Where to put your trust? Politicians or the market?

If there’s one topic guaranteed to cause friction between the big tenanted pubcos and their managed pub operating cousins, it’s the lease. The history of the ALMR, which represents the full spectrum of UK pub companies, is punctuated by the internal tension between managed and tenanted members over the development of a Lease Code for the industry. Those tensions remain and were brought to the surface again last summer at a special ALMR seminar on the subject in Birmingham, which proved to be perhaps the best industry debate of the year, bringing both sides together on the same platform. Differences may remain, but the industry is still talking to each other, and there is an understanding that even if business interests may appear to conflict the lease does have to work for both sides to ensure a healthy, vibrant and entrepreneurial pub sector. So will the news that the Commons trade and industry committee is going to investigate the relationship between pub companies and their tenants going to help? Unlikely. At best it will be an irrelevance. It has set itself a ridiculously short time frame to gain any real understanding of what can be a complex relationship. The committee also has no teeth, it can only advice Government. Given the fact that the Office of Fair Trading approved the Punch/Pubmaster deal only last year, there is plenty of evidence to suggest there is no case to answer and the Government will do nothing. At worst, it will be a costly waste of time. The truth is that the modern-day lease is much fairer, if only because of competition and the dialogue that goes on within the industry. There is no lack of pub operators, small chains or individuals, wanting to do lease deals and if you visit the Punch website, for example, you can just about tailor any type of agreement you like. You can even avoid upward only rents – for a price. And if pubs are under threat, why has the estimated total mysteriously stayed at 60,000 for the past decade at least? One thing the pub industry should have learned is that political interference is a blunt instrument that usually has unforeseen consequences. Isn’t the OFT and the Competition Act enough for anyone? The market may be imperfect, but it has to be better than more Red Tape. I wonder if the Federation of Small Businesses, which has called for the enquiry on the behalf of smaller tenants, sees the irony. There is undoubtedly a wider competition concern about the size of the big two pubcos, Enterprise and Punch. The latter is still growing, and according to reports is interested in Laurels community pub estate. With the two largest managed groups, Spirit and Mitchells & Butlers, the four comprise a first division that owns 35% of the UK pub estate and creates more profit than the rest of the industry put together. The buying power these four can exert puts them into the same frame as the major supermarkets. But is this in itself a reason to legislate? It depends on how they wield that power? Big is not necessarily efficient or a business goal in itself. There is already enough talk in City circles about whether M&B should be split up, and the cyclical nature of investor sentiment predicts that in three or four years there will be those asking what Enterprise and Punch are for and demanding their break-up? Business can be tough, unpredictable and at times downright nasty, but better that than the meddling of politicians and the straightjacket of legislation.