Pubs and hospitality sector face mounting pressure amid tax hikes and closures

The UK’s hospitality sector is facing a deepening crisis, with pubs, restaurants and cafes bearing the brunt of recent tax increases and rising operational costs. Industry leaders have warned that the scale of closures and job losses is accelerating, threatening the future of thousands of businesses and the communities they serve.

According to analysis by UKHospitality, more than half of all job losses in the UK since the Autumn Budget have occurred in the hospitality sector, amounting to nearly 89,000 roles. The Office for National Statistics recorded 164,641 total job losses over the same period, meaning hospitality accounted for 53 per cent of the national figure. Trade bodies say the impact of Chancellor Rachel Reeves’s £25 billion rise in employer National Insurance contributions, coupled with an above-inflation increase in the minimum wage, has created a “double whammy” for businesses already grappling with high energy bills and reduced consumer spending.

Pubs have been particularly hard hit. Government data shows that 209 pubs were demolished or converted for other uses in the first half of 2025—an average of eight closures per week. Since 2020, more than 2,280 pubs have disappeared from communities across England and Wales. The South East has been the worst affected region, losing 31 pubs in just six months.

Emma McClarkin, chief executive of the British Beer and Pub Association, described the trend as “heartbreaking” and directly linked to the surge in costs. “Pubs and brewers are important employers and have real social value. But this is a really sad pattern, and unfortunately a lot of these pubs never come back,” she said.

The financial strain has forced many hospitality businesses to reduce opening hours, cut staff, and raise prices. A recent survey by leading trade bodies found that nearly three-quarters of pubs, restaurants and cafes were operating below 85 per cent of their normal capacity, with one in five having no cash reserves at all.

Despite these challenges, there are pockets of resilience. The hospitality sector has seen a surge in new startups, particularly in Scotland, where business incorporations rose by 18.7 per cent in the first half of 2025 compared to late 2024. However, industry leaders caution that without urgent government intervention—such as reforms to business rates, VAT reductions, and a reversal of National Insurance changes—the sector risks further contraction.

A government spokesperson defended its support for hospitality, citing measures such as extended business rates relief, reduced licensing costs, and cuts to alcohol duty on draught pints. But trade bodies argue these steps fall short of addressing the structural pressures created by the Budget.

As the autumn approaches, calls are growing for the government to act decisively to prevent a winter of closures and job losses across the UK’s hospitality landscape.