New report predicts a brighter than anticipated future for foodservice

A new report comprising 150 pages of detailed analysis, data, forecasts, macro-factors and trends and entitled The Next 5 Years – 2025 to 2029, which forecasts that the UK Foodservice market will achieve growth in 2025, will come as some surprise, as expectations are for a significant decline as a result of tax and cost increases.

However, Future Foodservice the forecast and advisory business that produced the report predicts that growth will come from consumers having a greater ability to spend and from operators meeting their demands with new and exciting concepts, although it accepts that growth does mask significant structural changes in the market.

The author of the report, Simon Stenning, a leading forecaster, analyst and commentator on the UK hospitality/foodservice market, explains: “The hospitality/foodservice industry continues to face enormous challenges with increasing costs of labour and higher costs of doing business.

“We have to be cautious with our positive message in this report, as we recognise that not all businesses will survive the challenging conditions.”

“It is easy to point out the opportunities from being creative, innovative and from investing in new concepts, however there are many operators who struggle to see what the future looks like after April. What we forecast is that attracting consumers is the key to success, and that there will be many operators who do, and will continue to do so over the course of the next 5 years.”

Stenning continues “There are significant concerns within the industry as to the impacts that tax and cost increases will have on profitability and viability of hospitality businesses, quite understandably, and this report details how independent operators will struggle to continue, leading to losses of pub and restaurant outlets. And yet, our forecasts in this report are for the market to grow in 2025 and onwards to 2029.”

The nitty gritty

The report forecasts total market growth of +2.4% in 2025. This will take the eating and drinking out of home market (excluding accommodation) to a total valuation of £105.3bn, a £2.4bn increase on the sizing of the market at the end of 2024.

It has to be acknowledged that this forecast is lower than previously outlined, as the impacts from the new Government messaging from July, and the October budget have dragged down the economy and the potential profitability for all businesses.

Future Foodservice also recognises that it is going to be a hellish period for all operators, and their suppliers, manufacturers, and wholesalers, having to deal with the significant tax and cost increases coming through – it isn’t going to be easy.

The cost challenges will, unfortunately, lead to growing numbers of independent businesses closing, but at the same time, this new report forecasts that well-funded and managed, Branded operators will survive, expand, and potentially thrive, as the economy improves and as consumers build confidence and disposable incomes.

Indeed, when the industry is looked at through the eyes of the consumer, the picture is far rosier, and this is the key thinking behind the forecasts; there is going to be real wage growth this year, even with inflation rearing up again from April; there should also be positive impacts from the increased funding from government into the public sector, (even though the effects from that turn less positive after 2026), plus interest rates fall through 2025, even if not as sharply or quickly as previously hoped for.

All of which points to a picture of consumers being better-off in 2025, and with confidence increasing, especially from the personal finance perspective, and savings levels having been built up, Future Foodservice believes that the appetite to spend will return more positively.

The forecasts in the report are built around the theme that ‘Demand is not finite’ and that when the industry creates and innovates, providing consumers with what they want, and even offers that they don’t yet know that they want, the industry will see more growth and successes.

The saying that ‘Diamonds are formed under great pressure’ will definitely be true in 2025, as the report forecasts the brand winners and losers within each sector over the next five years; there will be brands that shine, and find the ability to expand, because they are focusing on delivering incredible consumer experiences, whatever the price point, and because they offer something different, or are specialised by ways of cuisines, or experiences.

So, ‘The Next 5 Years’ report forecasts are more positive than many may expect, based on a rounded view of looking at the consumer angle, but it relies on more operators remembering that ‘Demand is not finite’ and that by inspiring and encouraging consumers, they will then spend their money.

Key points

• 2025 will see further growth for the industry despite tax and cost increases. Forecasts are for the total market to grow by +2.4% over 2024 levels, reaching £105.3bn (all food & drink consumed out of home, excluding accommodation)
• Revenue growth will come from some price increases, but also from some volume increases as areas such as city centres, offices, travel and even retail gain more traction & footfall.
• Growth for the market comes despite significant numbers of independent businesses closing, especially in the Restaurant and Pub sectors; these are offset by increases in outlets in Fast Food and in Retail Cafes, Coffee Shops and Sandwich & Bakery shops.
• The economy is expected to see some growth in 2025, driven by the fiscal stimulus from Government spending, which will find some way of dripping through in disposable spend into foodservice/hospitality, and this period should also see Bank of England slowly reducing the base rate to improve the economic situation for many consumers.

For further information on ‘The Next 5 Years – Future Foodservice from 2025 to 2029’ visit: www.FutureFoodservice.com

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