Hospitality Sector Contracts as Four Businesses Close Daily Under Labour
Britain's hospitality industry is facing a severe contraction, with four food and drink venues closing their doors every day during the final months of 2025. This alarming trend emerges as businesses grapple with mounting cost pressures and the impending termination of pandemic-era business rates relief.
Sharp Decline During Festive Period
According to the latest NIQ Hospitality Market Monitor industry report, the number of hospitality venues across Britain decreased by 0.4 percent between October and December 2025. This contraction represents a net loss of 382 businesses during what is traditionally the sector's most profitable trading period.
This decline marks a dramatic reversal from earlier in the year when the total number of hospitality sites - including cafes, restaurants, pubs, and hotels - had actually grown by 0.2 percent. By the end of 2025, the sector had shrunk by 0.2 percent year-on-year as operators either prepared for the withdrawal of government support or ceased trading entirely.
Government Response Draws Criticism
Chancellor Rachel Reeves has faced mounting pressure from industry leaders after refusing to extend comprehensive support to hospitality businesses beyond pubs. Despite pleas from hotel executives to safeguard employment, the Treasury has maintained its position while hinting at concessions specifically for watering holes.
This selective approach follows a backlash campaign that saw numerous landlords banning Labour MPs from their establishments. Industry groups including UKHospitality have warned that without broader measures, more cafes, restaurants, and hotels will have no alternative but to close permanently.
Industry Leaders Sound Alarm
In a strongly worded letter to the Chancellor, more than 130 hotel executives identified soaring business rate bills as the most significant challenge currently facing the sector. Allen Simpson, Chief Executive of UKHospitality, told the Daily Mail: The cost challenges facing hospitality businesses continue to grow and four businesses closing a day in the last quarter of 2025 is the unfortunate reality of a sector shouldering the highest tax burden in the economy.
Simpson emphasized that every part of hospitality is impacted by rising costs and business rates hikes, with restaurants being particularly vulnerable to the current wave of closures. He stressed the urgent need for a hospitality-wide solution to avert the looming business rates increases, warning that without comprehensive support, business closures and job losses will accelerate this year.
Selective Support Questioned
While defending her approach at the World Economic Forum in Davos, Chancellor Reeves insisted that pubs face a far different situation from other hospitality businesses such as hotels, restaurants, and cafes. She told The Times: The situation pubs face is different from other parts of the hospitality sector. We've just been using this time to get the package right. We'll be setting out details in the next few days.
However, industry representatives have questioned this rationale, pointing out that all hospitality businesses face similar challenges including:
- Relentless increases in operating costs
- Soaring energy bills and commercial rents
- Higher minimum wage requirements
- Increased employer National Insurance contributions
Sector-Wide Challenges Documented
The NIQ report reveals that while hotel and bar numbers have shown year-on-year growth, casual dining establishments and nightclubs are experiencing significant decline. Notable casualties include the Pizza Hut chain, which closed 68 restaurants at the end of 2025, alongside numerous independent eateries.
Business leaders reported struggling with what they describe as relentless increases in operating costs while attempting to balance price increases against customer retention. The situation is compounded by broader economic pressures, with the Office for National Statistics reporting a 70,000 reduction in hospitality payroll employees during 2025, including nearly 9,000 jobs lost in December alone.
Broader Cultural Impact
The crisis extends beyond traditional hospitality venues to cultural institutions. The Music Venue Trust reports that performing arts venues are on their knees, with thousands of jobs and numerous venues lost during 2025 primarily due to financial difficulties.
Karl Chessell, director of hospital operators and food at NIQ, offered a sobering assessment: Despite the government's recent rethink on rates for pubs, conditions are unlikely to get any easier in 2026. NIQ's research indicates low optimism among leaders and flat or negative year-on-year trading in real terms.
The government maintains that it is supporting the sector through a £4.3 billion package designed to limit bill increases, alongside a 25 percent cap on corporation tax. However, with four venues continuing to close daily and industry confidence at low ebb, hospitality businesses await more comprehensive solutions as they navigate an increasingly challenging economic landscape.
