The latest Business Confidence Survey from CGA by NIQ and Sona showed operational costs had increased for close to two thirds (63%) of industry leaders over the last 12 months, attributed to inflationary pressures on the cost of labour, food and drink and other key inputs.
In contrast, just a third (34%) have increased capital expenditure while close to half (45%) had been forced to cut their capex, more than double the 20% who have reduced their operational expenditure.
The survey also highlighted a growing split in hospitality, with 25% of operators currently able to increase both operational and capital expenditure and 14% forced to reduce both.
It indicates fragility within the sector, the report stated, with 9% of leaders reporting they now have no cash reserves to draw on, while 53% have fewer than six months of reserves left.
Soaring coasts had been particularly damaging for smaller operators, according to the data, as just 22% of independents increased capital expenditure year-on-year, while 60% have been forced to cut it - 15 percentage points more than the sector average.
Intense pressure
The intense cost pressures have forced many businesses within the sector to make difficult decisions on investment, despite recognition of the value of capex in sustaining sales and keeping pace with competitors.
Some two thirds (65%) of leaders said site refurbishments were a high or medium priority for investment, while 55% said the same about workforce management technology and half (50%) identified both customer-facing technology and site acquisitions as high or medium priorities.
CGA by NIQ hospitality operators and food EMEA director Karl Chessell said: “April’s increases in pay levels and National Insurance contributions have added yet more weight to the heavy cost burdens on hospitality businesses.
“They have further polarised the sector, between successful and efficient businesses that are able to invest across the board, and weaker ones that are struggling to keep up with day-to-day costs and are scaling back capital projects.
“All leaders are acutely aware of the importance of capex, especially in areas like technology, which can unlock efficiencies and extra revenue. Investment here feels a big stretch for some operators at the moment—especially smaller ones—but it’s going to be essential if businesses are to stay competitive and meet guests’ evolving needs.”
Volatile market
Despite low optimism, the Business Confidence Survey provided some cause for cautious confidence about the outlook.
While three in five (61%) leaders felt the current economic environment was a barrier to their capital expenditure, only 27% cite consumer sentiment—an indication that Britain’s underlying demand for hospitality remains strong.
Sona vice president of hospitality Paul Watson said: “As operational costs continue to climb, hospitality businesses are rightly reassessing how they allocate resources, but the findings from this survey underscore the critical need to invest in the right solutions for your business.
“Intelligent, AI-driven solutions can deliver immediate efficiencies in scheduling, labour optimisation and compliance, helping operators reduce overheads without compromising service quality.
“For smaller and independent businesses especially, targeted tech investment isn’t just a cost, it’s a strategic lever to unlock resilience, agility and long-term competitiveness in a volatile market.”
