Hospitality Sector on the Brink as Employment Costs Force Daily Shutdowns

The UK's hospitality sector is facing a troubling crisis, with an average of two hospitality businesses closing their doors every single day during the first half of 2025. Recent research by CGA, NIQ, and AlixPartners highlights the severity of the situation, revealing that Britain’s hospitality landscape has contracted significantly, leaving the industry smaller than at any point since the pandemic.

The Hospitality Market Monitor report found that by the end of June 2025, only 98,746 hospitality venues remained operational, marking a reduction of 374 sites since the start of the year. This decline equates to around 62 net closures each month, representing a 0.4% reduction in licensed premises nationwide.

Alarmingly, the hospitality sector has shrunk by 14.2% compared to its pre-pandemic size in March 2020, losing more than 16,000 venues over the past five years. This rate of decline is significantly steeper than during previous economic downturns, surpassing even the impact of the 2008 financial crisis. Independent restaurants have suffered disproportionately, experiencing a sharp contraction of 22.7% during this period.

Key factors contributing to this crisis include increased employment costs introduced in April 2025, notably higher employers’ National Insurance Contributions (NIC), elevated business rates, and a rise in the National Living Wage. The Hospitality Market Monitor further warns that these pressures are likely to trigger a fresh wave of company restructurings and closures throughout the remainder of the year.

Notably, food-led hospitality businesses suffered a 2.9% decline within the past year, whereas drink-led venues reported a modest 1% increase. This disparity aligns with insights from the CGA RSM Hospitality Business Tracker, which confirmed managed pubs are currently outperforming other hospitality business types.

Karl Chessell, Business Unit Director for Hospitality Operators and Food at CGA by NIQ, emphasised the strain the sector is facing: "Hospitality has been struggling under a disproportionate weight of inflation and taxes in recent years, and our latest figures show how every round of additional costs sends more businesses to the wall. New pay and NICs aren’t the sole cause of closures lately, but they have been the final straw for many operators, especially smaller ones. The sector needs a fairer tax regime that supports growth and investment and encourages consumer spending."

Graeme Smith, Senior Partner at AlixPartners, highlighted the uncertain future facing the industry: "The effects of a step change in costs and taxation, which landed this April, have made the trading environment more challenging for many hospitality businesses. Consumer demand appears to be resilient, so the medium-term impact of these changes remains unclear, but it seems likely that more closures will follow. We expect continued polarisation in the market, with stronger businesses growing at the expense of struggling competitors."

Kate Nicholls, Chair of UKHospitality, provided a stark warning, calling the situation a "devastating blow" to communities: "Two hospitality venues closing every day is not just a statistic; it represents the hollowing out of our high streets and communities. Independent businesses, the lifeblood of our sector, are disproportionately crushed by unfair taxation and soaring employment costs. Investment is at a standstill, as businesses focus simply on survival."

Nicholls urgently called on the government for decisive action ahead of the upcoming Budget: "We run the very real risk of being taxed out of existence. The government must lower business rates, fix poorly designed NICs that penalise job creation and reduce VAT rates to stimulate investment and align Britain with European counterparts. Without these immediate interventions, closures will continue to accelerate, costing thousands more jobs and devastating high streets nationwide."