Landlords and punters across the country should be raising a glass to Vince Cable today after he announced new rules for pub companies (or pubcos) which will help local publicans in these difficult economic times.

His plans include the introduction of an independent adjudicator and a new statutory code for the industry – something I argued for in this IPPR report: Tied Down.

Pubs are an important part of the community – they’re a meeting place for family and friends and host meetings of local clubs and associations, promoting local charities and events. But they’ve faced serious demise with 16 pubs currently closing every week.

There is no one single reason for this – there are many (supermarket price competition, the recession, changing tastes and lifestyles). But the commercial structure of the industry is an important factor. The pub sector is dominated by the large pubcos and very many publicans operate under what is called a tied lease arrangement. This means they have to buy all their beer from the pubco that owns their pub at a list price and cannot buy it wholesale where it can often be bought cheaper at a discount. This considerably limits these publicans flexibility in what are very difficult times.

IPPR’s study found that publicans tied to a pubco are unlikely to make the same levels of profit as those that are not. Nearly half (46 per cent) earn less than £15,000 a year compared to just 22 per cent of independent publicans. They are more likely to be under financial pressure – almost three in five (57 per cent) said they were struggling financially compared to four in ten (43 per cent) of independent landlords. Being tied to a pub company was seen as a contributing factor to the financial hardship for the majority of these pubs (88%). Importantly few publicans thought that the revised voluntary code of practice introduced by the industry had made any difference.

Two cheers therefore for Vince Cable in announcing a stronger statutory code and an independent adjudicator, which will give publicans much greater power in their negotiations with the pubcos. In particular the new overarching ‘fair dealing’ provision is a significant reform. It would have been three cheers if he had gone further and given the publican the right to request a non tied lease. Nevertheless this represents a very welcome step towards resolving the crisis facing our pub industry.

* Rick Muir is Associate Director of IPPR