Restaurants face labour and cost pressures, but growth remains on the menu

With rising costs and staffing pressures, the UK’s hospitality industry continues to face a storm of difficulties in 2026, yet optimism hasn’t disappeared just yet.

Research carried out by restaurant POS provider Toast — in partnership with business solutions provider Expert Market — reveals that while costs and labour challenges remain a significant concern for restaurant businesses, a large majority of business owners believe that some form of growth is possible in the year ahead.

This cautious confidence suggests that businesses are adapting their strategies — focusing less on survival alone and more on building long-term resilience.

Staffing and other issues continue to persist in hospitality

Hospitality firms are continuing to battle rising costs and labour shortages, particularly following the rise in employer National Insurance Contributions (NICs) and hiked business rates announced in the Government’s Autumn Budget.

Unsurprisingly, inflation is hitting businesses, too. According to the UK Restaurant Industry Predictions 2026 report by Toast and Expert Market — which surveyed 400 restaurant owners — 50% of firms believe rising ingredient and energy costs will be the biggest challenge to face this year.

Meanwhile, labour shortages are an ongoing problem, with 60% of businesses expressing their concerns about the reduced level of hirable employees. With the unemployment rate hitting 5.1% in the UK — the highest since the COVID-19 pandemic — jobs in hospitality have declined every month since October 2024, according to research reported by Bitget.

And with the Government’s business rates support package only applicable to pub venues, restaurants are continuing to face further cost difficulties. These pressures have pushed hundreds of businesses to close in the last year, with 382 less licensed premises at the end of December 2025 compared to three months prior — equating to four closures per day.

Restaurants remain optimistic about growth

Despite the bleak outlook and ongoing difficulties, a large share of restaurant owners expect their businesses to grow over the next year.

The Toast report indicates that 71% of businesses expect growth overall, including 51% predicting moderate growth and 20% anticipating significant growth.

And while labour shortages have persisted, further research by Toast and Expert Market into staff satisfaction reveals that clear career development, competitive salaries, and company benefits like flexible working are important factors to avoid staff turnover.

“A shortage of experienced staff has long been a feature of the restaurant industry.” Chris Mallard, Editor of Expert Market, told Restaurant Online.

“The hard work and unsociable hours don’t appeal to everybody, so it’s good to see that operators are thinking about this and coming up with ways to professionalise the career to attract and keep employees.”

What should restaurants prioritise in 2026?

While 2026 shows no shortage of challenges for restaurants, many are responding by adapting rather than retreating — changing their focus from simple expansion to the things that keep their customers coming back.

For example, Toast’s report states that 31% plan to improve customer experience. This could be something as simple as creating a unique atmosphere, utilising POS technology for more efficient ordering or introducing personalised services – all things that produce a sense of connection that big chains can’t easily match.

“The focus for restaurants should be on creating dining experiences that are memorable for more than food alone.” Edward Brunet, Founding Director at Le Bab, told Toast. “It’s all about hosting guests, rather than simply serving them.”

Additionally, with 53% of hospitality businesses already using AI technology, this is set to become the norm for operations. Whether it’s tracking sales, managing inventory, or cutting down on admin to free up more time for staff, AI can help your business run more efficiently and give your team increased time to focus on serving customers. Ultimately, it’ll have a positive impact on both retention and loyalty. 

With 50% of consumers both eating out and ordering food at least once a week, delivery and off-premise dining are becoming increasingly relevant. In fact, restaurants view it as somewhat (47%) or extremely (41%) important, which is a clear indicator that businesses should treat these options as a core part of their offering. Doing so will support both profitability and customer expectations.

Discover the the ales and ails of hospitality

Planet of the Grapes founder Matt Harris has over 25 years of experience in hospitality. Read his bi-monthly column for Startups now.

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