UK hospitality sector faces rising insolvencies and job losses in 2025

As we approach the new season of spring, there do not appear to be many green shoots appearing in the hospitality and leisure sector. In fact, it is quite the opposite, with insolvencies and job losses on the rise.

Rising costs and insolvencies hit hospitality businesses

Corporate insolvencies in the UK are at their highest since the financial crash of 2008/09, with nearly 2,000 businesses failing in January alone – an increase of 11% from the previous year. In addition to a flat-lining economy, the increase is principally due to additional costs hitting operators in April following the Budget in October, which includes higher National Insurance contributions and a 7% increase in the National Living Wage. 

Job losses across the sector

Job losses are inevitable. Official data shows that the number of workers employed in accommodation and food services dropped by 58,000 between January 2024 and January 2025. A survey by the Chartered Institute of Personnel and Development indicates that a quarter of businesses plan to cut jobs, the highest level in a decade, outside of the COVID-19 pandemic. The hospitality and leisure sector is expected to be amongst the hardest hit as the Employer’s National Insurance rate increases from 13.8% to 15%.

Additional costs in the spring will also arise from the reduction in rates relief, also announced in the Budget, from 75% to 40%, resulting in an estimated £140m additional cost for retail, hospitality and leisure firms.

Inflation adds to business challenges

Inflation has also reared its ugly head again, rising by 3% in the year to January 2025, up from 2.5% in the year to December 2024. Is this a blip or the sign of more inflation? Some analysts expect further increases with a potential peak of 3.7% later this year. Inflation makes it very difficult for operators to manage the cost of doing business.

How hospitality businesses can adapt

These are tough times. The hospitality sector remains a key part of the UK economy, employing around 1 in 10 people. Individual operators need to up their game in the face of adversity to stand out from the crowd. In addition, they need to align themselves with their target customers even more in the current climate. 

Luxury and exclusivity for high-net-worth customers

At the top end of the income and wealth scale, the drive is to luxury and exclusivity. In recent years, the hospitality sector has seen a significant shift towards membership-based services. As consumers seek more personalised, luxurious and unique experiences, operators are offering private, invitation-only experiences tailored to wealthy individuals.

Value driven brands for younger consumers

For younger, single and less affluent customers, there is a flight to brands that correlate with their values, with a particular focus on brands and operators that promote social and environmental causes.

Value for money and connection for families

A third segment, consisting predominantly of middle-aged parents, prioritises value for money, escape from routine and connection with family and friends. Loungers, the restaurant and bar group has prospered in the space, scaling up to the extent that it was recently acquired by Fortress Investment in the US for £354m.

Enhancing digital and online presence

A strong and effective digital offering remains important for brands and operators, particularly at the booking stage. If potential customers find it difficult to book activities online, they are likely to look elsewhere. Key focus areas include:

• Seamless online booking: A smooth, hassle-free reservation system.
• Engaging visual content: High-quality images and videos to showcase offerings.
• Transparent pricing & easy payments: Clear pricing structures and convenient payment methods.

The next step

If you would like to discuss the above, please get in touch with Martin Jones at martin.jones@uhy-uk.com or reach out to one of our specialist hospitality accountants.