The UK’s hundred largest restaurant groups sold more food last year and kept less money. Turnover rose 3% to £13.3bn. Combined profit fell 44%, from £365m to £204m.
The research, compiled by the accountancy firm UHY Hacker Young from accounts filed up to 30 June 2026, describes profitability nearly halving across the sector in a single year.
Growth and collapse in the same set of accounts is unusual enough to be worth pausing on. These are not businesses losing customers. They are businesses whose additional customers arrived carrying costs that exceeded what they paid.
A Sector Running on 1.5%
Do the division and the number that emerges is the one that matters. £204m of profit on £13.3bn of turnover is a net margin of roughly 1.5% across the whole hundred.
That is thinner than a supermarket, and a supermarket does not have to cook anything. It means the sector is keeping about a pound and a half from every hundred pounds spent in its restaurants, after everything.
A margin that thin has an important property: it removes the buffer between a modest cost increase and a loss. A business at 10% can absorb a 2% cost rise and remain profitable. At 1.5%, the same rise is fatal, and no amount of operational excellence changes that arithmetic.
It also explains why the sector’s problems arrive so suddenly. There is no gradual erosion visible in the accounts of a 1.5%-margin business, because there is nothing to erode gradually. It is profitable, and then it is not.
Where the Growth Went
Martin Jones, a partner at UHY Hacker Young, was direct about the mechanism: rising costs have “absorbed all the benefits of increased turnover and then some”.
The specific increases he identifies are the National Minimum Wage, employers’ National Insurance contributions, higher business rates, and continued inflation in food and energy. Three of those four are set by government rather than by the market.
That is what makes this different from an ordinary cost squeeze. A restaurant facing rising beef prices can change the menu. A restaurant facing a higher employers’ National Insurance rate cannot change anything except the number of people it employs, and hospitality is not a business you can run with fewer of them.
The effect compounds because restaurants are unusually labour-heavy. Payroll is typically the largest single line in a restaurant’s costs, so a percentage increase applied to employment lands with more force here than in almost any other sector.
Six Ingredients That Beat Inflation
Food price volatility exacerbated the pressure, and the research names the culprits: olive oil, beef, chocolate, coffee, eggs and pasta all rose faster than general inflation.
Read that list as a menu rather than a commodity table. Olive oil, pasta and beef between them describe most of Italian and steakhouse dining. Coffee and chocolate cover the entire cafe and dessert trade. Eggs are in the breakfast service.
This is why headline food inflation understates the problem for an operator. A restaurant does not buy the average shopping basket; it buys a concentrated set of inputs determined by its concept, and if two of them spike there is no substitution available without changing what the restaurant is.
A menu redesign is also slower and more expensive than it sounds. New dishes need costing, testing, staff training, printing and marketing, and the change is visible to customers who chose the restaurant for the dish being removed.
Getting People Through the Door Is Not Enough
The most quotable finding is that demand is not the failure point.
“A lot of individual restaurant companies are showing they can attract customers,” Jones said, “but turning those sales into profit has become far more difficult.” He added that operators “are now finding that simply getting more people through the door is no longer enough” and must “work much harder to protect already thin margins”.
That inverts the usual hospitality story. The industry’s standard problem is empty tables, and the standard response is marketing, discounting and delivery partnerships to fill them. This dataset says the tables filled and it did not help.
For an operator the strategic implication is uncomfortable, because most of the available management levers point at volume. Filling a covered table at a negative contribution margin makes the accounts worse, not better, and that is a genuinely hard thing for a hospitality business to accept.
Value and Fine Dining Are in the Same Squeeze
The composition of the sample matters, because it rules out the easy explanations.
The hundred includes Loungers UK, which operates Cosy Club, The Restaurant Group behind Wagamama and Barburrito, Lemon Pepper Holdings which runs Wingstop UK, and Gordon Ramsay Restaurants with Bread Street Kitchen, Street Pizza and Street Burger.
That range spans fast-casual chicken to celebrity fine dining, with high-street all-day dining and pan-Asian chains in between. If the squeeze were about positioning, one end of that range would be doing well.
Neither does scale rescue anyone. These are the hundred largest groups in the country, with the best purchasing terms, the most sophisticated systems and the deepest management. The 44% fall is what happened to the operators best equipped to avoid it.
Why a Tax Rise Lands Harder Here
Three of the four cost drivers identified are policy decisions, and the way they interact with this sector is worth setting out, because it is not the same as the effect on a typical business.
Employers’ National Insurance is charged on payroll. The minimum wage sets the floor for that payroll. Business rates are charged on premises. A restaurant is, structurally, a lot of people working in an expensive room, so it is exposed to all three at once and to each of them more than most.
Compare it with a business of the same turnover in software or professional services. Fewer staff per pound of revenue, cheaper premises per pound of revenue, and a margin measured in double digits. The same three increases applied to that business produce a noticeable but survivable dent. Applied here, against 1.5%, they produce the 44%.
This is not an argument that the increases were wrong. There are reasonable cases for a higher minimum wage and for taxing employment, and this sector employs a great many people at the lower end of the pay scale, which is precisely the group those policies are designed to help.
It is an argument that the incidence is uneven in a way the headline rate conceals. A percentage-point increase in employers’ National Insurance is not a uniform cost across the economy; it is a small charge on capital-intensive businesses and a large one on labour-intensive ones.
The visible consequence is who closes. When the sector adjusts, it does so by shedding the sites and the jobs that were marginal, which are disproportionately the entry-level roles in the towns with the thinnest trade.
The Same Arithmetic Is Closing Estates
This data explains decisions elsewhere in the sector that look drastic in isolation.
Whitbread is closing its entire branded restaurant estate, and the numbers behind it fit this pattern precisely: exiting up to £160m of food and drink sales costs only £10m of profit. That is a division running at almost exactly the margin this research describes, which is why it could be closed without much affecting the bottom line.
The pressure runs down the supply chain too, where independent brewers cannot get into 62% of their own local pubs because operators under margin pressure consolidate supply to whoever offers the best terms.
And it explains the political salience of business rates. A 20% cut was granted to pubs, clubs and live music venues; at a 1.5% net margin, a rates reduction of that size is not a gesture but a meaningful change to whether a site trades at all.
What a 1.5% Margin Cannot Survive
The forward question is what happens at the next increase, whatever its source.
A sector at 1.5% has no capacity to absorb another employment cost rise, another energy contract renewal at a higher price, or another commodity spike in one of its six named ingredients. Any of those individually is enough to take the aggregate figure to zero.
The responses available are all unattractive. Raising prices in a market where consumers are visibly managing their budgets risks the volume that is currently holding up. Cutting staff degrades the service that justifies the price. Closing sites is what the accounts eventually force, and it is already happening at the top of the market.
For anyone operating in or supplying this sector, the number to work from is not the 44% headline but the 1.5%. It says the industry has no margin for the next surprise, and that the businesses most likely to survive the coming year are the ones already modelling what they do when the surprise arrives rather than hoping it does not.
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