The sector has demonstrated considerable resilience in recent years, supported by growth among independently owned producers, retailers, restaurants, pubs and other hospitality businesses.
Scotland Food & Drink says the country now has around 17,000 food and drink businesses, with the industry generating a record annual turnover of approximately £19 billion.
However, business owners continue to face rising employment costs, high energy prices, inflation, recruitment difficulties and increasingly complex regulations.
Although demand remains strong in some areas, Savills recorded 38 hospitality openings in Glasgow city centre during 2025, profitability is under severe pressure. Operating margins for some hospitality businesses are now thought to be as low as three per cent, making investment and expansion increasingly difficult.
Matthew McDermott, (PICTURED) Henderson Loggie’s Head of Food and Drink in Scotland, told That's Food and Drink that the company is calling for long-term action, including a review of the increase in employers’ National Insurance contributions and a permanent reduction in VAT for hospitality businesses.
The firm points out hospitality operators in several European countries already benefit from reduced VAT rates.
Restaurants and catering businesses pay nine per cent in Ireland, seven per cent in Germany and generally around ten per cent in France, Italy and Spain. Comparable UK businesses are commonly required to charge the standard 20 per cent rate.
Prime Minister Andy Burnham recently announced an additional 20 per cent reduction in business rates for eligible pubs, social clubs and live music venues in England from April 2027. However, business rates are devolved, so the measure does not automatically apply in Scotland. Scottish hospitality businesses already receive certain forms of non-domestic rates relief, but uncertainty remains over future support.
McDermott warned against assuming the industry’s recent growth means that businesses can continue absorbing additional costs.
He told us: “Producers and exporters are continuously faced with increased regulatory burdens and spiralling cost pressures,” he said. “For the hospitality sector, the pressures are largely home-grown, with increasing costs and regulatory burdens chipping away at already slim profits.”
He added Scotland’s food and drink businesses have continued to innovate, invest and create employment during extremely difficult trading conditions.
Food and drink is central to Scotland’s economy, tourism industry and international reputation. It also plays an important part in sustaining local communities and struggling high streets.
Henderson Loggie believes the time has come for politicians to move beyond promises and introduce practical, lasting policies that give producers, exporters and hospitality operators the confidence to invest in their futures.
Henderson Loggie is an independent, owner-managed Scottish accountancy firm employing almost 200 partners and staff.
