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Restaurant Market Growth Remains Behind Pubs as Outlet Decline Hinders Recovery

The UK restaurant market is forecast to reach a value of £18.7 billion in 2023, marking a growth of 5.2% and positioning the sector 2.6% behind its pre-pandemic value, latest research from Lumina Intelligence UK Restaurant Market Report has shown.

Although operators are struggling to boost volumes, penetration has remained flat-year-on-year ‒ seeing restaurants lose share of the total eating out market and leaving growth behind that of pubs & fast food outlets. Restaurant players are, inevitably, more exposed to the impacts of cautious consumer spending, rising staff costs with the new national living wage, and ongoing cost hikes for food, ingredients and drinks.

The unsettling decline in the number of outlets continues to dampen recovery in the restaurant market, with an average of eight sites each week forecast to close in 2023. This equates to a total of 27,020 site closures ‒ around 4,000 fewer than in 2018. Challenging trading conditions are not the sole cause of these closures: overexpansion in some areas of the restaurant market has also played a part.

In 2023, closures are being driven by independents, as branded restaurants are navigating the challenging conditions more successfully. Indeed, this segment is predicted to achieve value growth of 9.0% in 2023 and set to open a modest, yet significant 1.1% more outlets.

Brands are adapting by driving recovery with more mergers & acquisitions activity, making operational efficiencies and aligning themselves with consumer trends in products and experience. Restaurant menu management tactics are evolving to balance consumer demands with cost control as operators must, of course, navigate price increases without deterring customers. Menu price inflation, a boost in meat-free dishes and lower-calorie additional courses are key menu strategies in 2023. Using premium ingredients, exploring ‘kitchen tourism’ to appeal to the appetite for international cuisine, and adding more ‘veggie-centric’ dishes are leading trends across menus.

As the economy continues to recover the future looks brighter, with a market value of £19.5 billion forecast for 2026 ‒ underpinned by a continuing stronger performance from branded restaurants. Over the next three years, interest rate reductions and average earnings outpacing inflation are expected to boost consumer spending power. However, restaurant market growth is forecast at 1.4%, sitting behind the total eating out market growth of 2.6%.