There’s nothing businesses abhor more than uncertainty. Now regulation – a statutory framework plus adjudicator – is to be enacted in the tenanted pub company sphere, uncertainty hangs in the air like a bad smell. The fear will be that somewhere along the line in the future, regulatory intervention will spring some legally enforced ruling that sinks the tenanted pub company model below the waterline. Even the family regional brewers, who have been very largely exempted from the censure heaped on the model by anti-pubco campaigners, will be jittery. 

One senior figure I spoke to this week, who oversees a substantial tenanted estate, was muttering glumly about wanting to exit tenanted pubs entirely, overwhelmed by weariness and frustration with the on-going haggling and back-biting. It’s ironic that parliamentary patience over self-regulation should have come to a dramatic halt at a moment when self-regulation seems to have been making decent progress. Reading the evidence sent to Vince Cable you come across almost exactly what you would expect - a host of entrenched positions. I know from private conversations with senior figures that the obvious question has been asked – could this outcome have been prevented?

Former Punch Taverns chief executive Roger Whiteside hinted at the central problem in a valedictory column last week when he reported a frosty reception from senior colleagues at a British Beer and Pub Association meeting when he argued that the critics had a point. Whiteside and his colleagues at Punch have moved heaven and earth to create the internal culture that was required to create a better relationship with tenants having publicly announced that there was a “lack of transparency and trust” for licensees. But for Punch and other companies there was something missing. It got to the stage where it was not enough to set about changing the internal culture. What was needed earlier was an external apparatus to deal with the tensions. 

Mitchells & Butlers chief executive Alistair Darby, appearing before a committee of MPs examining the pub company and tenant relationship in a former guise as head of Marston’s tenanted division, said that the right to use the tie had to be earned. By this he meant that there was an enhanced obligation for tenanted pub companies, compared to other property landlords, to ensure (and prove) that they are giving their tenants the greatest chance possible to succeed. The fundamental problem was the large tenanted pub companies lost the emotional argument over and over again because they were unable to prove categorically that they definitely weren’t part of the problem. As MPs up and down the country heard stories of clattering pub failures within their own constituency, often involving the same handful of companies, the political temperature inevitably began to rise again during the recession. 

As a former editor of a well-known trade magazine I know it’s nearly always impossible to apportion blame when a business failure arises in the sector. MPs are certainly not well-equipped to work out the extent to which the tenanted business model is to blame. Which is the point here. If there was a major failure by the tenanted pub companies it was around not setting up their own adjudicator three or four years ago – and getting ahead of the problem. An independent adjudicator, an ombudsman figure, might have worked like the Portman Group’s independent complaints panel, issuing tough rulings – and sanctions – in cases of wrong-doing. The sector’s own adjudicator would have been the external counter-balance to the contractual power that the pubcos undoubtedly wield. The adjudicator’s rulings could have been held up as proof that there was an avenue for complaining tenants to seek redress. It would have helped the large pubcos in every sense to take a few heaped spoonfuls of medicine very publicly.

From time to time, the large pubcos sensed that they needed to fund something along these lines to fill the vacuum that the vocal campaigners had occupied – at one stage Enterprise boss Ted Tuppen offered £100,000 towards something like this. But the regulatory danger loomed and receded – and the appetite to spend money did the same.

It must have been a slow news week at the New Scientist magazine, judging by the editorial and associated article in their January 12th edition. No news about the Bosun Particle; no fascinating new insights into genome sequencing – instead just a turgid regurgitation of some of the shoddiest claims of ‘alcohol science’.

Their editorial was entitled “Get serious about drinking” and asserted that “Curbing harmful consumption can no longer be left to the industry.” Well, when was it ever? The problem, according to the editorial, is that “Up until now, politicians have generally been content to let the alcohol industry regulate itself.” This assertion may come as something of a surprise to readers of Propel who, since 2005, have witnessed a relentless tide of restrictive regulation all designed to regulate the industry, reduce consumption and get us drinking less. It also beggars belief that a scientific journal of such weight and significance can demonstrate such breath-taking ignorance. Haven’t they heard of licensing law?

Far from it being the case that the alcohol industry has been left to “regulate itself”, we’ve had regulation imposed on us since 1495 when Henry VII, then leading England out of medieval confusion, enacted the first statute governing the conduct of alehouses. This statute empowered local justices to take financial sureties from the keepers of alehouses as a guarantee of their good conduct. Judges of Assize were given the power to suppress alehouses that were, in their view, unnecessary. Just over half a century later, in 1552, a proper system was created for licensing alehouses for the first time. Licensees were required to recognise their responsibility for running an orderly house, unlawful games were prohibited, and drunkenness was outlawed. We’ve been highly regulated ever since.

The editorial further asserts that “alcohol is relatively cheap, widely available and addictive”. Well, it’s not relatively cheap - it’s relatively expensive given that alcohol price inflation has exceeded the general level of price inflation by around 2% a year for the past 20 years. Alcohol is addictive? To assert that alcohol is an addictive substance, without any qualification, recalls the alcohol science of the 1940s and the now-discredited disease theory of alcoholism. But alcohol is widely available. So - one out of three.

By ignoring the long history of alcohol regulation the New Scientist seeks to promote the idea that ours is an industry out of control, and only more legislation designed to restrict availability and raise price can solve the problem. Yes, you’ve guessed it: minimum pricing, which, they say, “scientific evidence” proves will be effective in tackling alcohol misuse. Strange….how can there be scientific evidence for a policy that hasn’t been tried anywhere in the world? The editorial concludes: “If the industry is serious about reducing harm, it should come out in support of minimum pricing. New year’s resolutions usually fail, and so do alcohol policies based on personal restraint.” But we’ve never had an alcohol policy based on personal restraint!

The lead article inside New Scientist is written by Peter Aldhous and is entitled “The battle of the bottle”. Now, it turns out that Mr Aldhous is New Scientist’s San Francisco bureau chief and this may account for his lack of knowledge of British legislation, but he surely must be aware of American legislation and the struggle over Prohibition and Repeal. But his article makes numerous assertions that are clearly nonsense: “The Brits deserve their reputation for booziness.” Actually, we’re seventeenth in the European league table for alcohol consumption per capita. The article asserts that Britain’s per capita consumption is the equivalent of 33 litres of vodka a year – over the government’s recommended limit of 27.3 litres a year. Actually, these statistics are out of date and we now know that over two thirds of British drinkers drink within the sensible drinking limits. Peter Aldhous’s website states that he is “fascinated by data visualization” – whatever that means. I suggest that it’s just better to get the data right, and up-to-date and give the “visualization” a miss!

 

The article is, however, right to suggest that the drinks’ industry view that we need to target problem drinkers and adopt voluntary advertising codes is contested by a global push, co-ordinated by the WHO, to encourage governments to increase price, restrict availability and ban advertising. It is wrong to suggest that the efficacy of these policies is supported by an “extensive evidence base”. Actually it is supported by speculative mathematical models like the Sheffield Alcohol Policy Model, which is at the softest end of soft, social science.

 

I think I will relax now with a nice glass of shiraz and see if I can visualize some data!

 

A great number of businesses in the retail, leisure and food service industries have been burdened with interest rate swap products that banks have been promoting so aggressively in recent years. Many borrowers were sold (often being compelled to buy) these products without being made aware that, however low interest rates might fall, they would be locked into paying substantially higher interest rates under the terms of the product for its full term, typically ten, 12 or 15 years, which would sometimes be significantly longer than the term of the underlying business loan. There was always a massive, and purposely hidden, imbalance between the borrower and the banks. The banks were effectively the casino in these deals. The reality is that most businesses had no grasp or understanding of the risks associated with these products.

 

When the products have caused losses the inherent unfairness further manifests itself insofar as the borrower would be unable to cancel (‘exit’) the interest rate swap without the agreement of the bank. Upon seeking such agreement, the borrower will have almost inevitably faced huge non-negotiable exit fees, which in many cases they have been unable to afford.

 

The Financial Services Authority announced in June 2012 that it had found ‘’serious failings ‘’ in the way the products were sold, prompting ten banks to agree to review the sale of 40,000 swaps made on or after 1 December 2001. The Financial Services Authority then established a pilot review to test the effectiveness of each bank beginning a full review of their swap sales. 

 

Last week, the Financial Services Authority published the findings of the pilot review carried out by Barclays, HSBC, Lloyds, RBS and independent reviewers in 2012. The review looked at 173 sales to non-sophisticated customers and, staggeringly, found over 90% did not comply with one or more regulatory requirements.

 

The four banks will now conduct a full review of their sales of interest rate swaps and the Financial Services Authority says it expects that Allied Irish Bank (UK), Bank of Ireland, Clydesdale and Yorkshire Banks, The Co-operative Bank and Santander UK will start their own reviews.

 

If your business has a turnover of less than 6.5 million, a balance sheet of less than £3.26 million and less than 50 employees then you will be deemed to be a ‘’non-sophisticated customer’’, which in many ways simplifies the legal claims process. We would urge all businesses to immediately get your potential claim underway. It is imperative that businesses do not simply wait in hope that their bank will eventually get around to reviewing the sale of an interest rate swap. 

If left to their own devices, there is little doubt the banks will be looking to delay any redress to their customers. The first limitation to the FSA Scheme is it only applies at this juncture to the four largest banks. The second major problem is that all the scheme ensures is the banks will review cases - there has been no assurances by the banks to actually provide redress. 

Also, and very importantly, it has recently been announced that redress is also possible for businesses who have a balance sheet over 3.26 million and employ over 50 employees to make claims, provided the total value of the interest rate swap is equal to or less than ten million. There’s no doubt the examples of mis-selling are many and the impact these sales have had on small businesses has been, in many cases, catastrophic.