The confidence of Britain’s hospitality leaders has fallen for the fifth quarter in a row as pressure mounts on operating costs, CGA by NIQ’s latest Business Confidence Survey shows.
The exclusive poll reveals only a third (33%) of leaders feel confident about prospects for their business over the next 12 months—8 percentage points down from October’s figure of 41%.
Optimism is now at its lowest point since late 2022, and its second lowest since the COVID lockdowns of 2020. Confidence is even more fragile among independent operators at just 12%.
Only 14% of all leaders meanwhile feel optimistic about the future of hospitality in general over the next year—6 percentage points down quarter-on-quarter and barely a third of the level of 41% in January 2024.
Optimism has slipped despite solid trading for many hospitality groups over Christmas, stability in venue numbers and an easing of inflation in some areas. More than four-fifths of leaders say their fourth quarter trading was either ahead (43%) or level (40%) year-on-year. However, only 31% said they increased their profits, while 29% said they had dropped.
Profitability has been eroded by fast-rising labour costs, the Business Confidence Survey shows. Nearly half (47%) of leaders say their wage costs have significantly increased in the last 12 months, with another 52% saying they had increased. High numbers report at least some increases in the cost of food and drink (79%), energy (57%) and rent (39%).
The strain on costs is set to worsen from April, when employers face extra labour costs. More than four in five (84%) leaders say the planned reduction in National Insurance contribution thresholds will have a very negative impact on their business. Well over half will be very negatively affected by increases to NIC rates (62%) and increases to the National Minimum Wage (53%).
This will have significant impacts for businesses, and well over half of leaders say it will force them to cancel investment (64%), reduce staff levels (59%) and reduce employee benefits (57%). Smaller numbers say they will have to defer pay increases, cut training, reduce trading hours or close sites.
Karl Chessell, CGA by NIQ’s director – hospitality operators and food, EMEA, said, “After a strong end to 2024 and a cooling of inflation, hospitality groups should be looking forward with positivity. However, our latest survey makes clear that leaders’ confidence is being hard hit by a relentless squeeze on margins.
“Entrepreneurs and smaller businesses, the lifeblood of hospitality, are particularly vulnerable, and new payroll costs will force many businesses to pull investment and cut jobs, compromising the economic growth the government wants. Hospitality remains a dynamic industry, but the need for targeted support and a rethink on NIC is now urgent.”
