UK hospitality: A strong summer but structural challenges remain

The UK hospitality sector has had a boost over the summer. England's run to the World Cup semi-final and extended licensing hours lifted spending across pubs and bars by 16% over the tournament, and the government has since confirmed a 20% cut to business rates bills for pubs, social clubs and live music venues in England from April 2027.

The question is whether that goodwill converts into sustainable returns now the tournament is over, and when the sunshine and headlines have gone.

Hospitality firms still face structural challenges

While there has been good news for the sector, a short-term trading spike should not be mistaken for a fix to the underlying economics.

Firms are still facing significant structural pressures that have not gone away:

• Reduced consumer spend. Higher takings around the World Cup have not reversed the longer-term decline in demand. Only five of the UK’s 13 regions recorded footfall growth in the first half of 2026, concentrated in London, the Southeast, the Southwest and Northern Ireland. Customer visits to pubs and restaurants were down 7% across the second quarter, despite the World Cup starting on 11 June.
• Rising cost base. The increase to the national minimum wage in April 2026 added around £1.4 billion of cost across the sector, roughly £900 a year for each full-time worker on that rate, on top of the increase to employers' national insurance contributions costing approximately £3.4 billion a year. Input costs are moving in the same direction. Restaurant price inflation is running at 6.8% year on year, four times the ONS food and beverage rate, and operators are finding the limits of passing that on while visit numbers fall. Energy costs remain high, and changes in the way businesses pay for the national grid applicable from April 2026 mean multi-site operators, such as hospitality groups, will be among the hardest hit.
• Employment reform. The Employment Rights Act 2025 is being phased in from October 2026, introducing a right to guaranteed hours (based on a reference period) and day one statutory sick pay, amongst other changes. Hospitality is one of the most exposed sectors, employing around 350,000 workers on zero-hours contracts. The operating reality of the sector is shaped by both seasonal and weather dependent factors, with a wide variation in covers. Staffing models will need to change, at higher cost and greater risk to employers.
• High taxation. The UK applies 20% VAT to food, drink and hotel accommodation alike, the second highest rate for hospitality in Europe. Most European countries operate a reduced rate for the sector, with Ireland now at 9%. Much of the industry is campaigning for a cut to 10%.

A tournament summer tends to redistribute demand between venue types and pulls trade forward. It does not reset a cost base, and it does not always carry a business through the pre-Christmas lull.

Sector argues financial support does not go far enough

The sector has received recent good news on policy. The 20% cut to rates sits on top of the 15% relief announced in January for 2026/27 and a real-terms freeze for two further years, and the Prime Minister has called it a first step.

The cut is welcome, but it is small relative to the problem and narrow in scope. It is expected to save a typical pub an estimated £1,100 next year. Crucially, it does not apply to restaurants and hotels, a distinction the sector has publicly challenged on the basis that they compete for the same customers, in the same locations, with the same cost structures. 

The relief also has to be viewed against what has already happened. For example, April's revaluation lifted rateable values by an average of 30% for pubs (compared to an average of 19.4% across England for all properties), with businesses running large estates or high-value sites the most exposed. For many operators that increase will more than absorb the discount.  

Churn across the wider hospitality market underlines the point. In 2025, roughly 15 sites a week were opening but 11 a week were closing, and nearly half of the venues launched that year had gone within twelve months. 

Rates relief helps at the margin, but the businesses that come through this period will need to have built a genuinely sustainable model.

The cost of staying competitive

Grant Thornton’s own research has shown that consumers are prioritising memorable experiences, and the experience economy has been one of the sector's fastest growing segments. 

But operators here face their own challenges. Many city centres are at or near capacity, with consumers able to choose between several competing concepts within a short walk. Competition is also coming from outside the sector with social fitness formats, such as padel, offering the same shared, competitive occasion. While consumers might play padel weekly, the average visit frequency at a competitive socialising venue is closer to twice a year. 

Sustaining demand therefore requires continual reinvestment in games, interiors and technology, with air conditioning becoming close to essential as extreme heat grows more common. Each involves capital expenditure, potential planning consents and trading downtime, straining businesses already managing tight cash headroom.

The consequences are visible. Sixes, the cricket-based concept backed by England internationals, fell into administration in December 2025 on the back of poor site selection and fierce competition, before being acquired in May 2026 by a vehicle backed by its secured lenders. Axe-throwing operator Whistle Punks ceased trading and went into liquidation in 2025.

Rise in CVAs as groups look to right-size the business

Structural cost pressure is leading groups to reset cost bases across their estates. Many are shaped by historical acquisitions and carry sites whose trading performance varies widely. Groups are turning to CVAs to reduce costs, agree landlord compromises and put the business on a sustainable footing. Recent examples include:

• Turtle Bay, the Caribbean restaurant brand, had its CVA approved by around 92% of voting creditors by value in July 2026, closing four sites and varying terms on 15 more. Twenty-nine sites remain unaffected
• Franco Manca, the pizza chain, secured over 90% approval by value in May 2026, covering the closure of 16 of around 70 sites
• Leon, the natural fast-food chain, had its CVA approved unanimously in May 2026, removing a number of underperforming sites and enabling it to exit administration with 43 restaurants, including 23 franchises.

Landlords are conceding, but with sharper elbows than in 2020 and 2021, when the pandemic-era wave of retail and casual dining CVAs pushed most of the compromise onto them. The comfortable approval margins seen this year reflect pre-launch negotiation, careful advice and thorough preparation from the business before a proposal is launched.

How we can help

The pressures facing firms shift the conversation to rethinking how hospitality businesses operate, protect margins and sustain performance.

Early intervention matters, whether a business is facing short-term cash flow pressure, profitability concerns, refinancing or covenant compliance issues. The options narrow sharply as liquidity tightens, and what separates a consensual outcome from a formal one is usually how early the conversation starts.

Grant Thornton's Turnaround & Restructuring team works with operators, lenders, landlords and investors across the consumer and hospitality sectors. We help management teams assess financial performance, manage stakeholder relationships and identify the options available, from operational and financial improvement and new external investment through to a CVA, a pre-pack administration or a restructuring plan. 

If you would like to discuss how we can support you, please contact Philip Stephenson.