A third of the UK’s pubs, bars, restaurants and hotels are now operating at a loss following a wave of government-imposed tax increases that came into effect in April, according to a new industry survey.
The research, conducted by UKHospitality, the British Beer & Pub Association, the British Institute of Innkeeping and Hospitality Ulster, reveals that nearly one in three hospitality firms is losing money—raising concerns about the future viability of a sector that contributes over £26 billion to the UK economy and supports close to a million jobs.
The stark findings come after a series of fiscal changes introduced in the Chancellor’s spring budget. Most notably, employer National Insurance contributions (NICs) were raised from 13.8 per cent to 15 per cent, while the earnings threshold triggering NIC payments was reduced from £9,100 to £5,000. Business rates also rose for many premises, adding further financial strain.
According to the survey, which polled hundreds of businesses last month, 60 per cent of hospitality operators have already cut jobs and nearly two-thirds have slashed staff hours. More than half said they have been forced to cancel planned investments, and 76 per cent have increased prices in an attempt to remain solvent.
The total cost impact of these changes is estimated at £3.4 billion across the sector. Industry leaders warn that the sudden hike represents the sharpest quarterly increase in operating costs in years—and risks accelerating the closure of local pubs, hotels and restaurants that are still recovering from the pandemic and grappling with broader inflationary pressures.
In a joint statement, the trade associations warned: “The government seems to be setting itself up to miss its own targets with these most recent cost hikes for the hospitality sector.
“Jobs are being lost, livelihoods are under threat, communities are set to lose precious assets, and consumers are experiencing price rises when wallets are already feeling the pinch.”
The groups are calling for an urgent reversal of the NIC changes, faster reform of the business rates system, and a long-campaigned-for reduction in VAT for the hospitality industry—an intervention they argue would ease pressure on operators, reduce prices for customers, and stimulate job creation and investment.
Senior industry figures have also written to Chancellor Rachel Reeves warning that the NIC changes are regressive and disproportionately affect low earners. Some roles, particularly those close to the minimum wage, could become economically unviable as a result, they claim.
Tim Martin, chairman of JD Wetherspoon, has been among the most vocal critics of the government’s policy direction. He said his pub chain faces an additional £60 million in labour-related costs this year alone due to the increase in employers’ NICs and the April hike in the minimum wage.
Despite mounting pressure, the Treasury defended the government’s position. A spokesperson said: “We are a pro-business government and we know the vital importance of the hospitality sector to local communities and the wider economy. That’s why we’re supporting them with business rates relief, cutting duty on draught pints, capping corporation tax and protecting the smallest businesses from the employer National Insurance rise, which is helping to fund the NHS.”
While the government argues that broader measures will support hospitality through the transition, many operators say the current approach is short-sighted and risks undermining a sector that has long been a major contributor to UK jobs, growth and high street vitality.
Without meaningful intervention, trade bodies warn, more businesses will face closure in the coming months—threatening not just individual livelihoods, but the cultural and economic fabric of communities across the country.
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A third of UK hospitality businesses ‘operating at a loss’ after April tax hikes