Optimism has been weakened by rising costs – especially through sharp increases to National Insurance contributions and Minimum and Living Wage levels from April – and compounded by cautious consumer spending in 2025 after a strong end to 2024
The proportion of leaders feeling confident about the future of hospitality ‘in general’ is at 15%.
“The double whammy of higher costs and softer trading have hit hospitality businesses hard, and it’s no surprise that confidence is running low,” says Karl Chessell, director - hospitality operators and food, EMEA at CGA by NIQ.
Four in five (80%) leaders report that wage bills are now significantly higher than they were 12 months ago, and nine in 10 (91%) say increased employment costs are a concern for the next 12 months.
On top of these, significant numbers of leaders are concerned by increases in business rates (73%) and inflation in the cost of food and drink (61%).
Alongside this, a third (34%) of leaders say their first-quarter revenue fell year-on-year.
By contrast, however, 37% have recorded an increase.
These figures are in line with the CGA RSM Hospitality Business Tracker, which indicated negative or fractional growth in each of the first three months of this year.
Mounting costs have also strained businesses’ margins, with nearly a third (31%) of leaders saying their profits have fallen year-on-year.
Just over a fifth either operated at a loss (15%) or broke even (6%) in the first quarter — treble the number of 5% in the last quarter of 2024.
Additionally, the survey highlights further challenges around new legislation.
Just over half (55%) of leaders are concerned about compliance with the Employment Rights Bill, and a third (34%) are concerned about costs connected to the Extended Producer Responsibility strategy.
“It is particularly frustrating that so many of the increases in employers’ outgoings are out of their control,” Chessell continues.
“These costs are choking hospitality businesses and compromising the investment and employment that are so important to the UK economy.”
Weakening viability
The combination of flat sales and increasing costs is weakening the viability of hospitality operators, the survey shows.
Nearly three in five (59%) leaders say they currently have fewer than six months’ worth of cash reserves.
One in 10 (10%) considers their business is at risk of failure in the next 12 months.
The danger of failure is forcing many employers to cut employment costs.
Nearly two thirds of leaders have reduced the staff count (65%) and/or cut the hours available to their staff.
Significant numbers have deferred pay increases (40%) and reduced spending on employee benefits and training (both 29%).
More positive news from the survey, meanwhile, includes a quarter-on-quarter increase in the proportion of independent operators feeling optimistic about prospects for their business in the next 12 months, from 12% to 21%.
There has also been some relief on energy bills, with well over half (57%) of leaders reporting these have decreased year-on-year.
“The longer term outlook for the sector remains good, but it deserves much better support than it is currently getting,” adds Chessell.