It’s no secret that the hospitality sector is facing one of its toughest periods in recent memory. From pubs and restaurants to cafés and catering firms, businesses across the UK are grappling with rising costs, shrinking margins and growing uncertainty. For many directors, the question is no longer whether things are difficult. It’s how long they can hold on.
Recent data paints a stark picture. According to a joint survey by UKHospitality, the British Beer and Pub Association, and Hospitality Ulster, 79% of hospitality businesses have raised prices in the past year, yet 73% report having less than six months’ cash reserves. Over half have reduced staff hours or cut roles entirely.
The pressures are coming from all directions:
- Wage increases: The National Living Wage for those aged 21 and over rose by 6.7% in April 2025, with further rises expected in 2026 and beyond.
- National Insurance: Employer contributions have increased, adding to payroll costs.
- Business rates: Relief schemes have been scaled back, leaving many with higher fixed overheads.
- Energy and supply chain costs: Despite some stabilisation, prices remain significantly above pre-pandemic levels.
For directors, these aren’t just numbers. They’re daily realities. And while turnover may still look healthy on paper, profitability is often another story.
Turnover is vanity, profit is sanity
Elaine Wilkins, Director at Antony Batty’s Bournemouth office, recently met with the directors of a well-established hospitality business in the area. The business’s weekly turnover is around £10,000 – a figure that might suggest stability. But rising costs, especially since April, have eroded margins to the point where they’re no longer making a profit.
“They’ve worked incredibly hard to try to return to profitability,” Elaine explains, “but the numbers just aren’t adding up. They’re now facing a difficult decision: raise prices, or risk insolvency.”
It’s a dilemma many directors will recognise. Price increases can feel risky, especially when loyal customers are already stretched. But as Elaine advised, transparency is key.
“They need to explain the situation clearly, both in-store and on their website. Let customers know that every effort has been made to cut costs elsewhere, and that price rises are a last resort. Don’t be scared to put prices up but be transparent and put notes on menus or a notice up thanking clients for their custom and their understanding.”
Crucially, Elaine urged them to speak with their accountant and prepare a detailed cash flow analysis.
“It’s not enough to guess what a price increase might achieve. You need to know exactly how big an increase is required to restore profitability, and what the impact will be.”
She also points out that:
“Continuing to trade when profits are not being made will only deepen financial problems and potentially expose directors to personal liability for wrongful trading if insolvency is the outcome. Recognising when a business has reached this point requires honest assessment and professional guidance.”
The danger of delay
One of the most common mistakes directors make is waiting too long to seek advice. When cashflow tightens, it’s tempting to hope things will improve. But as costs continue to rise, the margin for error shrinks.
That’s when early intervention from a licensed insolvency practitioner can make all the difference. Contrary to popular belief, insolvency practitioners aren’t just there to wind up companies. They’re problem-solvers, often able to help directors restructure, negotiate with creditors and buy time to turn things around.
At Antony Batty & Company, our team regularly supports directors with:
- Time to Pay arrangements with HMRC
- Company Voluntary Arrangements (CVAs) to manage debts while continuing to trade
- Cashflow forecasting and viability reviews
- Advice on director responsibilities and legal obligations
These aren’t last-ditch solutions. They’re proactive tools that can help struggling but still viable businesses stay afloat.
A sector worth saving
Hospitality isn’t just another industry. It’s part of the UK’s social and economic fabric. It provides jobs, community spaces and cultural value. But without targeted support and early action, many businesses risk being lost.
Trade bodies are calling for urgent government intervention, including:
- A cut in VAT for hospitality services
- Reversal of the recent Employers’ National Insurance increase
- Restoration of business rates relief for small and medium-sized operators
Whether or not these measures are introduced, directors must focus on what they can control. That means understanding their numbers, communicating clearly with customers and seeking expert advice before problems escalate.
How insolvency practitioners can help
The current climate is undeniably tough, but it’s not hopeless. With the right support and a clear plan, many hospitality businesses can weather the storm. As Elaine’s case study shows, even difficult decisions like price increases can be managed with honesty and precision.
If you’re a director feeling the pressure, don’t hope for things to get better. Be proactive, talk to your accountant. Review your cashflow. And speak to a licensed insolvency practitioner who understands your sector and can help you explore your options.
Antony Batty & Company has offices in London, Bournemouth, Brentwood, the Thames Valley and Salisbury. Our team is ready to listen, advise and support directors who want to take control before it’s too late.
