Calling Time – Money Running Thin in Hospitality

The short answer

Money is running thin in UK hospitality because costs have risen far faster than sales. UKHospitality says the sector has absorbed more than £5bn of extra costs in two years, from higher employer National Insurance, the National Living Wage and business rates. Like-for-like sales have trailed inflation for 16 months running, and 23% of venues were operating at a loss in mid-2026.

How much have hospitality costs risen?

Almost every major cost line moved up at once.

UKHospitality estimates the lower National Insurance threshold alone brought 774,000 hospitality employees into scope for the first time. Payroll typically runs at 25-35% of net turnover, so labour costs dominate.

How thin are hospitality margins now?

Thinner than at any time most operators can remember.

• Big groups are squeezed too. Profits at the UK’s top 100 restaurant groups fell 44%, from £365m to £204m, while turnover rose 3% to £13.3bn. IGD reads that as a margin of about 1.5%.
• A quarter are losing money. A joint trade body survey of more than 16,000 venues found 23% operating at a loss in mid-2026, up from 15% three months earlier, with one in six at risk of failure within a year.
• Pubs are hardest hit. A BII member survey found only one in four pubs made a profit from January to August 2026.
• Tax takes a bigger share. Analysis for the BRC found hospitality pays 82p in business taxes per £1 of pre-tax profit, against 50p across all sectors.

How many hospitality businesses are closing?

Why aren’t higher sales fixing it?

Because sales are growing slower than costs.

The NIQ RSM Hospitality Business Tracker found like-for-like sales up just 0.8% in August 2026, the 16th month in a row below inflation. Restaurants grew 2.4%, pubs 0.5% and bars fell 2.5%. Raising prices further risks pushing guests away; restaurant and hotel inflation is already a full point above CPI.

Cash buffers are thin. In CGA by NIQ’s August 2025 confidence survey, 53% of operators had less than six months of cash reserves.

Key trends

• The last Budget offered partial relief. The Autumn Budget of November 2025 made lower business rates multipliers for retail, hospitality and leisure permanent, funded by higher rates on properties worth over £500,000, with a £4.3bn package to phase in large rises. It left VAT and employer NICs unchanged, so UKHospitality continues to call for VAT to be cut to 10%.
• Wages keep rising. The Low Pay Commission is weighing an April 2027 National Living Wage of £13.02 to £13.34.
• Hiring is slowing. Hospitality vacancies fell to 70,000 in the three months to September 2026, down 7% on a year earlier, and average weekly earnings fell 1.4%, a sign that operators are trimming hours.
• Food inflation has eased, unevenly. ONS food inflation was 1.3% in August 2026, but individual items still swing sharply by supplier.
• Pubs got targeted help, others didn’t. Pubs and live music venues receive an extra 15% rates discount in 2026/27. Hotels, restaurants and cafés do not.

What can operators actually control?

Not tax, wages or rates. But a lot more than it feels like.

1. Supplier prices. Track every line price and challenge rises the week they happen.
2. Like-for-like buying. Compare the same product across suppliers, and switch where it pays.
3. Leakage. Stop paying duplicates, unclaimed credits and short deliveries.
4. Off-contract buying. Route spend through agreed suppliers and purchase orders.
5. Cash visibility. Know exactly what you owe in the next 30 days.
6. Admin time. Every hour a manager spends keying invoices is an hour off the floor.

At one UK hospitality operator, OmniPATH captured value worth 9.1% of spend across eighteen months of invoices. When margins are 1.5%, that is the difference between surviving and closing.

Where OmniPATH fits

OmniPATH gives operators control over the costs they can move. Every supplier invoice is read to the line, prices are tracked item by item, duplicates and missing credits are flagged before payment, and the Operation Snapshot shows cash needed for the next 30 days from day one.

Related reading

• Top Challenges in Hospitality
• Top 10 Benefits of AP Automation in Hospitality
• The Silent Profit Drain

FAQ

Why are UK hospitality businesses struggling in 2026?

Costs have risen faster than sales. Higher employer National Insurance, two National Living Wage increases and the end of business rates relief have added more than £5bn in two years, according to UKHospitality, while like-for-like sales have trailed inflation for 16 months.

How many hospitality businesses closed in 2025?

There were 3,353 hospitality insolvencies in England and Wales in 2025, compared with 3,465 in 2024. Britain had 98,564 licensed premises at the end of June 2026, 14.3% fewer than in March 2020.

What is the National Living Wage in 2026?

From 1 April 2026 the National Living Wage is £12.71 an hour for workers aged 21 and over, up 4.1%. The rate for 18 to 20 year olds is £10.85.

What changed in hospitality business rates in April 2026?

The 40% retail, hospitality and leisure relief ended and was replaced by permanently lower multipliers for those properties. Revaluation raised many rateable values, and pubs and live music venues received an extra 15% discount for 2026/27.

What is the average profit margin for UK restaurants?

Margins are very thin. Profits at the UK’s top 100 restaurant groups fell 44% to £204m on £13.3bn of turnover, a margin of about 1.5%, and 23% of venues were operating at a loss in mid-2026.

How can hospitality operators reduce costs?

Focus on the costs you control: track supplier prices line by line, compare products across suppliers, stop duplicate payments and unclaimed credits, route buying through agreed suppliers and cut manual admin time.

Sources

• UKHospitality via Restaurant Online – extra costs and job losses
• BDO – employer NICs changes
• GOV.UK – National Living Wage 2026
• UKHospitality – Low Pay Commission response 2025 (PDF)
• Reading Borough Council – business rates multipliers 2026
• Hotel Management Network – hotel rateable values
• Morning Advertiser – pubs 15% rates relief
• ONS – consumer price inflation
• QX Global – UKHospitality energy survey
• The Caterer – top 100 restaurant groups and IGD analysis
• Restaurant Online – joint trade body survey
• Vinetur – BII member survey
• UKHospitality – tax burden analysis
• Insolvency Service – company insolvencies August 2026
• Morning Advertiser – 2025 hospitality insolvencies
• NIQ – Hospitality Market Monitor Q2 2026 and Q1 2026
• ITV – BBPA pub closures
• NIQ – RSM Hospitality Business Tracker, August 2026
• NIQ – CGA confidence survey, August 2025
• Morning Advertiser – Autumn Budget 2025 hospitality reforms
• ATT – National Living Wage outlook
• Morning Advertiser – hospitality vacancies and wages