Over half of business leaders report drop in profitability

Half of business leaders have reported a drop in profit and are pessimistic about prospects over the next 12 months, according to new research.

Only 41% of respondents to the Business Confidence Survey from NIQ and Zonal reported that their quarterly revenue had increased year-on-year, despite higher prices in most venues.

Over half (52%) said that their profitability had either dropped or that they were running at a loss.

The survey quizzed senior leaders responsible for some than 17,000 hospitality sites. Just 35% of them felt optimistic for their business over the next 12 months, despite some hope that Prime Minister Andy Burnham will offer some relief, with 47% saying they were optimistic that the new leadership would benefit hospitality.

Respondents said that high labour costs were a significant concern, with employment costs rising by an average of 11% per person in two years.

Karl Chessell, director – hospitality operators and food, EMEA at NIQ, said: “The World Cup and hot weather should have boosted hospitality this summer, but any benefits have been outweighed by relentless challenges.

“Falling visits and rising costs are a hugely damaging combination and it is no surprise to see that leaders’ confidence is running so low – especially among smaller businesses. With conflicts and the climate fuelling market volatility, there is little respite in sight on inflation.”

He added that the forthcoming budget may provide some reasons for optimism.

Chessell said: “From VAT to rates to National Insurance contributions to alcohol duty, there are many levers that the government can immediately pull to ease the pressure on operators. Doing so would quickly unlock investment and new jobs and help kickstart the economic growth that the country needs.”

Tim Chapman, chief commercial officer at Zonal, added: “What is most striking about this research is that, despite the challenging operating environment, just how much operators are continuing to invest where they can – in their estates, in their teams, in technology, and in the experiences that keep guests coming back.

“That being said, there’s no hiding from the fact that confidence in the sector is flat at best. Recent Government moves, however, such as business rates relief, are creating some optimism as we look to rest of 2026 and beyond.”