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What’s the Average Profit Margin by Industry in the UK?

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What’s the Average Profit Margin by Industry in the UK?

Published date: 14.08.2025
Last updated: 17.09.2025

The UK is a hub for small and medium-sized businesses (SMBs) across multiple industries. There are more than 5.5 million SMBs currently operating on the island.

Aspiring and current business owners that want to know about the average profit margin by industry should consider these percentages as a strategic decision-making initiative. This will help you make informed choices for your current or future business endeavours.

With this in mind, let’s explore what the average profit margin by industry is in the UK and whether your business is performing within its industry’s mean.

TABLE OF CONTENTS

What Is a Profit Margin and How Is It Calculated?

Profit margin, always expressed as a percentage, is a broad financial metric that can be subdivided into three groups: gross, net and operating profit margin.

While profitability is always the ultimate aim for any enterprise, it’s essential that you’re carrying out the right calculations to determine if your business is performing on par with its peers within the same industry.

Here’s a breakdown of how to do this.

Gross profit margin

The gross profit margin is your total revenue minus the total cost of goods sold as part of your business activities.

The gross profit margin formula is as follows:

((Net Revenue – Cost of Goods Sold) / Net Revenue) × 100 = Gross Profit Margin

Example: If you sell a sandwich for £5 and your cost of goods sold (buns, cheese, ham, etc.) totals £1, you will subtract £1 from £5 to get £4, and then divide that by £5. Multiply the total to give you 80% gross profit margin.

Net profit margin

The net profit margin takes into account cost of goods sold, taxes, interest, expenses such as electricity and labour etc.

The formula is as follows:

(Net Profit / Gross Revenue) × 100 = Net Profit Margin

Example: If you sell a sandwich for £5 but it costs you £1 to make the sandwich and a combined total of £2.50 to pay all your expenses, your net profit is £5 minus £1 minus £2.50, which equals £1.50. Take the £1.50 and divide it by £5 and then multiply by 100. The result is a 30% net profit margin.

Operating profit margin

The operating profit margin subtracts the total operating expenses from the business’ gross revenue.

You can calculate it using the following formula:

(Operating Profit / Gross Revenue) × 100 = Operating Profit Margin

Example: Say that you sell one sandwich for £5 and that your operating expenses amount to £2.40. You will need to divide the £2.40 by £5 and then multiply by 100 to give you an operating profit margin of 48%.

Why Profit Margins Vary Widely by Industry

Aiming for a high profit margin is the ultimate business goal. However, not all industries fare the same.

For example, a few reasons for these differences include:

Cost structure differences: Some sectors (like manufacturing and hospitality) have high fixed and variable costs, while others (such as digital services) operate with lower overheads.
Pricing power and competition: Industries with unique products or strong brands can command higher prices, whereas highly competitive markets often see their margins squeezed.
Capital intensity: Businesses that require significant investment in equipment, facilities or stock typically have lower margins due to higher depreciation and financing costs.
Regulation and compliance costs: Sectors like finance, healthcare and construction face heavier compliance requirements, which can reduce profitability.
Supply chain volatility: Industries reliant on raw materials or imports (food production and retail for example) are more vulnerable to price fluctuations and margin erosion.
Labour intensity: Service-heavy sectors with high staffing needs, such as hospitality or social care, often operate on thinner margins due to wage costs.
Market maturity and growth potential: Emerging or niche sectors can enjoy higher margins during growth phases, while mature markets may face price competition that brings margins down.

In short, profit margins vary across industries because each sector faces unique cost structures, competitive pressures and operational challenges that influence profitability.

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Average Profit Margins Across Key UK Sectors

Profitability varies significantly across UK industries, with average profit margins ranging from the low single digits in cost-heavy sectors like construction to more than 30% in specialised retail niches like financial services.

UK Sector	Typical Profit Margin/Profitability
Private non-financial corporations (overall)	Net rate of return: 8.8% (Q2 2024)
Manufacturing	Net rate of return: 7.3% (Q2 2024)
Services (non-financial)	Net rate of return: 15.1% (Q2 2024)
Construction (average)	~3.9% (2021 global benchmark)
Construction (Top 100 UK firms)	~1.7% (2024, down from 2.7 % in 2023)
Veterinary chains	~20%
Private nursery providers	>20%
SMEs overall	Median profit: £13,000
SMEs – property & business services	Median profit: £15,000
SMEs – retail/hospitality/manufacturing/health	Median profit: £11,000
Restaurants/Hospitality	Average: 3–5%; best performers: 15–20%
Retail – confectionery (small)	40–45%
Retail – large non-grocery	>50%
Retail – grocery	30–35%
Energy and big banks (post-pandemic)	Pre-tax margins 30%, post-tax 20%
Telecommunications	Average net margin: 12.5%; equipment ~15%, services ~5%
Agriculture – all farms	Average Farm Business Income (FBI): £41.5k; gross margins often exceed 10%
Agriculture – dairy farms	Average FBI: £74k; gross margin ~52%; net ~12%
Agriculture – specialist poultry	Average FBI: £143.5k
Property development – small	10–20%
Property development – mid-size	15–25%
Property development – new build	20–30%
Direct real estate activities	Average profit margin: 18.9%

By understanding how your sector compares to these benchmarks, you can better assess your business performance, refine your pricing strategy and strengthen your long-term profitability.

What These Averages Mean for Small Businesses

Understanding industry averages for profit margins can help you benchmark your business’ performance and improve company profitability.

If your average gross profit margin is significantly below the norm, it may indicate low margin pricing or high operating cost issues that you need to address. On the other hand, a high net profit compared to your sector could indicate a strong business model and an effective pricing strategy.

Economic trends, such as changes in gross domestic product (GDP) or shifts in sale volume, also affect margins.

If you operate in a sector with naturally low gross profit margins, focusing on higher total sales volumes and reducing your indirect costs can protect your business’ financial health.

For those in high gross profit industries, sustaining a net operating surplus depends on adapting to the economic environment at the given period of time and refining your business strategy.

How to Benchmark Your Business Against Industry Standards

Benchmarking your business against industry standards is a practical way to measure performance, identify areas for improvement and shape your business strategy.

Here’s how to do it:

Compare your average profit margin, gross margin and net operating surplus with the industry averages mentioned above. This will help you see if you are operating with a low or high margin relative to your competitors.
Review your operating and indirect costs to identify areas where efficiencies can be made. If your figures are below the sector norm, it could indicate potential issues with your pricing strategy, sales volume or business model.
For figures that are above the average, focus on protecting your advantage through strong customer relationships, innovation and adapting to changing economic conditions.

Regular benchmarking ensures you track company profitability over time and remain competitive in your market, regardless of GDP or demand fluctuations.

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POS Data and Reporting Tools to Track Margins

With myPOS, you get more than just a method of accepting payments. You gain a powerful tool for monitoring your average profit margin and net rate in real time.

Every transaction processed through myPOS automatically feeds into detailed reports. This gives you instant visibility over sales performance, operating costs, and profitability.

Our platform’s built-in analytics help you identify your best-selling items, track seasonal trends and measure the effect of pricing changes or promotions. These insights allow you to make informed decisions that protect your margins and boost profitability.

Irrespective of whether you run a busy café, a boutique shop or a hotel, myPOS puts the data you need at your fingertips so you can focus on growth while keeping tabs on your finances.

Tips for Improving Profitability in Low-Margin Industries

Operating in a low profit margin industry can be challenging, but there are effective strategies to improve your business’ profitability.

Consider focusing on the following aspects:

Improving your pricing strategy to ensure you’re not undervaluing your goods or services.
Increasing sales volume while managing your operating and indirect costs.
Investing in technology, like efficient retail or hospitality payment solutions, to streamline operations.
Regularly reviewing your business model and adapting it to changing economic conditions.

In particular, hospitality businesses are advised to utilise tailored solutions. These can make a significant difference in tracking sales and controlling costs because specialised tools and platforms like myPOS can support your growth.

Frequently Asked Questions

Is a 40% profit margin too high?

A 40% profit margin is considered very high in most industries. Although some sectors (such as software, luxury goods and certain niche retail businesses) can achieve margins at or above this level, the average profit margin for UK private businesses is considerably lower, typically under 15%.

Which industry has the highest profit margin?

In the UK, industries such as professional services, financial services and some specialised healthcare sectors (like private dentistry or veterinary services) have some of the highest margins, often going beyond 20%. Luxury goods, high-end software and specialist consultancy services can also post high profit margins. In some cases, these margins are above 40%. The “highest” margin depends on how you measure it (gross or net) and the specific business model within the industry your business operates in.

Is 30% a high profit margin?

Yes, a 30% profit margin is high for most businesses. In the UK, average margins for private non-financial companies are below 10%, so a 30% margin would place you above the norm. Many healthy businesses operate successfully on margins of between 10% and 15%, so achieving 30% often indicates strong pricing strategies, efficient operations and a competitive advantage.