would be in their interests to load the anonymised sample with wet-led pubs either intentionally (because this will distort the model findings) or because wet-led pubs will likely dominate each income decile.  There is no evidence that auditing was done by LE to ensure the sample reflected the overall split between wet and dry-led pubs of each Pub Company’s pubs.

Unsubstantiated and false information has been regularly provided to MPs, the BIS Select Committee and to Government – and this is documented including in the recent Save the Pub Group report on pub closures – from opponents of any reform.  So without the data that the London Economics report was based on, neither Government Ministers nor anyone else can have any confidence that this information was factual and reliable; frankly, the belief of many professionals reading the report is that the opposite is likely to be the case.

The reality of the pubco model on pub closures

The assumption in the London Economics research, which clearly demonstrates underlying bias and predetermination, is that reform will close pubs.

In fact, the evidence in this report demonstrates the outcome of reform will be precisely the opposite – and also the simple, obvious conclusion of the necessary transfer of pub profits as recommended by BIS, the BIS Select Committee (after their four comprehensive, evidence based reports) and the Fair Deal for Your Local coalition including the Federation of Small Businesses and Forum of Private Business. 

To finally put to rest a dishonest myth long peddled by the pubcos, their lobbyists the BBPA and associates, in November 2013 the All Party Parliamentary Save the Pub Group published a significant (and properly researched and openly referenced) report worked on in conjunction with CGA Strategy, using their own methodology and figures. 

This proved that CGA Strategy’s figures on pub closures – and other figures – clearly show that the non-managed (largely leased/tenanted) sector has seen many more net closures than those of independent freehouses – the opposite of what the BBPA and its pubco members have tried to claim is the case for years.

The report, which is based on data and ongoing correspondence from CGA Strategy, who compile data on pub closures, include CGA’s own figures between December 2005 and March 2013 which show that there has been a much larger drop 15.9% (5,117 pubs) in the non-managed pubs category (mostly leased and tenanted pubs) and only 9.5% (2,131 pubs) for independent trade pubs.

The BBPA’s own numbers – published in their Statistical Handbook 2013 – show that over 10 years from 2002-2012 the ‘Free/Independent’ sector has actually GROWN whilst the ‘Tenanted and Leased’ sector has shrunk.

The BBPA’s figures show pubs in free/independent ownership have actually grown by around 1,600, whilst the pubs in tenanted and leased ownership have shrunk by more than 8,000, showing the ‘free/independent’ sector is not only surviving but thriving, despite the smoking ban, supermarket prices and tax.

The report also exposes how, with pub transfers from one sector to another (from non-managed to free) not being logged in the figures, some closures of non-managed pubs are being wrongly presented as closures of independent/free of tie pubs – including failed pubco pubs being sold to developers and being classed as a ‘free’ closure, something that is clearly wrong and is distorting the figures. The fact remains that the number of pubs in independent/free ownership has remained stable over the last ten years which means that this must be happening – and therefore giving a misleading picture of sector closures.

The report also exposes how the CGA figures do not record many temporary pub closures – known as “churn” where a pubco pub tenant fails and is replaced. This means that this trend, that is rife, is happening to an estimated quarter of pubco estates every year, according to figures revealed from pubcos, these churn figures are NOT counted where the closure is under two weeks, which is commonplace with pubcos installing temporary managers and replacement tenants on a tenancy at will (TAW) basis. 

Finally, using the staggering disposal rates of the large pubcos, from their own reports – that show an incredible THIRD of all the pubs of the two large pubcos being sold off in four years – the Save the Pub Group show that it is this part of the pub trade that is doing exceptionally badly – both in terms of temporary and permanent closures. This clearly shows why the Government must act to deal with this – and the endemic pubco overcharging that is leading to so many pubco pub failures and closures.

The required action is to introduce a statutory code of practice for the large pub companies which enshrines in law a Market Rent Only option for tied licensees.

This report and its figures are clear evidence showing the catastrophic effect of the pubco tied model and the comparative health of free/independent pubs must be used by BIS to back the appropriate action, which is the BIS Select Committee solution. Only their Market Rent Only solution will ensure that pubco tied publicans at last have a fair deal – which will lead to many more pubs being viable and staying open and serving their communities.

The Research Project Conducted for the FSB by Research by Design

The Federation of Small Businesses also conducted research into the likely effects of reform of the pubco leased model.

Unlike the London Economics report, this was a genuinely research-based project, conducted by an independent market research company – who hired a second company who did not even know the organisation requesting the research, so it would be done without bias.

The data is robust and independently and directly obtained, unlike the London Economics report which simply relies on information supplied by the very opponents of reform.

The full study and data is in the public domain, unlike the pubco supplied information that London Economics have used, which remains secret – and of course withheld due to “commercial confidentiality”.

The FSB research was based on a telephone survey carried out by an independent research company on behalf of the FSB. The survey of 500 tenants of the big pub companies (both members and non-members of the FSB) took place in August and September 2013.

The results of the research, by extrapolation, shows very clearly that introducing a Market Rent Only option for tied licensees of the large pub owning companies would benefit the UK economy by millions of pounds – and would lead to 148,320 extra staff hours and £48,666,758 in wages paid per year.

Publicans were then asked what they would do, in various key business decision making areas, if they were operating under a Market Rent Only lease or tenancy.

Almost all tenants (98%) agreed they would have more confidence in the future of their business if they were had the Market Rent Only option.

The FSB research asked if the Market Rent Only option was available to them, would they take it and what effect it would have on their business decision making. Using the FSB research findings, the new work gives robust projections of the impact of introducing the BIS Select Committee solution, the Market Rent Only option in terms of jobs, investment in pubs and money spent on advertising.

The key findings of the research are as follows:

When questioned about how they’d run their pub if a given a Market Rent Only option, 75% of tenants said they would take on more staff or increase staff hours, 78% would invest in pub maintenance and 73% would invest in modernisation. Almost all tenants (98%) agreed they would have more confidence in the future of their business if they were free of the tie.

What this shows very clearly is that the Market Rent Only option would lead to many MORE pubs being viable – which would of course lead to many fewer pub closures, the opposite of what the London Economics report based on pubco figures claims to show.

It also confirms that Britain’s burgeoning brewing sector would benefit. 91% of licensees – who currently can’t – would deal directly with the 1,000, or more, microbreweries in the UK. It would be great news for beer lovers too: 8,213 pubs currently forced to buy from pubco lists would offer a wider range of beers.

It is great news for consumers, a whacking 8,614 pubs in the UK would use the extra profits to bring down the price of a pint. This also exposes how the extortionate prices charged by the indebted pubcos to their own tenants is a key reason for high pub prices, a reason cited by some people as to why they have stopped going to the pub.

Using the FSB research findings, the new work gives robust projections of the impact of introducing the BIS Select Committee solution, the Market Rent Only option in terms of jobs, investment in pubs and money spent on advertising.

·         9,888 pubs would take on a new member of staff or increase staff hours. If 9,888 paid only the minimum wage of £6.31 to employees and increased total staffing hours by 15 per week, this would create £48,666,758 of additional wages to the UK Economy.

·         10,359 pubs would spend money on maintenance. Working on an average of £1,000 spend per pub, this means an extra £10,359,000 spent on pub maintenance in the UK.

·         6,698 pubs would spend money on modernisation. Working on an average of £1,000 spend per pub, this means an extra £6,697,984 spent on pub modernisation the UK.

·         9,796 pubs would spend more on advertising and websites. Estimating an average £1,000 spend per pub, this means an extra spend of £9,796,000 on advertising and websites in the UK.

On the basis of the extra spend on maintenance, modernisation, increased staffing hours and advertising the introduction of the Market Rent Only option would lead to a total benefit of £78,489,772 to the UK economy.

This doesn’t take into account additional tax take by the Treasury – which would also be a result of the introduction of the Market Rent Only option.

Almost all tenants (98%) agreed they would have more confidence in the future of their business if they had the Market Rent Only option.

John Allan, National Chairman, Federation of Small Businesses, has said:

“These new findings show once again how vital it is for pub landlords to get a fairer deal while boosting the economy and creating new jobs. The FSB is certain the statutory code can’t come soon enough. It is not fair to see the largest pub companies controlling the relationships to their own advantage. All landlords need to be on a level playing field creating more choice, greater freedom to invest and the ability to generate thousands of much needed jobs in the UK.”

The response to the BIS Consultation

The Government’s public consultation resulted in the highest response ever with over 7,000 respondents to the online survey and an overwhelming 96% supporting the call for reform. The online survey resulted in 67.6% (of all respondents) in favour of a market rent only option in the statutory code.   

Of the written responses from tenants, of those who answered the consultation questions, 89% of tenants said there should be a statutory code and 84% said there should be a market rent only option in it.     

The Support for Reform

  • The Federation of Small Businesses
  • The Forum of Private Business
  • The GMB
  • The Guild of Master Victuallers
  • The Fair Pint Campaign    
  • Pubs Advisory Service
  • Justice for Licensees
  • Licensees Supporting Licensees
  • CAMRA (The Campaign for Real Ale)
  • Licensees Unite the Union

 

Together Fair Deal for Your Local supporting organisations have a membership of more than two million people.

A total of 206 MPs have signed up to support reforms and there have been  two unanimous Parliamentary votes supporting action.


Conclusion

The London Economics report for BIS is frankly an expensive embarrassment, something that London Economics should be ashamed of, as it fails many simple tests of academic rigour. The Department for Business, Innovation and Skills should also be embarrassed, for this shoddy piece of work has been a costly waste of money – and worse still a seriously misleading piece of work.  The flawed methodology that produced such a demonstrably skewed report  deserves a full explanation from Government.

The Save the Pub Group believe that BIS should ask London Economics for their money back, as they have failed to provide a credible report and failed to do any real research.  They have wasted taxpayers’ money.

Something clearly doesn’t add up – not only the London Economics conclusions – but also the basis upon which this work was commissioned, the brief that was provided and the lack of objectivity in the whole process.

The clear suspicion is that this work was commissioned deliberately by someone in Government in an attempt to find an excuse for not doing as BIS have promised, which is to finally act to deal with the scandalous overcharging by the large leased pubcos, which BIS have acknowledged.

If this work is used by some in the Government to duck desperately needed and overdue reform of the discredited pubco model, they will not be forgiven by thousands of licensees, over 150,000 CAMRA members, not to mention small businesspeople and pub customers up and down the country. Another cop-out based on flawed information, as happened in 2011 with the misrepresentation of the CGA figures, will raise serious question marks about the influence of the pubcos and the lobbyists at the heart of Government.

To fail to act now on the basis of this biased and flawed report would undermine the integrity of Government. If such a report based on pubco data is sufficient to avoid intervention then the will of parliament and nine years of Select Committee inquiries will have been an utter waste of taxpayers’ money and a failure of evidence-based decision making.  Worse still, this will be seen as a cynical attempt to give in to questionable lobbying to avoid taking action over an issue.

Save the Pub Group

January 2014

 

Written by the office of Greg Mulholland MP and Gareth Epps, Steering Group member of the Fair Deal for Your Local campaign & Simon Clarke from the Fair Pint campaign.


[1] “The aim of this policy is to reduce exploitation of pub owning companies’ licensees and increase the share of profits going to the licensees.”  BIS – Pubs Statutory Code and Adjudicator, Impact Assessment document

[2] Pubcos squeeze life out of pubs with high rents and wholesale beer prices. Campaign for Real Ale. http://www.camra.org.uk/article.php?group_id=10091

Pub Companies – Seventh Report of Session 2008-9, House of Commons Business and Enterprise Committee http://www.publications.parliament.uk/pa/cm200809/cmselect/cmberr/26/26i.pdf

Pub companies: follow-up – Fifth Report of Session 2009-10, House of Commons Business, Innovation and Skills Select Committee http://www.publications.parliament.uk/pa/cm200910/cmselect/cmbis/138/138.pdf

Consultation on a Statutory Code for Pub Companies – Fourth Report of Session 2013-14, House of Commons Business, Innovation and Skills Select Committee http://www.publications.parliament.uk/pa/cm201314/cmselect/cmbis/314/314.pdf

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