UK hospitality loses two sites a day
A report by CGA by NIQ has discovered the impact of the UK government’s increased taxes on the on-trade.
The Hospitality Market Monitor figures show that the on-trade managed to return to a position of stable site numbers in 2024, following the disruption of Covid-19, high inflation and the cost-of-living crisis.
However, the government’s recent increase in employment costs has added pressure to profitability, triggering a period of net site closures.
In the October 2024 budget, chancellor Rachel Reeves announced an increase in minimum wage and employer National Insurance contributions (NICs), which came into effect from April this year.
The Hospitality Market Monitor shows that the hospitality sector contracted by 0.3% in the first quarter of the year (Q1), and shrank by another 0.1% between March and June.
In real terms, the sector has suffered a net decline of 374 licensed premises in the first half of the year, equivalent to 62 closures per month or two every day.
The figures show there are now 14.2% fewer hospitality sites compared with the pre-Covid benchmark of March 2020 – representing more than 16,000 net closures.
Manchester was identified as the only UK city in growth between March and June, with its sites up by 0.8%. Meanwhile, London fell by 0.2%, Edinburgh by 1.7% and Glasgow by 1.1%.
A bright spot for wet-led venues
The report shows that the on-trade has fared better than the dining-out sector.
In June 2025, there were 4% more bars than in June 2024, however this was a 0.9% fall compared with March 2025.
Meanwhile, the number of nightclubs rose by 4.6% from June 2024 to June 2025, but fell by 0.4% from March 2025.
Drink-led venues as a whole grew by 1% between June 2024 and 2025, and by 0.1% between March and June 2025.
Managed venues fared better than their independent counterparts, growing by 7.5% in the 12 months, compared with an increase of 1.2%.
AlixPartners’ Graeme Smith said: “After a period of relative stability for pub and restaurant businesses last year, the first half of 2025 has proved more challenging, with the net closure rate increasing again – the big question for hospitality is what happens from here.
“The effects of a step change in costs and taxation, which landed this April, have made the trading environment more challenging for many hospitality businesses.
“While it seems likely that more closures will follow in the immediate term, consumer demand does appear to be resilient, so the medium-term impact of these changes are yet to be seen.
“We would expect the polarisation in the market to continue, with the leading players continuing to grow and take market share from struggling and under-invested brands.”
The industry responds
Last month, it was revealed that the hospitality sector has lost 84,000 jobs since the budget, with many in the on-trade preparing for further hikes.
Kate Nicholls, chair of UKHospitality, added: “These latest figures are a devastating blow, showing in the starkest terms the impact of government-driven cost pressures.
“Two hospitality venues closing every day is not just a statistic; it represents the hollowing out of our high streets and communities.
“Independent businesses, the lifeblood of our sector, are being disproportionately crushed under the weight of unfair taxation and soaring employment costs. The result is a sector in survival mode, where investment is at a standstill. Businesses are being forced to focus on just keeping the lights on, and growth is secondary.
“This cannot continue. The government has pushed hospitality to the breaking point, and we now run the very real risk of being taxed out of existence.
“Ahead of the budget, we are calling for urgent, decisive action to relieve the burden on a sector that should be a powerful engine for economic growth and job creation across the entire country.
“The government must lower the business rates that punish high street businesses, fix the poorly designed National Insurance contributions that penalise job creation, and cut the rate of VAT to stimulate investment and align us with our European counterparts.
“Without these changes, we will see this alarming trend of closures accelerate, costing thousands more jobs and decimating high streets across the UK.”
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