The UK has seen a nearly 20% rise in insolvencies since January, with bars, restaurants, and hotels in particular struggling under the weight of soaring costs.
New figures reveal a sharp 19.8% increase in insolvencies between January and July 2025, a worrying sign of the significant financial strain that the UK business population is facing.
The summer months proved particularly challenging, with June to July alone seeing a 6.7% jump, the steepest monthly rise so far this year.
This wave of closures is rippling through the hospitality industry, which has been hardest hit, leading to job losses and a dwindling choice of surviving pubs and eateries.
Together, they highlight the bleak position many businesses face as costs soar and customer spending fails to follow suit.
What’s behind the surge in insolvencies?
Analysis by the Morning Advertiser shows insolvencies rising across the board from 273 in January to 327 in July. While there were minor dips in February and April, the overall trend has been upwards, with June – July marking the most dramatic increase at 6.7%.
Earlier data from the government’s Insolvency Service also highlighted the problem. In the 12 months leading up to June 2025, accommodation and food service activities ranked among the industries with the highest number of insolvencies across the UK economy.
At the time, Saxon Moseley, partner and head of leisure and hospitality, commented:
“Rising costs, including food inflation, energy, national minimum wage and employers’ national insurance contributions have contributed to the increase in insolvencies this year, combined with sluggish consumer demand.”
Rising costs and sluggish demand cripple industry
As Moseley outlines, operators are under pressure from multiple directions. Food inflation, soaring energy bills, and rising labour costs, including both minimum wage increases and higher employer NIC contributions, are eating into already tight margins.
At the same time, consumer confidence has taken a hit in response to the cost-of-living crisis. Many households are understandably cutting back on optional spending, with bars and restaurants feeling the effects.
For smaller businesses in particular, the combination of higher overheads and shrinking demand can be lethal. Unlike larger chains, independents often lack the financial buffer to absorb sudden changes, making insolvency an increasingly realistic outcome.
The bleak cumulative result of rising input costs, declining footfall, and the pressure to keep prices competitive is that many hospitality businesses have no other option but to call it a day.
What will the Budget bring?
With the Autumn Budget approaching, hospitality bosses are searching for a light at the end of the tunnel.
In calls for financial relief, businesses are urging the government to consider reduced employer NIC contributions, targeted small business incentives, investment in consumer spending initiatives to support footfall, and a long-awaited reform of business rates.
Still, expectations need to be realistic. With the Chancellor under significant financial pressure, generous support for businesses looks unlikely.
For hospitality operators, the focus should remain on what’s in their control, such as reviewing costs and implementing operational efficiencies to build resilience against further shocks. “Many operators are now in survival mode,” added Saxon Moseley.
“As a key creator of jobs, the sector is a cornerstone for the UK economy, and therefore, a fragile hospitality industry presents an economic headache for the Chancellor.”
Moseley has also joined various industry groups pressing for Rachel Reeves to address the sector’s challenges head-on, as reported by The Caterer.
“Taking steps to overhaul the business rates system, as well as supporting the industry to respond to recent tax increases, would help alleviate pressure on operators, keep more businesses solvent, and in turn allow them to invest in jobs for the future,” he added.
