Soaring costs continue to take toll as hospitality closures accelerate

Businesses in the UK’s hospitality sector continue to be affected by soaring costs, with closures accelerating at the start of 2026. With confidence low and geopolitical pressures increasing, there are warnings that this is a trend that could persist throughout the year.

According to the latest Hospitality Market Monitor report from NIQ, powered by CGA intelligence, there were more than 350 closures of pubs and restaurants during the first quarter of 2026.

Factors including rising energy costs, weak consumer demand and tax increases were cited as playing a key role in a 0.3 per cent drop in the number of licensed premises in Britain during Q1 2026. The report showed that there were 98,609 licensed outlets in Britain at the end of March 2026, with an average of 3.4 net closures per day since the end of December 2025.

This represents the second successive quarter-on-quarter drop, indicating that closures are starting to accelerate across the hospitality sector. Closures are being driven by inflation in areas critical to the industry, including labour, energy and food and drink, which comes alongside fragile consumer confidence regarding spending. Furthermore, with conflicts continuing to escalate in the Middle East, it is likely that there will be further cost increases across the short-to-medium term.

According to the report, none of the main channels of the hospitality industry was able to record growth during Q1 2026. There was a particular decline in the casual dining restaurant subsector, which saw a 0.9 per cent drop in the number of outlets during the three month period, while bars were also heavily affected by cuts to consumer discretionary spending.

Karl Chessell, Director – Hospitality Operators and Food, EMEA at CGA by NIQ, commented “Soaring costs have taken a heavy toll on hospitality in the first quarter and forced hundreds of businesses to close, with distressing impacts for the operators and employees concerned.”

“Confidence among leaders and consumers alike is low, and geopolitical crises are likely to cause more damage in the months ahead. Many pubs, bars, restaurants and other outlets have shown remarkable resilience in the face of unprecedented challenges, but thousands are now nearing breaking point. Without targeted support, more closures can be expected over the rest of 2026.”

The report also analysed the accommodation sector, which has proven resilient to the headwinds that have defined the past few years. In the licensed hotel segment, outlet numbers have increased year-on-year and are now just 4.7 per cent smaller than pre-COVID levels in March 2020, in contrast to a 14.3 per cent drop across all outlets.

With holiday plans likely to continue to be affected by cautious household budgets and increasing travel costs, outlets such as hotels, holiday parks and guest houses could be set to capitalise on an increase in domestic holidays during summer 2026.

Despite the challenges that the UK restaurant industry is facing, the sector continues to see strong M&A opportunities

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