At a glance
- Hospitality leaders' optimism about their own businesses has increased but remains low, while confidence in the overall sector is even lower.
- Increased menu prices and new openings have driven revenue growth, but like-for-like spending remains flat.
- Higher labor costs and inflation have reduced profit margins for many operators, with significant impacts on cash reserves.
- Many businesses have responded to cost pressures by raising prices, reducing staff, cutting hours, deferring pay increases, and cancelling investments.
- Smaller independent businesses are particularly affected, with optimism significantly lower than the sector average.
- Leaders are calling for government support, focusing on business rates, VAT cuts, and National Insurance amendments to alleviate financial pressures.
The exclusive poll from CGA by NIQ and Sona shows 41% of leaders feel optimistic about prospects for their business over the next 12 months — up by seven percentage points from the first quarter.
By contrast, the proportion of leaders feeling confident about the future of hospitality in general is lower at 18%, but rose by three percentage points quarter-on-quarter.
Despite the recent uptick, leaders’ confidence remains at historically low levels with optimism for their own businesses down 15 percentage points on the second quarter of 2024.
New costs hit profits and jobs
Cautious confidence has been fuelled by stable spending in pubs, bars and restaurants in 2025.
Just over half (53%) of leaders say revenue increased year-on-year over the second quarter — nearly double the 28% who say it dropped.
However, increases are largely the result of higher menu prices and new openings, and the CGA RSM Hospitality Business Tracker has indicated broadly flat spending on a like-for-like basis in the first half of 2025.
Meanwhile, higher costs — including higher minimum pay levels and National Insurance contributions from April, as well as sustained inflation in food and drink — have hurt the margins of many operators.
More than a third (37%) of leaders say their second-quarter profits were down year-on-year, while only 27% say they rose.
This has left 9% of leaders with no cash reserves to draw on, while 53% have fewer than six months of reserves.
“Hospitality is a remarkably resilient sector, and these figures suggest leaders have responded nimbly to the many challenges they have faced in 2025,” says Karl Chessell, director - hospitality operators and food, at CGA by NIQ.
“However, fast-rising costs are clearly taking a toll on many businesses’ margins.”
More than four in five (84%) leaders say extra operating expenses have forced them to raise prices since April, while nearly half (48%) have reduced their staffing levels, 61% have cut hours available to their teams, and 34% have deferred pay increases.
Two in five (41%) have cancelled investment plans.
Smaller hospitality businesses have been particularly damaged.
Just 22% of leaders of independent companies now feel optimistic about their prospects for the next 12 months — barely half the sector-wide average of 41%.
“There’s a dangerous ripple effect, as leaders are being forced to take difficult decisions on employment and investment, while inevitable increases in menu prices are damaging consumer confidence,” Chessell continues.
“Well-run, distinctive and guest-focused hospitality operators can look forward with optimism, but without urgent government intervention the sector will struggle to generate the economic growth we know it is capable of.”
Calls for support
Rising costs have renewed calls for the Government to provide better backing for hospitality ahead of the autumn Budget.
Asked about their priorities for support, leaders identified lower business rates multipliers, a VAT cut and amendments to National Insurance contributions as their top three measures.
“Operators are continuing to face significant challenges, with margins being squeezed so tight that deploying more team members to deliver extra revenue can sometimes feel counterintuitive,” says Paul Watson, VP of hospitality at Sona.
“But without the correct team in place to protect peak trading times, revenue opportunities can walk back out the door, so finding the balance is crucial.
“Guests have become pickier about where they spend their money, so having a happy, stable and experienced team is absolutely vital to deliver exceptional guest experiences that will keep trade coming back again and again.
“Having people, tools and processes in place that nurture this balance will be key in the next few months.”