Amid skyrocketing overheads and energy costs, hospitality is facing financial pressures from all sides. Operators are at a crossroads, facing the difficult choice between absorbing rising costs, or passing them onto customers through price increases. 

An often talked-about option is ‘shrinkflation’. It’s a controversial, yet increasingly common strategy used to protect margins across industries without raising headline prices. The idea has its roots in retail, but has also been spotted in some UK pubs, bars, and restaurants.

Below, we explore the concept of shrinkflation to ask: is this hospitality’s golden ticket out of an economic crisis, or a surefire way to alienate your customers?

Why are menu prices rising in 2025?

Soaring food prices as well as the higher costs of spirits have sent inventory costs up. At the same time, hiked employer National Insurance contributions and National Living Wage rates have meant that payroll bills (one of the sector’s biggest expenses) are also going up.

In short, it’s becoming more expensive for organisations to both employ staff and produce the food and drink that customers enjoy everyday. And something has to give.

The latest CGA Prestige Foodservice Price Index (FPI) confirms the challenges, showing a sharp 2% month-on-month increase in food and drinks costs in June. Together, these pressures are already driving prices higher across the sector.

The result? Increasingly slim profit margins for operators. Despite rising sales in some areas, many businesses are struggling to stay afloat amid the pressure. The situation is so severe that even big names, such as BrewDog, have been forced to close bars. 

What is shrinkflation?

Shrinkflation refers to pubs, bars, and restaurants reducing portion sizes while keeping the menu price the same. It’s one tactic operators might use to survive inflation without absorbing the costs themselves or raising prices for customers. 

We’re all familiar with the most infamous case of shrinkflation, Cadbury’s Freddos. The chocolate snack has been getting noticeably smaller, making it the nation’s favourite unofficial recession barometer.

In pubs and restaurants, shrinkflation might look like smaller side portions or serving less meat in roast dinners. It can also affect beverages. In April, Oxfordshire pubs came under fire as over half of the drinks served were found to be short pours. An accident, or perhaps a subtle attempt at cost-cutting by shrinkflation.

There are other reasons behind shrinking portions, too. Some pubs are downsizing plates not as a sneaky pricing strategy, but to cut back on food waste. Oddly, some have even linked the issue to the Ozempic craze, arguing that customer appetites are also shrinking.

Navigating price rises in 2025

Operators might be tempted to use shrinkflation as a way to manage rising costs, but is it really a smart move? With price sensitivity still high and many people cutting back on non-essential spending, even small changes can be noticed. 

Slightly smaller portions or cheaper ingredients can be a less jarring adjustment for customers than a direct price hike. Still, it’s not without risks. Eagle-eyed regulars are likely to feel short-changed, leading to backlash that can damage long-term loyalty.

Thankfully, it’s not the only option for struggling businesses. Consider alternative pricing strategies, like smarter menu engineering to highlight higher-margin dishes. You should also try to negotiate better deals with suppliers if you’re struggling with higher menu costs.

Transparency can be a better alternative to cloaked price increases. Openly communicating with customers about the pressures of rising costs can build trust.

It’s worth remembering that short-term gains from shrinkflation may not be worth risking long-term customer relationships. After all, when portions quietly shrink, so can customer trust — and rebuilding that is a cost no SME can afford.

Community support is vital in today’s economy. That’s the ethos behind the well-known Small Business Saturday campaign, which champions independent firms across the UK. 

This November, the initiative is hitting the road again with a nationwide tour, bringing its message of support directly to local business owners.

Backed by BT, the annual tour is now in its thirteenth year of offering hands-on advice, resources, and inspiration to entrepreneurs. 

What is the Small Business Saturday Tour?

Small Business Saturday is a month-long touring roadshow, shining a spotlight on small businesses in towns and cities across the UK. 

Each year it goes behind the scenes of businesses, telling the stories of business owners and their communities, recognising the vital role of small businesses in local economies. 

Alongside its main programme, it offers online training, including webinars, mentoring, workshops, and success stories from entrepreneurs for any small businesses to access.

The tour will begin on November 3rd in Lossiemouth. Over the next five weeks, it will travel more than 3,000 miles in an electric van, highlighting the commitment to sustainability that many SMEs are embracing as they work towards the shared goal of achieving net zero.

Where will the 2025 tour visit?

Small Business Saturday 2025 will call in at 23 stops across the UK:

• Lossiemouth
• Aberdeenshire
• Edinburgh
• Belfast
• Preston
• Carlisle
• Durham
• Manchester
• Grimsby
• Derby
• Wrexham
• Hereford
• Newport
• Crediton
• Plymouth
• Salisbury
• Brighton
• Maidstone
• Leighton Buzzard
• Cambridge
• Putney, London
• BT, London
• The Regent’s Park, London

If you’d like to get involved, start by letting your customers know when the roadshow is coming to your town or city. Spread the word through your social media channels, email newsletters, or eye-catching in-store signage so your community doesn’t miss out.

Many businesses also mark the occasion by offering a special deal, product launch, or one-day discount, adding to the buzz and giving customers an extra reason to stop by.

To stay on top of the exact dates and timings for your area, follow the official Small Business Saturday channels or check their hashtags for the latest updates.

And if the tour doesn’t make it to your city? Don’t worry, you can still take part in the nationwide celebration through the online programme of events, which is open to everyone.

Why is Small Business Saturday important?

Small Business Saturday is a major event on the calendar for SMEs. It has engaged millions of shoppers and generated billions in spending for small businesses across the UK.

This event enhances the visibility of the UK’s 5.45 million small businesses, provides networking and learning opportunities, and fosters a strong sense of customer loyalty.

According to our 2024 survey, customer loyalty is the most important factor in business success, with 55% of businesses identifying it as such. In-person events like Small Business Saturday are a fruitful opportunity for businesses to maintain strong community foundations. 

If you’re not located near one of the tour stops, there are still many online resources available, such as workshops and mentoring, that you can take advantage of.

April’s changes to National Insurance Contributions (NICs) have left 84% of UK employers facing higher costs of employment, with almost a third reporting a significant rise, according to the latest CIPD figures released this month.

For SMEs already up against tight margins, planned changes to the National Living Wage (NLW) next spring will only compound the pressure. As a result, many firms have no choice but to put hiring plans on hold, which can stunt growth. 

They include Jonathan Moser, CEO at Mo’Living. “Since April, I’ve resisted taking on full-time staff. My property management business now runs entirely with 12 contractors and virtual assistants, both UK-based and overseas,” says Moser.

Could virtual assistants (VAs) be a viable alternative? Offering skilled support without the overheads of a full-time employee, VAs are becoming an increasingly attractive option for business owners who need help but can’t justify the expense of traditional hires.

What is a virtual assistant?

A virtual assistant is a remote professional who provides support to businesses, often on a freelance or contract basis. They can help with a wide range of tasks, everything from social media management, email handling, marketing, and accounting.

The increase in hiring for VAs and contractors is a direct response to a surge in employment costs, largely caused by the rise in employer NICs at the start of April. 

The effects of these tax hikes are already being felt in the job market, as data from QuickBooks shows a decline in job vacancies. 

It’s worth mentioning that some VAs are not people at all, but AI-powered tools which can automate repetitive tasks, such as data entry. That might be one reason why entry-level roles are seeing particularly large drops in vacancies.

Why virtual assistants are winning over SMEs

VAs allow businesses to get additional support while avoiding the extra costs associated with hiring traditional employees.

Instead of committing to paying a fixed salary and NICs, pension contributions, and additional employee benefits, businesses only need to pay VAs their day rate or hourly rate. There’s also added flexibility in that paid hours can fluctuate according to demand, meaning you’ll only pay for what you need. 

In addition, many VAs offer specialist skills, such as marketing, social media, and bookkeeping, sometimes all of the above. This means you can access high-value skills that would be otherwise pricey to hire in-house. 

While a lack of commitment can be a bonus, it can backfire. VAs can leave at any moment, leaving you in the lurch. They may also lack the deep brand knowledge that you would otherwise establish with long-term employees. Having a flow of transient freelancers, rather than a solid, committed team, can also negatively affect your company culture.

Other employers like Moser have already dived into the world of virtual assistance. Kate Allen, who is owner of the Kingsbridge-based Finest Stays, has also gone ‘virtual’.

“The best thing we’ve done lately is trial a VA for a couple of months. No HR hassle, no holiday pay, cheaper than hiring someone full-time, and the quality is excellent”, says Allen.

How to successfully hire a virtual assistant

The growing popularity of VAs reflects a wider shift towards a more flexible, agile workforce. Yes, this trend is partly driven by the rising costs of traditional employment, but it also represents an opportunity. For SMEs, virtual assistance offers a way to access growth and stay competitive, even in a challenging economic climate.

If you’re considering hiring a VA, start by mapping out your priorities. Which tasks are draining your time, and which ones could be handled more efficiently by someone else? Once you know what to delegate, you’ll have a clearer idea of the type of VA you need. 

Professional platforms are a good place to start searching, but before committing, it’s wise to run a trial project. This will allow you to assess a worker’s skills and communication style, plus set out a clear contract with expectations, deadlines, and terms.

Rachel Reeves is in the bad place. The Chancellor reportedly faces a £51bn black hole in the public finances, and economists say that tax rises in the forthcoming Autumn Budget are her only way out. One of which, experts warn, is likely to affect capital gains tax (CGT).

The Treasury has been leaning on CGT to raise money. Last October, the lower CGT rate rose to 18% for basic rate taxpayers (the higher rate increased to 24%). 

Entrepreneurs benefit from Business Asset Disposal Relief (BADR), which allows them to sell all or part of their business at a reduced rate of 14%, up to a lifetime limit of £1m. But, from 6 April 2026, this rate will rise in line with the normal CGT rate of 18%.

With this change set to add strain to already struggling businesses, experts are now warning that further increases to CGT could be disastrous for the UK’s M&A market.

What is capital gains tax?

CGT is paid on the profits when assets (including business entities, properties, equipment, or shares) are sold. It’s often described as a voluntary tax, because individuals can defer it by simply choosing not to put an asset up for sale.

CGT is arguably a more palatable tax rise over compulsory duties such as VAT. That might have been the Chancellor’s thinking when she raised rates in the 2024 Autumn Budget. 

That said, CGT has not proven to be reliable income for the government in recent years. At the end of July, HM Revenue & Customs released data which showed the government’s CGT take fell 18% in the 2023-24 fiscal year. 

That’s despite the annual tax-free allowance – the amount of gains you can make on a sale before paying tax – falling from £12,300 to £6,000 in the same period.

The tax-free allowance was once again halved to £3,000 in 2024 to further boost receipts. If the latest HMRC figures are anything to go by, this is unlikely to fill government coffers.

Rise “could collapse CGT receipts”

The problem with raising an involuntary tax rate is obvious: individuals affected by the rise will simply seek out ways to avoid paying it. In the case of CGT, that means prolonging the sale of a business. 

Peter Mardon, Head of Company Commercial and Director at law firm WSP Solicitors, says “in terms of raising revenue, the government’s CGT rate increases have been a failure.”

Mardon says many of his clients now plan to sell this tax year, before the rise in rates, or else hold off until 2029 when they expect a new Chancellor with more CGT-friendly policies.

It’s a delay, he warns, that will depress the UK’s mergers and acquisitions market and collapse CGT receipts “just when the government is most desperate for tax revenue”.

In this month’s print edition of Vogue, one advert featured a model wearing a floral playsuit from the fashion brand Guess. She was smiling, blonde, and entirely AI-generated.

Vogue has since confirmed this is the first time an AI person has featured in the magazine. Given the subsequent backlash the placement caused, it could also be the last. 

But with AI imagery cropping up frequently in digital marketing, is this a cautionary tale for retailers? Or an inspirational one?

In a recent survey by Startups, more than 8 out of 10 online retailers told us they felt pressure to adopt the latest technology in order to remain competitive. We explore what that means for advertising, and how consumers might respond to the new breed of robot models.

What is an AI fashion model?

AI fashion models are digital avatars created using generative AI. Designed to represent clothing and accessories in a way that mimics human models, they’re becoming a frequent presence online, and particularly in social commerce. 

If you think this sounds ridiculous, you’ve not been paying attention. CGI models have actually been knocking on advertisers’ doors for years.

These so-called ‘virtual influencers’ (computer-generated characters that live on social media) can earn up to £26,700 per post. One of the most famous, Lil Miquela, has starred in campaigns for Calvin Klein and Prada.

Lil Miquela isn’t a million-pound invention. She was built in 2016 by a small creative agency in LA called BRU:D. Since then, lots of fashion-tech startups have appeared on the market hoping to replicate BRU:D’s success at scale. And some are succeeding.

How do AI fashion models work?

For ecommerce brands, the key advantage of using an AI-generated product photo is convenience. All companies need to supply is a photo of the item, and they’ll be able to get a professional-looking image (or even a video) of a fully-styled model wearing it. 

Take the agency behind the Guess ad, Seraphinne Vallora. It produces editorial level AI-driven marketing campaigns, and offers a range of models, poses, and backgrounds that match your brand, for complete design control. 

The costs can be enticing. Botika is a software company based in Tel Aviv, which describes itself as “the leader in AI generated models for fashion”. It offers brands the option to purchase a minimum of 20 AI photos per month, for as little as $18 (around £14) per month.

When you compare this to the cost of hiring a commercial model, as well as make-up artists, stylists, photographers, and studio space, it becomes an easy sell to online stores.

Should you use AI in advertising?

AI offers powerful tools for content personalisation, volume, and efficiency. But it also presents risks. Many Vogue readers took to social media to lambast its use in the Guess advert, with some even threatening to cancel their magazine subscriptions.

Toeing the line between reducing costs and sowing mistrust is a tough ask for businesses. 50% of Brits say they don’t trust brands that don’t handle AI properly, according to photo editing software Photoroom. So what exactly is improper use?

For Guess critics, lack of clarity may have been their main qualm. The published ad included a tiny, easy-to-miss disclaimer “produced by Seraphinne Vallora on AI”, which left readers confused over the level of human work involved in the production.

Another issue could be that AI use did not align with Vogue’s branding. The magazine is well known for championing artistry and celebrating the work of fashion creators, deploying AI in a high-profile, heavily artistic context may have felt jarring to readers.

SMEs may find that AI is more readily accepted by consumers — especially in practical or low-budget contexts like product photography — than in a full-scale, creative campaign.

Retailers feeling pressure to adopt AI

According to our 2025 Workforce Report, 82% of UK businesses overall said they feel under pressure to adopt emerging technologies, including AI. Among ecommerce and retail businesses specifically, that figure rises to 84%.

With businesses clamouring to be the first to use the latest tech, and some consumers standing firm on the anti-AI bandwagon, the question of how and when robot creations become acceptable in paid media becomes increasingly confused. 

Ultimately, using AI in advertising comes down to context, transparency, and knowing your customers. In fashion, as in all marketing, trust is your most valuable accessory.

The global jeweller, Pandora has recently fallen victim to a cyber attack — becoming the latest high-profile cyber incident. Other major retailers, such as M&S and the Co-op, were also hit with similar attacks earlier this year. 

The increase in cybercrime among these businesses has inevitably raised caution among consumers, with research from GlobalData revealing that worries over the issue have deterred young people from shopping online.

This could have a serious impact on ecommerce SMEs, who are often more vulnerable to these threats because they don’t typically have the resources for strong cybersecurity measures.

Pandora becomes the latest victim in cyber attack wave

Last week, Pandora confirmed that it had been hit by a cyber attack, with customer data being breached as a result. However, the company claimed that no confidential information, such as passwords and credit card details, was compromised.

A Pandora spokesperson told Forbes: “While incidents like these have unfortunately become increasingly common across industries, particularly among global companies, we take this matter very seriously. We are working closely with our supplier to investigate the incident thoroughly and to implement all necessary measures to ensure this does not happen again.”

Pandora has become the latest business hit by malicious cyber attacks. M&S reported a cyber breach in April, resulting in customer information being compromised. 

Major services, such as online orders and click-and-collect, were also paused. And even after the issue was resolved, online ordering didn’t resume until June. Its click-and-collect service had only just returned yesterday.

That same month, the Co-op also reported a cyber attack. At the time, CEO Shirine Khoury-Haq told the BBC that criminals had “accessed data relating to a significant number of our current and past members.” 

Online shopping fears hurting customer trust

While these incidents have since been resolved, it isn’t surprising that cybercrime fears are making consumers think twice about shopping online.

Young shoppers in particular are feeling the most concerned. According to statistics by GlobalData, one in five young consumers in the UK are considering reducing their online shopping for this very reason. 

33.5% of shoppers aged 16-24 reported that they were likely to reduce or completely stop online shopping, followed closely by 33.4% of consumers aged 25-34.

For Pandora, this could become a concern. The company had previously worked hard to appeal to Gen Z through new and updated pieces in its Pandora Me collection.

Emily Salter, Lead Retail Analyst at GlobalData, believes that the security of payment information is the leading concern for young shoppers. “Younger consumers are more concerned about retailers storing their payment details, and think that they are not doing enough to protect their private information when shopping online,” Salter comments.

How to protect your small business from cyber attacks

Smaller online stores can be much more vulnerable to attacks, due to their smaller cash reserves. Research by FLR Spectron reveals that UK SMEs faced over 200,000 cyber attacks between July and September last year — equating to one every 39 seconds. 

It was also reported that the seasonal slowdown in the summertime make July and August the prime time for cyber criminals to strike.

While small retail businesses may not have the same resources as brands like Pandora, it’s crucial to be proactive in ensuring the best cybersecurity, or risk devastating consequences.

Scheduling critical security updates before staff go on leave, such as during the Christmas holidays, and assigning certain people with responsibility for monitoring security, can help to protect business information from being compromised.

Other best practices include running a stress test to see how the business responds to an out-of-hours threat. Even something as simple as educating staff around securing confidential information while travelling or working remotely can make all the difference.

But your response after an attack can be just as important. Christoph C. Cemper, founder of AIRPM, advises that organisations should focus on transparency over protecting brand reputation, as the former can actually work to ensure the latter.

“Notifying consumers immediately and being transparent about any attacks is essential, as Pandora has demonstrated, and is in compliance with GDPR,” he says. “Retailers that delay informing customers risk further reputational damage and a loss of consumer confidence.”

Economic difficulties have continued into 2025, with workplace redundancies and fewer job opportunities hitting virtually every UK sector.

And it doesn’t show signs of slowing down either, as research from QuickBooks has revealed a significant decline in small business vacancies. Businesses based in accommodation and food services are the most affected.

The findings are hardly surprising. Following increases in employer National Insurance Contributions (NICs) and changes to the Skilled Worker Visa, the UK economy has left many hospitality businesses struggling to hire and maintain staff.

And even with Government initiatives to help soften the blow, the risk of future tax increases in this year’s Autumn budget could leave businesses even worse off than they were before.

Grim outlook for hospitality hiring

High staff turnover and seasonal demand have traditionally created challenges for hospitality firms to retain a strong workforce throughout the year.

But the recent spikes in employer costs, caused by April’s NIC rise, have added pressure. Many companies are struggling to afford staff wages, with some being forced to cut job roles altogether to stay afloat. 

Research by QuickBooks’ Small Business Index reveals that 49,600 jobs have been lost since April 2025, when the increases in NICs were first enforced. Unsurprisingly, it found that businesses in the accommodation and food service industries were hit hardest by the changes, with a total loss of 21,800 vacancies. 

As well as job cuts, a survey reported by UK Hospitality found that 63% of businesses have had to reduce hours for available staff.

The issue is having an impact on the business outlook. At the start of this year, businesses in the hospitality sector told us they had the lowest level of optimism for 2025. 

In a joint statement published by the British Institute of Innkeeping (BII), various UK hospitality trade bodies said: “Hospitality is vital to the UK economy but is under threat from ongoing cost rises, which the April increases have only exacerbated.

“Jobs are being lost, livelihoods are under threat, communities are set to lose precious assets, and consumers are experiencing price rises when wallets are already feeling the pinch.”

Why else is the hospitality industry losing staff?

These latest job cuts are exacerbating existing labour shortages in hospitality. Historically, the industry has been a low-paid sector. Partly this is due to it having a large number of part-time workers and students. 

But while this has been a cost-effective approach for employers, only 56% of employees feel satisfied with their pay. And unfortunately, due to NICs further harming business profit margins, staff aren’t likely to see a substantial pay rise anytime soon. This is creating an exodus of talent as employees look elsewhere for job roles with more pay opportunities.

To make matters worse, updates to the UK’s Skilled Worker visa now mean that many hospitality-related roles — such as chefs, managers, and bakers — no longer qualify for the visa. This has made it much harder to hire hospitality staff from overseas.

And, with the National Living Wage expected to rise by as much as 65p next year, firms may find themselves forking out even more to hire staff, leading to further job losses.

How is the sector responding?

While this all sounds like doom and gloom, efforts are being made to help hospitality businesses through this difficult economic period.

The “Summer Streets” fund was introduced in June by the Mayor of London, Sadiq Khan, to fund outdoor seating for restaurants, cafes, pubs, and live music venues, and boost revenue during the busy summer months.

Meanwhile, new complaint law proposals announced last month could give pubs and other venues more freedom to extend their opening hours. Under the changes, developers building near existing venues may be required to install soundproofing in new properties.

That being said, there is also the possibility of future tax rises being implemented in the next Autumn budget, which Chancellor Rachel Reeves said she wouldn’t “rule out”. This could risk more job losses and even closure for some businesses.

Commenting on the impact of the previous tax increases, Kate Nicholls, Chair of UK Hospitality, told The Caterer: “Sectors like hospitality are the very sectors you need to create jobs in every part of the UK and for people of all ages, education and background, but hospitality and those working part-time are among the hardest hit by these tax increases.”

In late July, the government unveiled its Small Business Plan, designed to fuel growth and strengthen protections for small enterprises. One of the headline measures includes a £1bn pot of financing via Start-Up Loans, in addition to a crackdown on late payments.

Crucially, the funding isn’t just for existing firms; sole traders and new founders can also apply. But timing is everything if you want to avoid a surge in demand.

Robert Carter, Business Expert at Your Company Formations, says, “The government [s] actively fuelling growth through access to £1bn in Start-Up Loans. That’s a clear signal to founders: the climate is changing, but you have to move strategically to benefit.”

What’s in the Small Business Plan — and why it matters

Announced last month by the Small Business Commissioner (SBC), the plan outlines targeted measures to boost growth for small firms and sole traders. The most eye-catching is the £1bn funding injection, translating to 69,000 new Start-Up Loans for UK entrepreneurs.

Alongside funding, the plan aims to tackle one of the most persistent challenges for small businesses: late payments. The SBC will be given new powers to enforce 30-60 day payment terms.

As Carter explains, “This is the most meaningful intervention for small businesses we’ve seen in over two decades. Late payments have long been a quiet killer of UK startups. Cash flow dries up before they can scale.”

With such reforms on the table, sole traders with dreams of expansion should move quickly. This kind of opportunity hasn’t come around in over twenty years, so these loans will be popular, and waiting too long could mean encountering delays or missing out entirely.

How to apply — and boost your approval chances

The new Start-Up Loans offer up to £25,000 per founder, with payment terms of 1–5 years and mentoring support too. Run by the British Business Bank, the scheme is government-backed and relatively accessible. 

Sole traders are eligible, though having a formal business plan and being registered as a limited company will work in your favour, Carter says.

“This wave of support also signals the government’s renewed interest in accountable, structured startups. Proper company formation, including registered addresses, company secretaries, and director compliance, isn’t just admin. It’s increasingly a gateway to accessing government-backed finance and attracting investor interest,” he explains.

You can apply for a Start-Up Loan directly on the government’s portal. If you want to secure a loan, we advise getting ready now rather than later. 

For a broader overview of the current startup funding landscape, check out our guide to the small business grants you should have on your radar this year.

If your organic traffic has taken a mysterious dip, ‘Google Zero’ might be to blame. The term refers to the rise in zero-click searches, being driven by Google’s new AI overviews.

These AI-generated summaries pull information from across the web and display it directly on the search results page, meaning users often get the answers they need without actually needing to click through to a website. 

For site owners, that can result in a steep drop in traffic due to Google keeping users on its own site. And for those who sell online, the ripple effects can be brutal, as fewer visitors means fewer product views, fewer conversions, and wasted marketing spend.

What is Google Zero — and why should ecommerce owners care?

Google Zero refers to the rise of search results that give users direct answers, so they no longer need to click through to websites.

The unofficial term was coined by Nilay Patel from The Verge, who predicts that we could reach a point Google Search simply stops sending traffic outside of its search engine.

At the heart of this shift is Google’s AI Overview (AIO) feature, which summarises information from multiple sources online to give users an instant answer. While convenient for searchers, it’s far less friendly to website owners. 

With many queries now resolved on the search results page, users are less likely to click through to other websites. As a result, many firms are losing traffic despite ranking well. According to one report, organic clickthrough rates can drop by up to 70% due to AIOs.

Speaking to Exchange Wire, Stefan Mustieles, cofounder and director of search at Stonechat Digital, was blunt about the threat. “The ugly truth is that Google spent years guiding publishers on how to rank, but now the rug’s being pulled and there’s no real recourse. It’s not an overstatement to say we’re entering an ‘adapt or die’ moment”, he said.

It’s fair to say some small businesses already feel blindsided by the changes. The Verge mentions the case of HouseFresh, a small site dedicated to reviewing air purifiers, which has been struggling to compete with bigger publishers in search rankings.

In a detailed blog post, complete with receipts, HouseFresh revealed how its in-depth reviews are being overlooked by Google in favour of larger, well-known outlets. Since AIOs launched, the site says it has suffered a staggering 91% drop in traffic.

Is Google Zero a chance to start again?

Google has a rather different take. It claims that AI Overviews are the biggest upgrade to Search yet and are “driving more queries and higher quality clicks.” 

Google says that, despite external reports of sharp declines in clicks, traffic has in fact been steadily rising. It highlights that AI Overviews also link to cited sources, providing a potential new stream of traffic for those sites. 

Also, the search engine company notes that while AI Overviews give users a quick summary, those on a deep dive will still click through to do their own research, allowing people to ask more complex questions and receive richer, in-depth answers.

Some experts suggest the shift to AI search is partly a reaction to sites overusing Search Engine Optimisation (SEO) tactics to game the system and churn out low-quality content. 

Sites relying on superficial strategies, like over-optimised FAQs or keyword stuffing, are now losing traffic, while some of those that prioritise intent, quality, and long-term value are holding steady or even seeing gains.

That said, it’s important to note that with the speedy roll-out of new tools like Google AI Mode, the Search page is a particularly volatile place to be right now. This means there’s plenty of quality content that is currently being overlooked, hence the term, Google Zero. 

How to protect your ecommerce site from traffic loss

The zero-click world can be tricky to navigate, but there are ways to stay visible. Start by optimising for Google’s AI Overviews and ensuring your product pages, reviews, and resources deliver genuine value to shoppers. 

At the very least, track key visibility metrics, such as impressions and the appearance of AI features, to see how Google Zero is affecting your site and adjust your approach accordingly.

It’s also worth diversifying your marketing strategy, rather than putting all your eggs in Google’s basket. Selling through other channels such as social media, now called social commerce, is a smart tactic for those whose websites have been affected by Google Zero.

Ultimately, ecommerce businesses that focus on helpful, original content and build strong brand loyalty will be best placed not just to survive, but thrive, as AI search evolves.

The government has proposed an increase to the National Living Wage (NLW), from £12.21 to £12.71, from April 2026. While the announcement is said to be “indicative only” and may change, hospitality owners should brace for the increase in costs. 

Pubs, cafes, and restaurants are one of the largest employers of living wage staff, and directly affected by minimum wage rises. 

That means, alongside higher staff costs, hospitality professionals could also have to grapple with tighter margins from next Spring. 

Currently, the NLW is the minimum hourly rate for workers over 21, but there are calls for wage equality between 18-20-year-olds and over-21s, which could raise costs even further. 

What’s changing — and why it matters to hospitality

Every year, the Low Pay Commission (LPC) updates its projections for the National Living Wage in 2026, based on median UK wages. This is because the government has committed to ensuring that the NLW does not fall below two-thirds of median earnings.

Last week, the LPC estimated that the NLW will surge to £12.71 per hour by next April, representing a 4.1% increase from the current rate of £12.21 per hour. This increase will be the largest ever cash increase to the NLW, and will impact all staff aged 21+.

However, as the proposed new rate is based on factors including the cost of living, inflation forecasts, and the impact on the labour market, the actual rate could end up being anywhere from £12.55 per hour, to as high as £12.86 per hour.

Higher wages might help workers keep up with rising prices, but they also turn up the heat for employers. For hospitality venues, the pay bump lands on top of already eye-watering costs from inflation, energy, and rent increases.

And the ripple effects don’t stop there. When entry-level pay rises, supervisors and managers may expect an increase, too. While bigger pay packets give employees more financial breathing room, they may not be matched by higher customer spending, leaving businesses to absorb the extra costs without a boost in sales.

Will younger staff soon cost just as much?

In addition to raising the NLW, the LPC has suggested it may also close the £2 per hour wage discrepancy that currently exists for 18-20-year-olds. 

Currently, workers aged 18-20 are paid the National Minimum Wage (NMW) of £10 per hour, while over-20s are paid £12.21 per hour. By 2026, this gap could disappear. 

A recent poll by YouGov found that two-thirds of Brits feel that there should be no difference in pay for 18–20-year-olds and over-20s. Only one in five disagree with the changes and believe that pay should be lower for those aged 18-20.

Hospitality venues often rely on younger, lower-paid staff to keep wage costs manageable, so closing the pay gap could have a major economic impact on the sector.

Naturally, younger staff also tend to have less experience. With lower wages, hiring them is easier to justify. But if less experienced staff become more expensive, businesses may question whether it still makes financial sense to hire school leavers and students.

On the other hand, better pay could help entice more skilled workers back to an industry that’s been grappling with chronic labour shortages.

What hospitality businesses can do now

Only time will tell how the upcoming changes to the NLW and NMW will affect the hospitality sector. But employers can get ahead by acting now, reviewing staffing models, rota patterns, and margins well before April 2026 to ensure they’re prepared for the shift.

Running wage-impact scenarios can be a useful first step. For example, modelling how your profit and loss sheet would change if younger staff cost £2 more per hour. This not only highlights potential pressure points, but also informs decisions on staffing and pricing.

Think about how you might offset higher wage costs by making other parts of your business work harder, for example, improving customer experience and loyalty, cutting energy use, or using smarter rota scheduling so staffing matches demand.

Businesses that focus on retaining staff, investing in training, and improving efficiency will be best equipped to absorb higher wage bills and stay competitive in a changing market.

Small businesses are turning en masse to alternative lenders for funding, as concerns mount that the UK is falling behind on SME finance.

iwoca’s latest quarterly survey of SME finance brokers shows that 71% now agree that mainstream banks are pulling back from small business lending, reflecting a perceived loss of appetite for SME finance on the high street. 

In March, a report by the British Business Bank (BBB) found that challenger banks and fintechs today account for around 60% of gross lending. 

Specialist lenders have now outperformed the UK’s “Big Five” banks of HSBC, Barclays, Lloyds, NatWest, and Santander for four years in a row.

SMEs favouring alternative lenders

iwoca’s latest pulse survey of SME finance brokers, released today, shows that 61% chose to submit the majority of their loan applications to alternative lenders in the last four weeks. 

iwoca says the shift underlines a change in business attitudes, as SMEs seek out modern, tech-enabled solutions in place of traditional banking options.

With SMEs short on time and running out of options for finance, 73% of brokers say speed of decision-making is the main driving factor behind the shift.  

Similarly, the data suggests that, where SMEs are still turning to high street banks for funds, they will do so for smaller loans, as these are more likely to be granted quickly.

For spending on significant business investment decisions, though, 65% of brokers say they now steer clients toward non-banks for funding applications worth over £100,000.

69,000 new Startup-Up Loans

Access to finance has become a hot topic in the UK startup scene, thanks to a wealth of data showing that small businesses are becoming less likely to take out loans. 

In part, this could be a reflection of reduced appetite among SMEs, particularly in today’s economy. As the UK deals with higher interest rates and tighter lending conditions, SMEs are reportedly repaying debt at levels more than 20 times higher than pre-pandemic.

But another cause could also be lenders who are unwilling to loosen their purse strings. Last month, the fintech Allica Bank reported that SME loan rejections have risen from between 5-10% three decades ago to 40% today.

The UK government unveiled its Small Business Plan at the end of July in order to address the problem to “drive growth through the country” through its Plan for Change.

Alongside reforms to late payments, the programme pledges to deliver an additional 69,000 government-backed Start Up Loans. Plus, a £3bn boost to the ENABLE programme, a BBB-led scheme that provides guarantees to funds which lend to SMEs.

What alternative finance methods are there?

Firms that are rejected from a bank loan are supposed to be recommended alternative funding methods through the BBB’s Bank Referral Scheme, first introduced in 2016. 

But, reportedly, most SMEs don’t look elsewhere if their first-choice bank declines. It’s not a surprising response to rejection. But it is potentially having a detrimental effect on business growth and profitability, particularly as high street banks dole out fewer loans.

If you’re looking for business finance this year, check out our complete guide to all the ways to fund a business without a bank loan.

UK small businesses are being subject to penalties after making mistakes in payroll runs, new research has found. The data suggests evermore complex tax regulations are turning payroll compliance into a considerable risk for SMEs.

In a survey of 1,000 small business leaders, carried out by payroll software Employment Hero, 84% said they have made payroll errors, inadvertently impacting employees.

It’s potentially, also, hurting cash flow. Nearly half (40%) of this group have incurred penalties due to payroll issues, with more than a third having faced significant fines amounting to thousands of pounds.

In part, the issue is due to a wealth of employer costs introduced this April. Employment Hero UK Managing Director Kevin Fitzgerald comments: “With the rising National Minimum Wage, increased National Insurance Contributions, and tougher enforcement of employment law, there’s never been a more complicated time to be a small employer.”

Payroll errors are widespread

According to Employment Hero, over half of small business leaders surveyed reported making payroll errors more than once. The most common errors committed were:

• Calculating wages incorrectly (48%)
• Late/missing payments (38%)
• Calculating correct hours (36%)
• Incorrect tax calculations (27%)

Within Human Resources (HR), any mistakes that can impact a person’s financial wellbeing or livelihood must be taken seriously. Repeat payroll errors can erode trust among employees, leading to demotivation and a decline in productivity.

The supermarket giant, Asda found out firsthand what the fallout can be from a payroll blunder. Last March, an IT glitch resulted in nearly 10,000 workers receiving incorrect pay, leaving thousands either missing two weeks’ wages or reimbursing the company.

Asda employees then participated in a 48-hour strike in May following what they described as a “litany of workplace issues”.

Payroll expertise top concern for SMEs

Part of the issue is that many SMEs are still relying on outdated processes to manage their payroll. Manual processing is common, with Employment Hero finding that 31% still rely on spreadsheets to calculate wages (44% among those with fewer than 20 employees).

HMRC has introduced various initiatives to try and digitalise the tax process for SMEs, as part of its Transformation Roadmap. They include a new online Pay As You Earn (PAYE) service, for 30 million taxpayers to check and update their income, reliefs, and expenses.

However, last August, it was forced to delay plans to require employers to provide more detailed employee hours data via RTI payroll software until at least April 2026, amid concerns from employers they would not have time to implement the change.

As reporting requirements evolve, 70% of SMEs say they are worried about keeping up with payroll technology, reports Employment Hero. 38% say they are also held back by limited expertise, while 36% say they don’t have time to manage the process properly.

The answer for many is to outsource payroll to a third-party provider. However, the cost of payroll outsourcing can quickly climb as the business grows and takes on more staff.

Employment Hero found that small businesses are spending an average of £2,724 a month to outsource payroll – ranging from £1,625 among smaller SMEs to £3,408 for larger ones.

Employment Hero launches free payroll

With payroll outsourcing costs growing, and tax obligations becoming more complicated, many small businesses are turning to HMRC-approved payroll systems to manage staff payments.

As a DIY alternative, payroll software allows companies to stay compliant and reduce costs by managing payroll in-house rather than paying third-party fees. Some brands even often free payroll tiers to help firms get their foot on the payroll ladder.

Employment Hero has announced it will begin offering free payroll software to all UK businesses. As part of this commitment, the company has also launched a new competition offering £5,000 and a one-on-one payroll consultation. Businesses that sign up to the new, free plan before 31 October 2025 will be automatically entered into the draw.

Fitzgerald adds: “Payroll has become a compliance minefield. SMEs are trying to do the right thing, but outdated systems and limited resources are costing them dearly.

“No small business should face fines just for lacking the right tools – and that’s why we’re making payroll free. It’s too fundamental to get wrong. If we want SMEs to power growth and employment, we need to level the playing field – starting with payroll.”

Even the thought of Christmas feels a long way off for many people, but for retailers and ecommerce businesses, the best time to start planning for the holiday season is now.

While Christmas Creep (the trend of holiday and marketing promotions starting earlier each year) might get some eye-rolls from consumers, it’s actually a big opportunity for businesses to capture early-bird shoppers and take advantage of the upcoming season.

That’s why savvy online sellers should already be thinking about what products to stock, as well as how to meet demand, avoid supply chain delays, and stay ahead of the competition.

Why is Christmas coming early this year?

Seeing Christmas-related products before December isn’t new. For shoppers, it can feel as though Christmas Creep comes earlier every year.

However, there’s a good reason for it. With how hectic the season can be, businesses want to avoid any disruption with suppliers. After all, according to Logistics Business, 13% of global business leaders reported “significantly delayed” shipments last December.

And, while many don’t want to think about it yet, it was reported that nearly half of UK consumers start Christmas shopping by early November. 

Another study by TGM research found that 29% of female shoppers start in October or earlier, while men are more likely to delay their shopping until mid-November or later.

Last month, supermarket chain ASDA hit the headlines for selling Christmas items in July. The company said the reason behind this decision was to help make the season more affordable for shoppers.

An ASDA spokesperson stated: “We know how important it is for our shoppers to be able to spread the cost of Christmas, and we start to see searches for Christmas products on Asda.com as early as August.”

‘Tis the season to start planning

Of course, online stores aren’t immune to the Christmas craze. Research by BRC found that year-to-date online spending increased by 4% in 2024, with older shoppers (aged 45-54 and 55+) leading the surge, with sales rising by 56% and 59%, respectively.

Additionally, the rise in Buy Now, Pay Later (BNPL) schemes — such as Klarna and Clearpay — saw online sales surge by 15% last year, suggesting that many shoppers are deliberately starting early to spread the cost of their Christmas shop.

To answer this growing demand, online businesses need to start early to plan for increased traffic, higher order volumes, and customer service demands.

That could even include switching platforms. Unsurprisingly, social commerce has made a significant impact on seasonal shopping. TikTok, in particular, has become the go-to platform for social media shopping, having reported record-breaking Christmas sales in 2024. 

Four ways to prep your store for Christmas

Between managing stock, juggling promotions, and updating your website, setting up your online store for the holidays can be a serious headache. But getting ahead now can save you a ton of stress when the festive chaos really kicks in.

First is the obvious. Stock up on the essential products early, as you won’t have to deal with any delays or increased shipping costs during the peak season. Make sure your products also meet customer needs and trends from the year as well.

Next, think about your marketing strategy and how you’re going to promote your business and products during the festive season. Consider channels like email or social media, as well as paid ads, influencer partnerships, and even search engine optimisation (SEO) tweaks to capture the holiday search traffic.

Once you’ve got this figured out, you should look into updating your returns policy. It’s common practice for UK retailers to extend their policies over the Christmas period, and with 18% of small business orders returned post-holidays, this can help boost customer trust, reduce complaints, and give shoppers more confidence when shopping with you.

Your business website shouldn’t be left out either, as you’ll need to optimise it with content tailored to attract customers searching for holiday gifts and deals. This means preparing product descriptions, festive visuals, or dedicated gift guide pages.

While it might be a little early to think about your own seasonal shopping, it’s the perfect time to get your store ready for the busy period ahead. Not only will it ease the stress of the chaotic festivities, but it may even get you into the Christmas spirit, too.