Hospitality in the UK: industry profile

Hospitality remains one of the UK’s most economically important, labour-intensive and locally embedded industries, but it faces a number of challenges.

Data from the Office for National Statistics show that in 2025, the accommodation and food services sector comprised 176,685 businesses (up slightly on the previous two years), thus accounting for around 6.5% of VAT- and/or PAYE-registered UK businesses. The sector supported 2.6m jobs in September 2025 and generated £69.6bn of GVA in 2023, equivalent to approximately 7.1% of employment and 2.8% of UK economic output. The industry is dominated by smaller operators: 99.6% of hospitality businesses are SMEs, while 97.7% are small businesses.

Employment in the sector, though substantial, remains relatively low-paid. In 2025, median full-time hourly pay excluding overtime was £14.04 in hospitality, compared with £19.67 across the economy. The workforce also contains higher proportions of younger, part-time, foreign-born and minority ethnic workers than many other sectors.

Geographically, enterprise numbers are concentrated in England, especially London, the South East and the North West. Nevertheless, hospitality makes a significant contribution to the economic output of every country and region in the UK, accounting for between 2% and 4% of total output in each area.

Despite the pressures often associated with the sector, its enterprise base has expanded substantially over the longer term, rising from roughly 130,000 businesses in 2010 to about 175,000 by 2022, before broadly levelling off. Business formation has also generally exceeded closures; in 2024, for example, around 30,000 accommodation and food services businesses were created, compared with approximately 26,000 closures.

However, many parts of the industry have faced difficult trading conditions in recent times, with certain segments being hit particularly hard. The pub market, for instance, has endured a prolonged structural contraction — according to the British Beer and Pub Association (BBPA), there were 44,650 pubs in 2025, down from 45,000 in 2024, 45,350 in 2023, 55,400 in 2010, and 60,800 in 2000. (Though there are signs of selective investor appetite in this area, particularly for pubs with accommodation, diversified income streams and wet-led formats offering stronger margins.)

NIQ’s April 2026 Hospitality Market Monitor points to a contraction in Britain’s licensed hospitality market in Q1 2026, with 305 net site closures and no major segment recording quarterly growth. Cost pressures, weak consumer confidence and constrained discretionary spending continue to weigh on operators.

Below, we explore some of the key issues and trends currently affecting the industry in more detail.

The UK hospitality industry is often treated as being equivalent to SIC Section I, "accommodation and food service activities". This section is split into two divisions: accommodation, and food and beverage service activities. These are outlined below.

The accommodation segment is led by hotels and similar accommodation, ranging from budget and economy hotels through to mid-market, premium and luxury establishments. It includes large branded hotel groups, boutique and independent hotels, aparthotels, resort hotels, motels, guesthouses and bed-and-breakfasts. Many operators also form part of the wider visitor economy, with accommodation often combined with restaurants, bars, spas, leisure facilities, meeting rooms, conference space or wedding and events venues.

Beyond hotels, accommodation also includes holiday and other short-stay accommodation, such as serviced apartments, self-catering cottages, holiday lets, youth hostels, and so on.

A further sub-segment comprises camping grounds, recreational vehicle parks and trailer parks. Here, operators range from small rural independents to larger holiday park groups, with the latter often combining accommodation with leisure, food and beverage, retail and entertainment.

There is also a smaller “other accommodation” category, covering forms such as boarding houses, workers' hostels, and railway sleeping cars.

This segment comprises three broad areas. The largest is restaurants and mobile food service activities, covering much of the eating-out market, including licensed and unlicensed restaurants, cafés, fast-food outlets, takeaway food shops, delivery-led operators, food stalls and mobile food stands. Here, there are various commercial sub-categories, including full-service restaurants, casual dining, fine dining, fast-casual formats, quick-service restaurants, and so on.

The segment also includes event catering and other food service activities, covering catering for events such as weddings, conferences, and festivals, as well as industrial catering (eg, for office canteens) and food concessions at sports and similar facilities.

The third main area is beverage serving activities, which includes pubs, bars, and licensed clubs. In practice, this sub-segment often overlaps with the restaurant category. Within the pub market, for instance, there are wet-led pubs, where drinks sales dominate; food-led pubs, where meals are a significant revenue stream; and hybrid pub-restaurant formats.

Across much of the hospitality sector, operators are contending with high costs and weak margins, leading many facing an elevated risk of closure.

Labour costs represent perhaps the most acute pressure point. Recent increases to National Minimum Wage rates, together with higher employer National Insurance contributions, are raising payroll costs in a sector where low-paid roles are comparatively common. 24.6% of hospitality employee jobs were covered by the minimum wage in 2025, up from 21.8% in 2024, making statutory pay rises especially significant. 

Business rates are adding to the strain. Changes introduced in April 2026 materially increased rateable values for many hospitality properties, especially pubs and hotels. Lower multipliers and some targeted reliefs have cushioned the impact somewhat, but many businesses still face an increase in their tax bill as a result. A key theme emerging from the Institute of Hospitality’s 2025 Budget survey was the industry's strong desire for business rates reform, relief extensions, or sector-specific caps.

Energy costs are also a significant issue. Non-domestic electricity and gas prices have fallen from their 2023 peak, but they remain far above pre-crisis levels, and conflict in the Middle East could lead to significant new price rises during 2026. In an ONS survey of hospitality firms’ main concerns for May 2026, energy prices ranked highest, with 16.1% of businesses highlighting them as their top concern.

UKHospitality modelling suggests that, without sector-wide support, increasing cost pressures and higher business rates could drive an average of six daily closures across hotels, restaurants and pubs in 2026. Recent high-profile closures include Beefeater and Brewers Fayre pub sites, and several Franco Manca restaurants.

The sector is facing a more demanding compliance landscape, adding to operational pressure at a time when many operators are already contending with tight margins and elevated costs.

Employment-related compliance is a growing risk area. From April 2026, businesses using temporary labour through umbrella-company arrangements face greater exposure where employment taxes have not been properly accounted for, with joint and several liability increasing the need for checks on labour suppliers. Meanwhile, the creation of the Fair Work Agency also sharpens enforcement, bringing together a range of employment-rights enforcement functions, with powers to inspect premises, review records, require arrears to be paid and impose significant penalties. In this context, robust payroll controls and accurate workforce records are vital.

Operators are also adapting to the Employment (Allocation of Tips) Act 2023, which has increased the need for transparent tipping policies, reliable record-keeping and fair distribution processes. In addition, the phased introduction of measures included in the Employment Rights Act is set to add further obligations around guaranteed hours, sick pay, shift cancellation payments, and more.

Other regulatory changes will affect specific parts of the industry. Martyn’s Law will require many venues, especially larger premises, to strengthen security planning, procedures and staff training. Larger brands may also need to adjust their advertising practices in light of the new HFSS restrictions which came into force in January 2026.

That said, well-run hospitality operators may experience some relief around food law enforcement, with the updated Food Law Codes of Practice (published in October 2025) encouraging a more proportionate, risk-based approach.

According to UKHospitality, the hospitality market is increasingly oriented around two poles: fast, tech-enabled convenience models on the one hand, and distinctive, experience-led propositions on the other. This, they say, is leaving traditional mid-market operators under pressure to adapt: "offering only a standard meal or drink without the edge of speed or the charm of experience is dwindling in demand". 

Recent BDO research suggests that consumers are still willing to spend, but that their visits to restaurants, bars and pubs are becoming more intentional and considered. As a result, value, service quality and clear differentiation are becoming more important. Many operators are responding with events, entertainment, collaborations, themed experiences and more visually distinctive interiors, whilst also investing in app-based loyalty schemes, partnerships with delivery platforms, and branded retail extensions.

Health and lifestyle changes are also impacting demand. Low- and no-alcohol drinks have moved further into the mainstream, whilst health and diet trends are now directly influencing restaurant choice. Pubs are also exploring daytime usage, including coffee-led trade and “pub desking”, alongside more established social and occasion-based visits.

Hotels face a similar imperative to broaden or adapt their offerings. According to PwC, the market is becoming more clearly split between newly repositioned or branded assets, and older stock that risks underperforming on both occupancy and rate. Operators are thus being pushed to make better use of their assets. Key trends include revenue diversification (through memberships, bundled experiences, wellness packages, and so on), alongside investment in new accommodation formats such as compact rooms, high-density models, and branded residences.

Here, there is a clear opportunity for hospitality operators to obtain a higher spend per visit and capitalise on stronger experience-led demand. A key challenge, however, is that adapting to changing demand and asset-use patterns may require an increase in capital investment, recruitment of specialist staff, tighter risk management, and greater operational complexity.

Planning and licensing remain a significant source of friction for many hospitality operators, particularly pubs, bars and late-night venues. Recent disputes (such as that relating to The Sekforde, in Clerkenwell) have shown how vulnerable businesses can be to licence reviews, noise complaints and local objections, with some premises facing the threat of closure even when they are long-established parts of their neighbourhoods.

However, reform is now moving up the policy agenda. Government proposals outlined in a January 2026 House of Lords Library briefing seek to create a more supportive planning and licensing framework for hospitality and leisure businesses. The new National Licensing Policy Framework, although non-statutory, encourages local licensing authorities to take decisions that are fair, proportionate and sensitive to the wider economic and community value of venues. This includes avoiding blanket restrictions and refraining from imposing conditions which are "unnecessarily burdensome".

The proposed changes also seek to reduce the cost, complexity and delay involved in opening or operating hospitality premises. Measures include making it easier to convert vacant shops into cafés, bars or restaurants, fast-tracking permissions for outdoor dining and extended hours in designated “hospitality zones”, and strengthening protections for existing pubs, clubs and music venues where new residential developments are built nearby.

Although, as David Chaplin (chartered accountant and chairman of the Chaplin Hotel Group) has stressed, hospitality remains "a sector run by people for people", artificial intelligence (AI) is playing an increasingly important role in parts of the industry.

In hotels, the discussion is increasingly focused on agentic AI: systems able to connect and coordinate functions such as housekeeping, guest requests, distribution, pricing, procurement, payments and routine back-office administration. One key theme of the Hotel Yearbook 2026 is that operators which leverage such technologies will be better placed to reduce labour pressures, strengthen margins and deliver a more consistent guest experience.

A key constraint, however, is data infrastructure. Businesses are faced with the challenge of marshalling fragmented hotel data — across PMS, CRS, RMS, guest messaging, payments and other systems — into a form AI can understand and act upon. Legacy technology is therefore becoming a strategic limitation, not simply an administrative nuisance.

In restaurants and pubs, meanwhile, AI is already being used to speed up sales tracking, inventory management and other day-to-day tasks, whilst discovery is emerging as another important use case. OpenTable research suggests that 36% of Brits expect to use AI tools more often to find and book restaurants in 2026. This reinforces the importance of making menus, opening hours, locations and contact details accurate, consistent and machine-readable across digital platforms.

Business rates are perhaps the most controversial aspect of the current tax landscape for the UK hospitality sector.

From April 2026 new rateable values apply in England and Wales, and in Scotland. Meanwhile, revised multipliers have been introduced England and Wales, with Scotland reducing its three existing poundage rates. Certain reliefs have also been withdrawn or reduced. (Northern Ireland has seen less change for 2026-27, with existing support measures having been extended and the revaluation process paused.)

These changes have reshaped the rates burden for hospitality premises. In many cases, the new lower multipliers have not fully offset valuation increases and the end of temporary relief, leaving many facing increased bills. Some support – such as the Pubs and Live Music Venues Relief in England and Food and Drink Hospitality Rates Relief in Wales – is available to certain venues, however.

This remains one of the sector’s most prominent reform priorities. UKHospitality has warned that many venues may close if the government does not go further in its reform of the business rates regime.

Hospitality supplies are generally subject to the standard 20% VAT rate, after Covid-era relief — 5%, then 12.5% — ended in March 2022. The zero-rating of some cold takeaway food complicates the picture somewhat, however.

HMRC has issued VAT Notices pertaining to food products, catering and takeaway food, and hotels and holiday accommodation.

Sector bodies such as the British Beer and Pub Association (BBPA) have called for a permanent or renewed reduced rate, arguing it would cut prices and support demand, jobs and investment. Thus far, the government has resisted these calls for reform.

From 6 April 2025, the rate of employer NICs rose from 13.8% to 15%, while the secondary threshold fell from £9,100 to £5,000.

Although the Employment Allowance is worth up to £10,500, this increase has imposed significant additional costs on many hospitality businesses, given the labour-intensive nature of much of the sector.

Alcohol Duty now broadly taxes drinks by strength, with lower rates for draught products and small producer relief. Non-draught rates and draught rates both rose in February 2026.

Draught relief provides some support for pubs and similar businesses, but the BBPA have called for further reform of the alcohol duty regime to “better incentivise consumption of lower strength beverages and support pubs”.

Also known as "tourist taxes", overnight visitor levies are an important emerging issue for accommodation providers.

As of May 2026, there is significant regional variation in this regard. Scotland is furthest ahead: Edinburgh will charge 5% on paid accommodation, capped at five nights, from 24 July 2026; Glasgow is set to follow with a 5% levy from 25 January 2027. Wales has legislated for local levies from April 2027 at the earliest. England is developing mayoral levy powers, but primary legislation is still needed. For now, Northern Ireland has no equivalent.

For hospitality, such levies may be a double-edged sword: whilst they will fund destination infrastructure, they may give rise to additional costs, pricing complexity and demand risk.

The size and diversity of the UK hospitality industry means that any list of notable players will not be fully representative or comprehensive.

That said, some examples of noteworthy players are set out below.

• Compass Group UK & Ireland – foodservice giant whose Levy arm caters major sports, entertainment, exhibition and event venues.
• Costa Coffee – leading coffee-shop chain combining cafés, drive-through and Costa Express machines.
• Dishoom – well-known UK restaurant group positioning its sites as a homage to Bombay food culture, aligned to premium-casual demand and experiential dining.
• Domino’s Pizza Group – takeaway pizza leader with a digitally led delivery model.
• Greggs – food-to-go leader expanding beyond bakery roots into breakfast, delivery, evening trade and travel locations.
• Greene King – major pub retailer and brewer with thousands of pubs, restaurants and hotels nationwide.
• J D Wetherspoon – value-led pub chain with a distinctive estate, app ordering and national high-street presence.
• Mitchells & Butlers – managed pub and restaurant operator behind Toby Carvery, Harvester, Miller & Carter and All Bar One.
• Puttshack UK – tech-enabled mini-golf and cocktails concept exemplifying the growth of “competitive socialising” and experience-led venue formats.
• Red Engine – operator behind global competitive socialising brands Flight Club and Electric Shuffle, representing the bar-led experiential segment.
• Stonegate Group – the UK’s largest pub company, with a portfolio of 4,500+ sites; some are managed, others are leased and tenanted.
• Travelodge – budget hotel specialist with over 600 hotels and strong UK regional coverage.
• Whitbread – major hotel operator and the owner of Premier Inn, the UK's biggest hotel brand.

ICAEW’s Library & Information Service can provide information on UK and Irish participants in the hospitality industry via its wide range of company information services. This includes:

• Information on company acquisitions in the sector
• Private company transaction multiples
• Company data
• Beta values for companies and the sector
• P/E ratios for companies and the sector

For more information, please contact our enquiry team on +44 (0)20 7920 8620 or at library@icaew.com to discuss your requirements.

• Bed and Breakfast Association (BBA)
• British Beer and Pub Association (BBPA)
• British Institute of Innkeeping (BII)
• British Sandwich and Food to Go Association
• HOSPA - Hospitality Professionals Association
• Hospitality Action
• Institute of Hospitality
• Licensed Trade Charity (LTC)
• National Federation of Fish Friers (NFFF)
• Nationwide Caterers Association (NCASS)
• Night Time Industries Association (NTIA)
• Northern Ireland Hotels Federation (NIHF)
• UKHospitality

• European Hotel Managers Association (EHMA)
• HOTREC – European Hospitality
• International Hotel and Restaurant Association (IH&RA)