Investors in the pubs sector have been granted a degree of certainty as the Market Rent Option, which effectively abolishes the beer tie, receives Royal Assent. Pubs giant Enterprise Inns (ETI) is the main beneficiary, with its shares climbing 1.4% to 99p this morning.
The group has suffered a 22% fall in its share price since 18 November 2014 when MPs voted in favour of allowing landlords to buy their beer on the open market.
Enterprise Inns, one of the biggest tenanted pub companies, says Royal Assent ‘brings greater certainty as we continue to work with our publicans and develop ways of working to accommodate the forthcoming Statutory Code.'
There could be further relief on the horizon if the government decides to provide an exemption from the Market Rent Option for franchises and companies that invest significantly in their estate. Enterprise Inns and its peer Punch Taverns (PUB) spend a combined £170 million a year on capital expenditure and support for their pubs.
The exemptions could be introduced in secondary legislation this autumn but it’s not yet known how long the waiver will be and what constitutes ‘significant', so uncertainty still remains.
Enterprise Inns’ like-for-like net income grew by just 0.3% for its leased and tenanted estate in the 18 weeks to 31 January 2015, deteriorating from 2.7% in the third quarter and 0.5% in the fourth quarter of 2014.