Scotland’s Pubs and Bars Face Rising Costs and Staff Shortages, Impacting Tourism, Here’s All You Need to Know

The hospitality industry in Scotland, which includes pubs, bars, and licensed venues, is still facing a number of economic challenges, as highlighted by the bi-annual snapshot survey conducted by the Scottish Licensed Trade Association (SLTA). The survey, which took place in January 2026 and includes more than 400 licensed establishments in Scotland, presents a worrying scenario for one of the most significant sectors of the country’s economy. Increased costs of doing business and lack of consumer confidence are some of the key reasons for this difficult environment.

Rising Costs and Economic Uncertainty

The survey found that a significant 73% of hospitality outlets reported a decline in profitability when compared to the previous year. Of those, 42% experienced a drop of over 10% in their profitability, highlighting the severe pressure many businesses are under. The most pressing challenges identified by the survey include increases in energy costs, national insurance contributions, and a decline in footfall due to lower consumer spending. These escalating costs are outpacing inflation rates, with 68% of outlets facing increases of over 10%, making it difficult for many establishments to maintain profitability.

As Scotland’s hospitality industry struggles with these financial pressures, the impact is felt across various levels of the economy. Pubs, bars, and restaurants are essential contributors to Scotland’s tourism industry, and their ability to remain operational is crucial for both the local economy and the broader tourism sector. Lower profitability means fewer funds available for reinvestment, limiting opportunities for growth and innovation, and putting the future of many businesses at risk.

Impact on Jobs and Employment in the Hospitality Sector

Staff availability remains a persistent challenge within the hospitality industry. Despite a slight improvement in the availability of staff compared to previous surveys, the sector still faces difficulties in recruiting and retaining skilled workers. This staffing shortage further exacerbates the difficulties of running a profitable business and impacts service quality, which is crucial for attracting both local customers and tourists.

With tourism being a major economic driver in Scotland, the inability of hospitality businesses to fully operate due to staffing shortages or financial strain can deter potential visitors. Tourists are more likely to choose destinations where hospitality services are consistent, reliable, and of high quality. If businesses continue to struggle with staffing, Scotland’s reputation as a prime tourist destination could suffer, affecting the overall travel experience for visitors.

Consumer Confidence and Spending Patterns

The ongoing financial pressures on hospitality outlets are closely tied to changing consumer behavior. With rising costs of living and lower disposable incomes, many consumers are spending less on discretionary services such as dining out, drinking in pubs, and visiting bars. As a result, hospitality venues are experiencing a decline in footfall, and a significant portion of establishments are seeing lower revenues compared to previous years.

The survey also highlighted that only 40% of outlets believe that extended hours during the 2026 World Cup will boost their business. This suggests a more cautious outlook for the sector, even with major events that typically drive tourism and visitor spending. The combination of rising operational costs and shrinking consumer spending power has created an environment where even major events may not be enough to counterbalance the sector’s ongoing financial struggles.

Economic Policy and Government Action

As Scotland heads into the Holyrood elections in May 2026, the hospitality sector is urging both the Scottish and UK governments to take immediate action to address the challenges facing the industry. The SLTA’s survey found that 86% of respondents felt that neither the Scottish nor UK governments’ economic policies were aligned with the needs of the hospitality sector. Specifically, the SLTA is calling for two key policy changes: reforming business rates and reducing VAT for the hospitality sector. These reforms are seen as essential to ensuring that businesses can operate sustainably in the current economic environment.

The Republic of Ireland’s decision to reduce VAT for the hospitality sector to 9% has been cited as a positive example, and there is growing pressure for Scotland and the UK to adopt similar measures. The sector also seeks an immediate review of commercial rates, following the negative impacts of recent rate revaluations in Northern Ireland. The ability to introduce favorable policies that support the sector’s financial viability will be critical in ensuring the sustainability of Scotland’s hospitality businesses and, by extension, the country’s tourism industry.

Forecast for 2026: Stability or Decline?

Looking ahead to 2026, the outlook for Scotland’s hospitality sector remains grim. The survey revealed that 72% of respondents expect economic conditions to decline further in the coming year, with the majority forecasting either stability or a slight decline in trading. The looming threat of business closures is a real concern, with 14% of outlets considering or planning to shut down. While 63% of businesses expect to break even or remain profitable in 2026, the challenges remain substantial.

Despite these setbacks, there are some positive signs for the future of the sector. Trends such as the growing demand for stouts, low-alcohol drinks, and cocktails suggest that the industry may be able to adapt to changing consumer preferences and introduce new offerings that can drive revenue. However, these adjustments will not be enough to overcome the broader economic pressures unless more robust government support is provided.

The Importance of Immediate Action

The hospitality sector’s struggles in Scotland are not just an issue for business owners; they are an issue for the entire economy. Pubs, bars, and restaurants are critical components of the tourism industry, providing jobs, cultural experiences, and vital services for both locals and tourists. As such, it is essential that both the Scottish and UK governments take immediate action to alleviate the pressures facing this sector.

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Edinburgh’s Bold Move to Reintroduce Iconic Events with Funding from New Tourist Tax

Edinburgh’s new tourist tax, the Visitor Levy, set to be implemented in July, could potentially fund the revival of significant cultural events in the city, including the Festival Cavalcade and the Fireworks Concert. These iconic events, which have long been a staple of Edinburgh’s Festival celebrations, may return thanks to the funds generated by the levy.

One of the key purposes of the Visitor Levy is to support the city’s cultural and community events. A proposal for the funding includes a list of potential projects, to be presented at next week’s meeting of the council’s culture and communities committee. The committee will review these proposals before the full council makes a final decision later this month.

A central element of the proposal is the establishment of an Events Investment Fund, aimed at reintroducing popular public festivals and events. The fund could be used to reinstate the Festival Cavalcade, a grand parade featuring bands, floats, and Fringe performers, traditionally held during the opening weekend of the Festival. The report accompanying the proposal suggests replacing the closing Fireworks display with an environmentally friendly alternative, such as a drone or light show. This shift aligns with growing concerns over the environmental impact of large-scale fireworks displays. While the concept of a drone show has been discussed as an alternative, it is understood that private sector sponsorship will likely be necessary to help fund these high-cost events.

The Festival Cavalcade used to be a highly anticipated event on Princes Street, drawing crowds from both locals and visitors. Now, with the support of the Visitor Levy, the council hopes to gradually bring this community celebration back to life, possibly alongside a drone display or another suitable eco-friendly alternative for the closing event.

Alongside the Festival events, the proposed Events Investment Fund aims to enhance the existing £250,000-per-year Events Fund. The report highlights that recent funding applications totaled over £840,000, indicating a clear demand for additional resources to support the city’s events. The objective is to nurture more events that are unique to Edinburgh and resonate with the local community.

The fund would also contribute towards the £1.7 million that the council has already pledged to support the start of the 2027 Tour de France from Edinburgh. This is part of the wider push to invest in high-profile, international events that place Edinburgh at the forefront of global tourism and culture.

Another aspect of the proposal is the creation of a Programming Fund, designed to revive the tradition of community events at the Ross Bandstand in Princes Street Gardens. The Programming Fund would support a range of free, community-focused events from April to September, with a focus on mid-scale contemporary music, theatre, and cinema. The aim is to restore the spirit of public bandstands, offering locals and visitors alike a chance to enjoy performances in an iconic outdoor setting.

In addition to supporting regular events, the Programming Fund would also enable Edinburgh to host one-off major exhibitions and cultural programs throughout the year. The council envisions that this fund will work in collaboration with established venues like the Usher Hall and the City Art Centre, as well as cultural organizations such as the National Galleries and National Museums. These partnerships would facilitate the hosting of ambitious and experimental exhibitions that might not otherwise be feasible, helping to extend the vibrancy of Edinburgh’s cultural scene beyond the summer months.

The Programming Fund would also support the development of the city’s Tartan Parade, which celebrates Scotland’s rich heritage, tartan culture, and inclusivity. The parade would bring together pipe bands, dancers, musicians, and community organizations from Edinburgh and across the country, highlighting the diverse cultural contributions of Scotland’s people.

While the main focus of the funding proposal is on cultural and community events, the council’s transport and environment committee will also consider a separate set of projects that could receive Visitor Levy funding. Among these proposals is a significant revamp of George Street, aimed at enhancing the area’s appeal and accessibility for both locals and tourists.

With the Visitor Levy coming into effect this summer, Edinburgh stands to benefit from a boost in funding that can support a range of exciting initiatives, from the revival of beloved events to the introduction of new cultural experiences. The city’s rich cultural heritage, combined with the funding provided by the Visitor Levy, promises to further cement Edinburgh’s reputation as a global cultural hub.

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