Hospitality sector contracts as inflation drives wave of closures in Q1

This marks the sector’s second consecutive quarterly fall.

Rising costs for both businesses and consumers contributed to a 0.3% drop in Britain’s licensed hospitality venues in the first quarter (Q1) of 2026, according to the latest Hospitality Market Monitor.

The NIQ report, using CGA data, recorded 98,609 licensed outlets at the end of March 2026—down by 305 from December 2025, averaging about 3.4 closures per day.

It marks the second consecutive quarterly fall, indicating a continued build-up in closures across the sector.

The report links the downturn to sustained inflation in key operating costs such as labour, energy, and food and drink, along with weak consumer spending confidence.

It also notes that ongoing conflicts in the Middle East could put further pressure on energy-related costs in the near to medium term.

Across sectors, none showed net growth in Q1.

Casual dining restaurants saw the steepest decline, with a 0.9% drop in outlet numbers over three months.

Bars were also affected, reflecting reduced discretionary spending.

The accommodation sector was comparatively more stable.

The licensed hotel segment has grown year-on-year and now sits 4.7% below its March 2020 pre-pandemic level, a smaller decline than the 14.3% fall seen across all licensed premises.

The report suggests that tighter household budgets and rising travel costs could shift demand toward domestic breaks, potentially supporting staycations and benefiting hotels, guesthouses, and holiday parks over the summer.

“Confidence amongst leaders and consumers alike is low, and geopolitical crises are likely to cause more damage in the months ahead,” said Karl Chessell, director of hospitality operators and food for EMEA at NIQ. “Without targeted support, more closures can be expected over the rest of 2026.”