Hospitality Firms Face Cash Crisis After Tax Raid

A fifth of British hospitality businesses have no cash reserves left and nearly eight in 10 have raised prices as they battle to shoulder the succession of cost hikes placed on them at last year’s autumn Budget.

Fresh data from four of the sector’s trade bodies showed that 69 per cent of members have less than six months of reserves left while one in five have nothing to fall back on, putting into sharp relief the confluence of headwinds into which the embattled industry is facing.

The hospitality industry’s reliance on large numbers of low-skilled workers has left it especially exposed to the government’s decision to sign off an above-inflation increase to minimum wage and its £24bn employer national insurance contribution hike at its maiden Budget last October.

The national insurance change alone is estimated to have cost the sector an additional £3bn annually – or 10 per cent per worker – and led to 84,000 fewer jobs being created.

These sector-wide challenges have triggered 79 per cent of bosses to raise their prices since autumn, the data showed, while more than half have axed jobs as they scramble to shore up their moribund finances.

The stark findings, which derive from a poll of UK Hospitality, the British Institute of Innkeeping (BII), the British Beer & Pub Association (BBPA) and Hospitality Ulster members, led all four industry bodies to issue a joint statement warning that everyone in their sector was having to make “impossible decisions”.

“This shocking data reinforces the urgent need for government to recognise the incredible pressure hospitality businesses have been put under, particularly since April, and illustrates why it should come forward with measures to support this vital sector at the Budget,” the lobby groups wrote.

“Unsustainable tax increases are squeezing businesses, stifling growth and investment, and threatening local employment, especially for young people.”

Industry chiefs published the data alongside calls for the government to reduce VAT for their members at this autumn’s fiscal statement, as they battle to keep costs down for patrons and customers.

Bosses also demanded ministers “amend the changes to employer NICs” and deliver lower business rates for the industry.

“Businesses across the sector [are making] impossible decisions to cut jobs, put up prices, reduce opening hours and sadly limit the support they desperately want to give their communities,” the statement continued.

“Hospitality is united in which measures will reverse this trend and drive growth: a reduction in VAT for hospitality, changes to employer NICs and permanently lower business rates for the sector.”

Earlier this week, an analysis of government figures revealed that at least 209 pubs shut their doors in the first half of 2025which translates to eight a week.