The Night-Time Industries Association (NTIA) has estimated that more than 5,000 illegal parties will take place over the New Year weekend.
Businesses would normally manage huge crowds of people through the New Year's celebrations, and industry leaders are calling for the government to consider the impact on policing and emergency services during this period, with many warning that services will be overwhelmed.
The NTIA said the ongoing restrictions have created an increasing level of frustration and angst from people who have been socially starved for an elongated period of time, which is impacting their mental health and social wellbeing. It said that many will turn to illegal parties following the closure of businesses at 11pm, one hour short of the beginning of 2021.
The potentially huge number of attendees mixing together in non-Covid safe environments could create a fresh wave of infections in January.
Michael Kill, chief executive of the NTIA, said: "There is a growing concern that New Year's Eve is going to culminate in social unrest and will see a substantial number of illegal parties and mass gatherings following the closure of businesses at 11pm, with a real risk of overwhelming the police and emergency services.
"We are estimating that the UK will be witness to over 5,000 illegal parties across New Year's Eve weekend. The government needs to consider ways in which to manage this grave situation. People will want to celebrate the end of 2020 in their own way; ignoring the issue will not resolve what will be a significant car crash in every sense of the term.
"The volume of people being pushed out onto the street following the 11pm closure, one hour before NYE celebrations begins, will become counterproductive and we will see the impact of this in January 2021. There needs to be some consideration given to the current restrictions on NYE, and a unified message, urging people to consider the impact of their actions."
Sacha Lord, night time economy adviser for Greater Manchester, said: "The closure of hospitality venues in Tier 3, combined with the 11pm curfew elsewhere only serves to encourage house parties and outdoor gatherings, and it's inevitable we will see an increase of these on New Year's Eve. I urge all those considering hosting or attending a gathering to think about those around them who may be vulnerable to Covid-19, and to put their health and safety first."