Hospitality faces ‘finely balanced’ winter as cost pressures persist

The UK’s hospitality sector has entered the winter trading period on “finely balanced” footing, according to new analysis from OakNorth, which warned operators continue to face structural cost pressures and subdued mid-week demand.In its December Sector Pulse, covering the six months to 31 October 2025, OakNorth said inflation had firmed again after easing earlier in the year, driven by wage, insurance and business-rate pressures. 

Consumer demand remained steady in the first three quarters of 2025, supported by lower utility bills and selective real-income growth, but the lender said policy uncertainty ahead of the Autumn Budget left many operators hesitant to expand.

OakNorth found that F&B operators delivered mixed results through the summer, with pubs enjoying strong trading during major sporting events but many full-service restaurants and bars struggling to maintain momentum in mid-week and late-night periods. 

Investment activity also normalised from 2024 highs, with capital remaining available for well-branded and efficient assets, while secondary sites continued to face pricing pressure.

The lender said value remained the primary driver of demand across the sector, with 39% of adults citing accommodation cost as a barrier to booking and 48% identifying overall trip cost as their main concern. Residential pubs outperformed city-centre bars, supported by hot weather and major sporting events including the Women’s Euros, Wimbledon and the British and Irish Lions tour. 

Major operators increased investment in automation, forecasting and self-service technology to offset wage inflation. Quick-service restaurants continued to outperform the wider food service market through value bundles and loyalty platforms, while casual dining and full-service venues, affected by soft footfall and higher fixed costs, experienced more than two closures per day in the first half of the year.

Looking ahead, the lender said the sector faces a “cautious” winter as inflation is forecast to hover around 4% and fiscal tightening risks constraining discretionary income. 

It expects operators to prioritise tactical pricing, flexible staffing and short booking windows into 2026. Pubs are forecast to enjoy a solid festive period, supported by Christmas gatherings and sporting events such as the men’s Ashes, though energy and excise duty inflation will continue to weigh on margins.

Ben Barbanel, chief lending officer at OakNorth, said the past six months had shown the sector’s “remarkable adaptability”, highlighting performance among pubs, restaurants and quick-service operators.

He said: “The past six months have demonstrated the sector’s remarkable adaptability, from the strong summer performance of pubs and restaurants, supported by major sporting events and great weather, to the continued success of innovative operators in quick-service and casual dining.

“We back experienced operators and developers who have clear strategy, operational discipline, and the foresight to adapt to evolving consumer behaviour. As we move into the festive period, we’re particularly encouraged by the resilience of pubs and bars, which continue to play a vital role in their communities and remain a cornerstone of UK social life.”