Turning The Tables: How UK Restaurants And Bars Can Thrive In 2025, And What Lies Ahead In 2026

By Mark Edwards, audit partner and head of Leisure & Hospitality at BDO (https://www.bdo.co.uk)

The UK’s restaurant and bar sector stands at a pivotal moment. As 2025 unfolds, operators are navigating a landscape marked by economic headwinds, rising costs and evolving consumer expectations. Yet even amid these challenges, opportunities abound for those prepared to adapt, innovate and put guests at the heart of everything they do.

One thing is clear: operational excellence has never been more important. Labour costs continue to climb, especially after April’s National Insurance and National Minimum Wage increases, squeezing already thin margins. And while the upcoming UK GAAP changes from 2026 will lift EBITDA figures on paper, these accounting shifts won’t translate into additional cash flow. Businesses must keep a close eye on every pound spent, manage cashflows rigorously and plan ahead to avoid pinch points around payroll and tax liabilities.

At the same time, the dining experience is evolving rapidly. Today’s consumers – especially younger generations – want more than just a meal. They crave immersive, memorable experiences worth leaving home for. Experiential dining concepts are flourishing, from pop-ups with themed storytelling to venues offering interactive service. Restaurants that surprise and delight guests, creating moments that resonate long after the bill is paid, will earn loyalty and stand out in a crowded market.

Sustainability is no longer a nice-to-have; it’s an expectation. With the Simpler Recycling initiative in effect since April 2025, restaurants employing 10 or more staff need to separate food waste, reflecting wider societal priorities. Consumers are increasingly aware of their environmental footprint and expect businesses to share these values. Simple actions – sourcing ingredients locally, reducing waste through smarter inventory management, or designing flexible portion sizes – can strengthen a brand’s reputation and foster deeper community connections.
Meanwhile, data is a powerful tool for those who know how to use it.

Understanding what drives guests to return, how they interact with your menus or which marketing campaigns resonate best allows operators to tailor experiences and offers with precision. Insights from loyalty programmes, booking platforms and point-of-sale data help identify patterns and anticipate shifts in demand. In an environment where consumer habits can change quickly, data-driven decisions are essential to staying ahead.

Technology, including artificial intelligence, is proving to be an enabler, but it should never replace the human touch. AI tools can forecast inventory needs, reduce food waste and optimise staff scheduling, while digital ordering systems can streamline service. Yet it’s the personal touches – staff remembering a regular’s favourite dish or going the extra mile to accommodate dietary needs – that build loyalty and create stories guests want to share. Technology should support, not supplant. At the heart of hospitality is genuine human connection.

Labour remains a central challenge. Staff turnover is costly and can erode both service quality and profitability. Businesses must focus on creating workplaces where employees feel valued, offering clear opportunities for progression and supporting wellbeing. Investing in people isn’t just good practice; it’s a competitive advantage in a market where retaining skilled staff is increasingly difficult.

The appetite for M&A will continue shaping the industry. Despite current uncertainties, investors remain keen on scalable, differentiated concepts with strong fundamentals. This is evident in deals like Wingstop’s £400 million UK acquisition. However, only businesses with resilient operations, solid unit economics and a clear vision for growth will attract meaningful investment.

Smaller operators should focus on refining their brand identity and operational consistency, whether aiming to attract partners or strengthen their standalone position.

Even amid these pressures, there are signs of underlying consumer resilience. Dining out remains deeply embedded in British social life and many consumers see it as essential rather than a luxury. Younger diners, in particular, are keen to spend on unique, memorable experiences, offering opportunities for operators who can adapt quickly to emerging trends.

2026: Stability on the horizon, but challenges remain

Looking ahead to 2026, there are cautious signs of stabilisation in the market. A potential fall in base interest rates could begin to ease debt servicing costs, providing much-needed breathing space for operators burdened by loans taken during the pandemic. Alongside this, gradual improvements in real wage growth and more stable inflation may help restore consumer confidence and lift discretionary spending on leisure and dining.

Yet competition will only intensify as established brands and new entrants vie for attention with innovative concepts and fresh formats. To stay relevant, operators will need to remain agile, continually refining menus, service models and marketing strategies. Those who fail to evolve risk losing ground to faster-moving competitors.

M&A activity is likely to remain robust through 2026, with well-capitalised investors seeking opportunities to acquire strong UK operators at attractive valuations. Businesses that have laid the groundwork through sound cash management, strong brand positioning and investment in staff and technology will be best placed to secure funding and expand. Independents, meanwhile, may face mounting pressure, underlining the importance of efficient operations and a distinct brand identity.

Regulatory developments will continue to reshape the sector. New standards on sustainability and employment practices are expected to emerge in 2026, embedding environmental and social responsibility deeper into hospitality operations. Staying ahead of these changes will be essential for maintaining compliance and protecting brand reputation.

Technology adoption will also accelerate further. AI and automation will become increasingly commonplace, helping operators reduce costs, personalise experiences and improve operational efficiency. Yet even as technology reshapes back-of-house processes, the front-of-house magic must remain firmly rooted in authentic human connection.

In summary, 2025 demands resilience, focus and innovation. By sharpening operations, embracing sustainability, harnessing data and delivering exceptional guest experiences, operators can not only weather current challenges but lay the foundation for growth. As 2026 approaches, those who adapt proactively and keep people – both guests and staff – at the centre of their strategy will be best positioned to thrive in a market that promises both opportunities and ongoing tests of agility.

Read BDO’s new Restaurant and Bars 2025 report in full here: Restaurants and Bars Report 2025 – BDO