Friday, June 19, 2015

What is killing the Great British Pub? - A great piece by my erudite mate James Watson.

What is killing the Great British Pub?


The Great British Pub is an institution. It is an iconic, instantly-recognisable oasis of security and comfort, the world over. All pubs are unique. Yet in so many respects, all pubs are reassuringly the same. With few exceptions, one knows exactly what to expect. Everyone has their favourites. People will remark ‘that’s a good boozer’ or ‘what a lovely little pub’ often without being able to articulate what it is that so attracts them. What is that intangible, intrinsic magic? What essential characteristics make up the utopian Moon Under Water? Aside from beer, wine, spirits and toilets, the other factors are as individual and diverse as the general population itself. The clue is in the title – a Public House. Who is the public? It is everyone. All of us. Society. Community. The rest of the world does bars, cafes and restaurants, to differing degrees of success. Only the British can truly deliver a pub. That is because it is a finely-honed mature construct. Pubs have evolved from the three basic constituents of inn (1400s onwards), tavern (1600s onwards) and beer-house (1800s onwards) until by the golden age of ‘pub building’ (1860-1900) the formula had been perfected. Little changed until the 1960s when the traditional divisions between the public bar and the saloon or lounge were tragically torn down and a new wave of open-plan, yet somewhat lacking in soul and character, shared drinking spaces was born. The old rubbed along with the not-so-old, and the nearly-new, until the late 1990s when the wheels really started to come off the machine. Blair’s Britain offered the digital-age distractions of Brit Pop, Girl Power, four supermarkets in every town, deregulation of everything from banks to broadcasters, and within a decade, Britain found itself in the grip of the worst recession since the end of the Second World War. By the time the green shoots of recovery arrived, our pubscape had changed dramatically. At the lowest ebb of the economic downturn in early 2009, some 56 pubs each week were shutting their doors, permanently! How did we get into this mess? Did we lose our love for the pub or were more powerful forces at work, conspiring to dismantle the cultural fabric of society?

Public House Ownership

Historically, the brewers established estates of pubs in the region around their breweries. They were seen as essential outlets for their beer and in most cases the only route to get their product to market. To that end, the pubs were cash cows. They were to the brewers, what petrol stations are to the global oil companies. It made sense to invest in the premises, to make more people want to come and drink there, and to treat the publican fairly. The more beer he sold the more profit the brewers made. Sadly, a monopolistic situation developed through multiple mergers, acquisitions and takeovers until a ‘big six’ breweries controlled half the pubs in the late 1980s. Government legislation forced them to sell off much of their estates and restricted pub ownership by brewing companies. It also imposed certain rights on publicans to stock guest beers. With hindsight, it wasn’t a massive success…

By the mid-2000s around half the nation's pub stock had come into the hands of Pubcos. Pubco's took a different view on pubs. They were no longer essential community facilities and irreplaceable artefacts of the nation’s great heritage but more benign commercial real estate used as assets to leverage credit and capital, in order to buy yet more assets, to be bought and sold in future as seen fit, on the whim of hedge fund investors. The most significant ones still in existence today are the 'big six'; Punch, Enterprise, Admiral, Marstons, Greene King, Star. These firms, to a differing extent, act more like estate-owning companies interested in hard-nosed commercial lets
rather than their self-styled image of cuddly brewers and business partners to the UK's hardworking publicans. Without exception, they all swelled their estates to unsustainable levels during the good times and it caught up with them after the credit crunch. The only way to stay afloat was to milk their tenants for every last drop, asset strip and flog off the estate to developers. It was not just the poorer performing pubs they sold off, but any pub in the estate where a developer would offer them short-term cash that they felt was a better bet than (say) the next 5 years’ rent.

Protection of Land Use via the Planning System

The planning system, until 2012, was shamefully weak. It was strengthened in 2012 by the introduction of the National Planning Policy Framework (NPPF) and again in 2015 with the revision of the General Permitted Development Order (GPDO) on 6th April which gives added protection to pubs which are registered or nominated as Assets of Community Value. Yet pubs still close at a rate of 31 each week and we regularly see planners hoodwinked by developer spin and, often reluctantly, wring their hands whilst granting permission for demolition of our heritage and culture and replacement with luxury flats or mini supermarkets and a retort of ‘shame nobody used it, ah well’. The truth is a lot more complex.

Certain changes of use require planning consent. If it is proposed to convert a pub into houses or flats, this change is subject to consent, which means the local planning authority have the opportunity to apply local and national policy, which will include some degree (rarely enough) of protection with aims to safeguard community facilities against development. But the planning system is a balance. The harm caused by the closure and loss of the community facility, needs to be balanced against the planning gain of the additional housing provision. Local authorities have tough targets to deliver on new housing and often take the easy option by believing the developer when he argues the pub is no longer viable. Councillors and Council officers are rarely au fait with the complex economics of the pub sector and the underlying reasons behind a perceived lack of viability.

In other cases, the change of use is allowed via permitted development, and so regardless of any Council policies to save pubs, they do not have the opportunity to apply them! This is why, in 2014 alone, two pubs turned into supermarket convenient stores every week. Pubs are undoubtedly worth more to their owners in alternative use. This would be true for most buildings,
and indeed green spaces, parks, lakes, places of worship, cinemas, art galleries, museums, cemeteries, national parks and so on. The most profitable uses of land are derived from residential and high value retail. Pubs are marginal businesses for a variety of reasons from duty and business rates to high fixed overheads derived from stock liabilities and staff wages. In spite of this, pubs make money. Pubs are not charities. Certain land uses do not make money at all and in fact present a constant cost burden e.g. libraries and swimming pools. Yet they are important as they are facilities that communities value and they contribute to the vibrancy and diversity of our neighbourhoods.  If money alone was allowed to rule the day, every scrap of
Britain would be housing. There would be nowhere to meet one’s neighbours, to socially interact, to let one’s hair down on a Friday night after a hard week. And most importantly, there would be nowhere to enjoy that other Great British invention; cask ale. That is why the planning system exists! Planning was nationalised in 1947 precisely to ensure that communities and their elected representatives had some control in shaping their local areas. The National Planning Act recognised that free market economics alone would serve only those with capital and wealth whilst marginalising the rest of society.

Deliberate Neglect

If pubs are being ripened up for a secret auction, they are often deliberately run down to an extent that all custom is marginalised and goes elsewhere. In other cases, struggling publicans with 18 months left on their lease earning less than minimum wage having exhausted their savings simply cannot invest. They receive no help from their so-called business partner. In some cases, they get wilful hindrance! The media, members of the public, politicians (with a few exceptions) and opinion-formers all swallow the lie. Make no mistake, it is a lie. It is the easiest thing in the world to run a pub badly. When pubs are freed from the strangle-hold of Pubco greed and contempt, given love, care, a little investment, and placed in responsible hands, it has been proven time and again that premises can be completely transformed. The correct operator, who knows the community and the area, and offers something that people want; that special something that supermarkets cannot offer, underpinned by decent food and punctuated with quality beer, wine and conversation, in a comfortable environment, can exceed all expectations.

A Question of Viability?

To avoid the issue of turkeys failing to vote for Christmas, it should not be about proving viability, but the agent of change (developer, supermarket, care home, bookies, Mosque etc) needs to prove non-viability! The smart Councils are starting to insist on this. Many publicans have the rug pulled from under them whilst operating profitable businesses, but their figures will be misleading due to the effect of the tie and the fact that the harder they work, the less they keep, and the more goes to the Pubco. What a previous incumbent was or was not doing is totally irrelevant. If somebody has ran a pub badly, why not let someone new have a try? Pubs are viable in the right hands, but those hands do not get the opportunity to acquire pubs when stitch-up deals happen with developers. The question that should be asked is why were these pubs (31 each week) not advertised at a fair market price, free of tie and restrictive covenant, with discount reflecting their state of disrepair and the investment needed? The owners always want the highest price for an asset! This is natural in human terms but does not fit well with the big society and this is where the planning system is failing us, badly. St Paul's Cathedral would be worth many times more as a casino. The Church of England does not sell it because they know the planners would not allow it. But pubs are fair game. It's wrong and we need a big shift in attitude whilst we still have some left.

A Question of Greed

Finally, the operation of the tie and the grossly unfair tied leases are manipulated to contrive non-viability where the freeholder wants the pub use erased to pave the way for demolition or conversion. Tenants with the Pubcos might be on a 10, 15 or 25 years lease, some of them old enough to be renewals of brewery leases before the beer orders of 1989 e.g. Bass-Charrington owned lots of pubs but in the 1990s sold them all to Enterprise and Punch. The leases went with them, as did the sitting tenants. Gradually, at rent review, the new owners have hiked up the rent to obscene levels and restricted choice on tied products whilst giving nothing back in support.

Many tied tenants pay as much as twice the market rate for draught beer since they are obliged to buy it through their freeholder. For over a decade, the Pubcos have been offloading pubs with sitting tenants who have perhaps 1-4 years left. The new owner typically wants flats, especially in London and the South East, so needs to try to "prove" to the Council that the business is failing. He can trot out the old line on the smoking ban, religion, demographics, drink driving laws, supermarket competition etc. He can restrict the tenant's choice to one or two draught products and crank the prices up to drive the publican under. One developer in Spitalfields made the publican rise the price of Guinness from £3.70 a pint to £5.80 overnight to maintain the same level of gross profit, all through forcing him to pay more for the keg through a beer supply agency set up by Punch Taverns specifically to fulfil this extortionate role! Of course the publican discontinued Guinness as nobody would pay that when it was £3.10 in the JD Wetherspoon down the road. He then lost some customers; drop-ins calling by see a limited choice and decide to go elsewhere. Regulars cannot afford to come as regularly. The business is in decline. This is precisely what the developer wanted. The publican will then, in desperation, sell the remaining years on his lease for below market value, surrender and move out, quite often bankrupt and homeless. The developer can then present an empty "failed" pub to the Council and demand planning permission for this empty, unloved, former public house. Councillors swallow it most of the time, unless there is an
active campaign there to rally round and object. We have lost thousands of pubs by such underhanded means. The vicious cycle then perpetuates when folk say ‘shame all the pubs are shutting but they cannot compete with supermarkets’ and people tell themselves the pub game is dead, and consequently stop using pubs, which affects the good ones as well as the bad (there is no such thing as a bad pub - just bad management!), and the industry is further in decline. It is not that pubs are not viable. On the contrary, pubs have been viable for hundreds of years and have mostly evolved and responded to changing consumer tastes and behaviours. What the new generation of pub estate owners, who got in over their heads mean is that the buildings are more viable when put to alternative, higher value uses. This has little to do with viability and everything to do with greed.

The Future for Pubs

The past performance of sold, converted or demolished pubs is not the story here; it's the longterm survival and sustainability of the British pub, as a holistic institution, and how campaigners are making slow progress in the right direction. Chiefly the two measures are A) Planning Reform and B) Pubco Reform, the latter being addressed by the Small Business Act 2015 and the introduction of a statutory code, pubs adjudicator, and the Market Rent Only (MRO) option.

There are a number of brave entrepreneurs who are shaking up the game. It's very difficult for them to penetrate this racket but occasionally they rescue a pub from the grips of Pubco mismanagement and turn it around. There is also a phenomenal growth in the opening of so called ‘Micro Pubs’. There are well over 1000 in Britain and these are defined as traditional communal spaces specialising in decent beer with no entertainment or distractions other than conversation and social dialogue. They are proving popular and ironically one of the chief barriers to their proliferation is the need to obtain planning consent as they typically seek to establish themselves in small premises like shops and offices.

It is true that people do not use the pub as much as they did in the 1960s, or even the 1980s. Overall volumes of beer continue to decline. Social habits do change and evolve and the market needs to respond to this. Pubs are not given a fair chance. Their unscrupulous and greedy owners have no interest or aspiration in their long-term survival. Furthermore, the weak planning
system continues to be exploited by aggressive developers who are able to outbid any publican who has a more realistic appreciation of the true market value, as opposed to a development hope value. In spite of this there remains a fundamental fondness for the pub within British society. There is nothing else quite like it. It is a social leveller, where people from all backgrounds, classes, cultures and faiths are able to mix in a shared space, where all are treated equally. Whether it be a christening, engagement, wedding, graduation, new job, promotion, sporting win, retirement, birthday or a funeral, life’s ups and downs are celebrated and commiserated in the pub. Is this enough to sustain them? No. A pub must be for life, not just for Christmas. The economics of the industry and the high costs of running and staffing a pub mean that for many, a visit to the pub is now a luxury rather than an everyday essential. In this regard, food sales are driving growth and in a good many cases, a food offering is vital for the survival of pubs.

The government could and should do much more to assist publicans. The tax loopholes exploited by supermarkets could easily be closed. VAT in the hospitality sector could be cut to 5% or better still scrapped! Beer duty in the UK remains amongst the highest in Europe. The National Planning Policy Framework could take a stronger lead on promoting the community cohesion derived from well-managed pubs and insist on robust evidence that a pub is simply no longer required before entertaining consent for an alternative use. Such measures would redress the market and bring about fairness, deterring developers from over-paying and hence out-bidding well-meaning publicans.

It is hoped that the introduction of the statutory code and the Market Rent Only Option, along with further proper planning policies, will create the right framework for those in the most noble and selfless of professions, to continue in the fine spirit and tradition of the last few centuries, and keep the beer, wine and conversation flowing for generations to come. There is one very simple and highly enjoyable thing that each one of us can do to contribute to the survival of pubs. Go down your local now. Order a pint. Enjoy it. Chat to your neighbours and friends. Stay for another pint. Perhaps another. Buy the bar tender a drink, they work very hard. Have one more. Perhaps another. Behave yourself. Repeat as many nights as you can afford to.


About the Author

James Watson is a campaigner, activist and pub evangelist. He has enjoyed visiting British pubs since hewas a small child and has witnessed the worst years of pub attrition from the late 1990s to the present day.

Originally raised in a Midlands mining town, where pubs played a large part in his childhood, he moved to London at the age of 18 to pursue a career as a professional engineer. In every part of London, his local pub was closed, sold, converted to flats or demolished. After years of this repeating pattern, James lost his patience with the destroyers of pubs and refused to accept the inevitability of pub closures. He resolved to expose the truth behind the aggressive targeting of pubs and to hold local authorities to account to stop this needless destruction. He was a founder member of the campaign to save his local, The Chesham Arms in Hackney, which raged for almost 1000 days and finally defeated a property developer. The pub eventually reopened when the developer ran out of options and granted a lease to a young publican. James is convinced that a stronger planning system is vital for the future sustainability and protection of the Great British Pub. He serves as the Greater London region pub protection advisor for the Campaign for Real Ale.

And I'm happy to say that James is also a friend of mine, J Mark Dodds, the Pub Persuader.

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