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The Caterer

Give our pubs a chance

07 March 2014
Give our pubs a chance

The combined might of the supermarket ‘tax breaks' and pub companies' debts have seen thousands close, says Wetherspoon chairman Tim Martin

Another factor relates to the rates disparity. A pub pays around 6% of its sales as rates. This amounts to about 15p 
a pint, believe it or not.

Meanwhile, taking the rates paid by Morrisons in 2013 (£240m) alongside its sales (£18b), supermarkets appear to be paying rates at about 1.32% of their sales. So each pint bought in a pub has about nine times the level of business rates as a pint bought in a supermarket.

But the main reason for pub distress is the high level of debt assumed by some pub companies in the years running up to the credit crunch. This debt-fuelled pub boom saw the large tenanted pub estates of the major brewers being bought up by bankers, using borrowed money, who then hiked up the rents and the beer prices paid by the tenants.

As a result, they were able to remortgage the pubs, extracting tens of millions of pounds of 'profit' for themselves. The problem is that the so-called 'business model' was unsustainable - and thousands of pubs have closed.

After these investors sold out, the majority of the pubs in the tenanted estates ended up with public companies such as Enterprise Inns and Punch Taverns. They continued to buy pubs and increase debt right up until the credit crunch. When the licensees and tenants suffered, unprecedented numbers of publicans went bankrupt - and Enterprise and Punch shares plummeted.

A depressing aspect has been the attitude of the former pub titans to the plight of the tenants. Guy Hands and Hugh Osmond, joined by Enterprise Inns' boss Ted Tuppen, said nothing about the tax disparity with supermarkets, yet have been vociferous in criticising high tax rates that apply to them. There is a justifiable argument for a top rate of tax, but the disregard of the financial engineers for the plight of their tenants and their egocentric concentration on their own positions, dressed up as national concern, might even have caused Maggie Thatcher to side with Ed Balls.

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