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Cheers or tears: Are Brits in for cheaper beer?

A end of a 400-year-old rule that means British pubs can now pick and choose their ales, won't lead to cheaper beer, the boss of one of Britain's biggest brewers warned.

Currently, anyone wanting to become a pub landlord in the U.K. can rent a premise from the brewery that owns it. Rent and insurance is often below the market rate. In return, publicans must buy beer and other supplies from the owner -- often at a much higher rate than the market.

British lawmakers voted in favour of scrapping the rule Tuesday, a move that would allow pub tenants to buy beer from any supplier if it became law.

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While the move has raised hopes of cheaper beers and a revival of the "ol' British boozer", large companies such as Punch Taverns and Enterpirse Inns have attacked the plan and claimed the "beer tie" has helped entrepreneurs do well in the industry.

No cheaper beer

The CEO of one of Britain's biggest brewers Fuller, Smith and Turner said ending the beer tie won't push booze prices down.

"I think it's unlikely to lead to cheaper beer. These tenants that have pubs are going to need to support their pubs by putting more of their own money into pubs," Simon Emeny, told CNBC in a TV interview.

UK beer tie
Chris Ratcliffe | Bloomberg | Getty Images

"The tenanted business model actually gives entrepreneurs a really low cost way of entering the industry and I fear in the long term if pub companies are forced to behave like property businesses there will be much bigger barriers to entry."

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Emeny added that there will be "deterioration in the fabric of buildings", business closures and job losses as pubs will lose support.

More consumer choice

The Campaign for Real Ale (CAMRA), a lobby group for the pub industry that has been calling for an end to the beer tie, welcomed Tuesday's vote and said that the cost of a pint to the consumer will remain affordable.

CAMRA also released a study suggesting that 80 percent of tenants tied to the large pub companies reported earning less than £15,000 ($23,445) a year compared to only 40 percent of free of tie tenants. The CAMRA study also suggested that tied pubs could be paying around 77 percent higher for a keg of beer than the wholesale price.

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Analysts agree that the jury is still out on which side is right, but agree that abolishing the beer tie will offer more choice to consumers.

"This is the right move for the medium term in terms of choices for consumers, in terms of innovation and a breath of fresh air in the industry," Spiros Malandrakis, alcoholic drinks analyst at Euromonitor, told CNBC by phone.