New blow for pubs as MPs roll out a probe

Pub companies battered by the credit crunch, the smoking ban and the worst trading conditions for a decade woke up to another headache today - a fresh Government investigation into the industry.

Following pressure from landlord group Fair Pint, the Business and Enterprise Committee said it is launching a follow-up to the 2004 Trade and Industry report.

Committee chairman Peter Luff MP wants to see whether the pub companies are treating leaseholders fairly.

Landlords complain that the big pub companies raise rents whenever it suits them and overcharge for beer that they could better buy elsewhere. Luff is considering whether tougher regulation should be imposed - a potential disaster for the industry.

Four pubs close every day in the UK, something the pubcos blame on trading conditions. Critics say the business model of the big players is not viable.

The share prices have been devastated of late. Punch Taverns shares have halved in the last six weeks.

Giles Thorley, chief executive of Punch, said of the inquiry: "It is disappointing that this has come when we are putting significant effort into supporting our licensees following the effect of the smoking ban and the challenging trading climate. This will be a distraction for the industry." A move to break the tie that sees the owners of the properties also supply most of the beer sold in the pub would be especially worrisome.

Mark Brumby at Blue Oar Securities said: "Breaking the tie would obviously threaten the business model of Punch and Enterprise in its current form. The tone can only be said to be (potentially) very anti-pubco. The politicians have the chance to help (or to look as though they're helping) the little man ahead of an election. The pubcos need this like they need a hole in the head."

The British Beer and Pub Association welcomed the inquiry 'as a chance to lay to rest the misconceptions that have grown up around pub companies'.

The investigation will publish its conclusions later this year.