Hospitality Sector Sees Hundreds of Venues Close as Cost Pressures Intensify
The UK hospitality industry faced significant challenges in the final quarter of 2025, with new figures revealing a concerning wave of closures across the sector. According to consumer intelligence firm NIQ, there were 382 fewer licensed premises at the end of December compared to just three months earlier, representing an average of four closures per day during this critical trading period.
Restaurants and Casual Dining Hit Hardest
The data shows that casual dining establishments and restaurants bore the brunt of these closures, with 241 venues shutting their doors during the quarter. Pubs of all varieties also experienced a decline in numbers, continuing a worrying trend for traditional British drinking establishments.
Karl Chessell, director for hospitality operators and food at NIQ, described the acceleration in closures as particularly alarming. "This shows the toll that relentless increases in operating costs are taking on hospitality," he commented. "The dip is especially concerning since it came during hospitality's most important trading period of the year, when businesses traditionally build the cash reserves to sustain them through the quieter first quarter."
Multiple Cost Pressures Squeeze Businesses
NIQ identified several key factors driving these closures:
- Food inflation continuing to impact restaurant margins
- Higher labour costs following recent minimum wage increases
- Employers' national insurance contributions adding to operational expenses
- Suppressed consumer confidence reducing discretionary spending
The situation is expected to worsen with the looming increase in business rates, announced in November's Budget, which will apply to all hospitality businesses except pubs.
Industry Calls for Government Support
Hospitality firms are urgently calling for extended government support across the sector. UKHospitality, the industry body representing hospitality businesses, has issued stark warnings about potential further closures in 2026 without intervention.
The organisation forecasts that without adequate support:
- 963 restaurants could close
- 574 hotels might cease operations
- 540 pubs could shut their doors
London Shows Modest Recovery Amid National Decline
While the national picture appears bleak, London's hospitality scene demonstrated some resilience. The capital enjoyed a "modest revival" in 2025 following pandemic-related disruptions, with licensed premises increasing by 0.6 per cent to reach 2,976 venues by year's end.
NIQ attributed London's relative strength to:
- The steady return of office workers to city centres
- An uptick in tourist numbers from both international and domestic markets
However, even in London, the number of licensed premises remains 14 per cent below its pre-pandemic peak of March 2020, when the capital boasted 3,462 hospitality venues.
Mixed Performance Across Venue Types
Not all hospitality segments experienced decline during the quarter. The data revealed that:
- Bars saw a 1.0 per cent increase in numbers
- Large venues experienced a 0.4 per cent rise
This suggests that while traditional restaurants and pubs struggle, some alternative hospitality formats are finding ways to adapt to the challenging economic environment.
The hospitality sector's difficulties highlight broader economic pressures facing UK businesses, with operating costs continuing to rise while consumer spending remains constrained. Industry leaders emphasise that without targeted government support, the wave of closures witnessed in late 2025 may represent just the beginning of a more significant contraction in the UK's hospitality landscape.
