UK food service activity fell 1.9% for a fifth straight three-month decline

Food and beverage service activity in the UK fell 1.9% in the three months to September from the previous three-month period, extending a downturn for restaurants and related operators even as the broader services economy kept growing, according to the Office for National Statistics.

The ONS said the decline was the fifth consecutive three-month fall for food and beverage service activities. Across the wider accommodation and food service category, output fell 0.5% in the three months to September compared with the three months to June. That suggests the pressure inside hospitality was concentrated in food service rather than lodging, since accommodation output rose 2.5% over the same period.

The figures point to a split within consumer-facing parts of the economy. While households continued to spend in some service areas, restaurant and food service businesses underperformed the wider market. Consumer-facing services as a whole grew 0.5% in the three months to September, the ONS said, but food and beverage service activities were among the largest drags on that total.

The weakness in hospitality came during a period of overall economic growth. UK real gross domestic product rose 0.7% in the three months to September from the previous three months, the ONS said. Services output increased 0.9%, marking a ninth straight three-month expansion. Production rose 0.1%, while construction fell 0.7%.

Within services, 11 of 14 subsectors grew in the three months to September. The largest positive contributions came from administrative and support service activities, which rose 4.1%, information and communication, which increased 2.1%, and professional, scientific and technical activities, which grew 1.6%. The main negative contributions came from education, down 0.5%, and accommodation and food service activities, down 0.5%.

For hospitality businesses, the most important detail was the gap between hotels and food-led operators. The ONS said accommodation was one of the larger positive contributors to consumer-facing services, with a 2.5% rise in the three months to September. By contrast, food and beverage service activities fell 1.9%. That left the combined accommodation and food service sector in contraction even though the lodging side of the market grew.

The broader consumer-facing picture was mixed. Alongside the gain in accommodation, the ONS reported growth of 3.3% in wholesale and retail trade and repair of motor vehicles and motorcycles, and a 0.8% increase in retail trade excluding motor vehicles. The largest negative contributions came from food and beverage service activities and from sports activities and amusement and recreation activities, which fell 3.2%.

That pattern also shows that consumer demand was not weak across all areas. Instead, business-facing services continued to do more of the work in driving the UK economy. The ONS said non-consumer-facing services grew 1.0% in the three months to September, outpacing the 0.5% increase in consumer-facing services. From January through September, non-consumer-facing industries contributed more to services growth than consumer-facing ones.

On a monthly basis, the economy also expanded in September, though the ONS release did not highlight a separate monthly figure for restaurants and food services. Monthly GDP rose 0.2% in September after no growth in August and a 0.4% increase in July. Services rose 0.2% in September, while production increased 0.3% and construction grew 0.8%.

Within September’s monthly services data, the largest positive contribution came from real estate activities, which rose 0.4%. Transportation and storage increased 1.4%. The largest negative contribution came from professional, scientific and technical activities, down 0.7%, followed by information and communication, down 0.6%. Those monthly moves helped shape the overall services total, but the more important trend for hospitality remained the three-month decline in food service activity.

The ONS also said GDP in the three months to September was 1.9% higher than in the same period a year earlier. Over that annual comparison, services output rose 2.3% and production increased 1.5%, while construction fell 1.7%. That means the UK economy was still larger than a year earlier, even though some consumer-facing industries, including food service, weakened during the latest quarter.

The September GDP release included revisions to July and August estimates. The ONS said early GDP estimates are routinely revised as more data becomes available. For the services sector, the turnover response rate for the Monthly Business Survey component was 87.0% in September, which the agency said was broadly in line with expectations at that point in the reporting cycle.

For restaurant operators, caterers and other businesses inside the food service segment, the latest ONS data shows a market moving against the direction of the wider economy. Services overall continued to expand and consumer-facing services still posted growth, but food and beverage service activities contracted for a fifth straight rolling three-month period, making them one of the clearest weak spots in the UK’s latest GDP report.