- The warning comes just as new cost increases take effect from April 1
- Rising wages and taxes add billions in additional costs
- Energy and food inflation continue to squeeze already thin margins
The UK hospitality sector is staring at a difficult year ahead, with rising energy costs, higher wages and increasing taxes all hitting at once. The pressure is building so quickly that around one in five businesses now fear they could collapse within the next 12 months.
The warning comes just as new cost increases take effect from April 1, when businesses face higher business rates alongside increases in the national living wage and minimum wage. For many operators, this isn’t just another challenge — it feels like a tipping point.
According to data from CGA by NIQ, nearly half of hospitality businesses (44 per cent) are already feeling pessimistic about their prospects. Around 17 per cent are operating at a loss, while a small but worrying 2 per cent say their businesses are no longer viable.
Costs rising faster than businesses can keep up
What’s making the situation harder is the combination of pressures hitting at the same time. Energy bills remain volatile, especially for businesses not locked into fixed contracts. At the same time, food and drink costs continue to rise, while customers themselves are cutting back due to the wider cost of living squeeze.
Labour costs are also climbing. Industry body UKHospitality estimates that wage increases alone will add around £1.4 billion in costs across the sector.
Business rates are another concern. While exact figures vary, estimates suggest the average hotel in England could pay about £28,900 more this year, an increase of roughly 30 per cent. Restaurants are expected to see bills rise by around £1,800, or 15 per cent.
These changes stem from measures announced in the November budget by Chancellor Rachel Reeves, although some relief measures have been introduced, including discounts for pubs and temporary caps on increases.
“Unsustainable” pressure and calls for support
Industry groups say the combined weight of these costs is becoming difficult to manage. Many businesses are operating on extremely thin margins, with smaller and independent operators seen as the most vulnerable.
In a joint statement, trade bodies including UKHospitality reportedly said businesses are finding it increasingly hard to stay afloat, warning that more cost increases could lead to closures and job losses, as quoted in a news report.
They argue that while some support measures have helped, broader policy changes are still adding pressure at a time when the sector is trying to recover and grow.
There are now growing calls for further government intervention — particularly around business rates, taxation and energy support — to prevent what some fear could become a wave of closures across high streets and communities.
For now, the sector appears to be navigating a narrow path, balancing rising costs against weakening demand, with little clarity on how long the pressure will last.
