The latest Business Confidence Survey from NIQ and Zonal found just 37% of respondents were optimistic about their business prospects over the next 12 months.
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This was down from 51% in February, when operators were buoyed by strong Christmas and New Year trading.
Confidence in the wider hospitality sector has also declined, falling 10 percentage points in the second quarter to 21%.
Independent operators felt the pressure most, with just 16% of leaders at single-site businesses positive about the year ahead.
Geopolitical turmoil
The fall in confidence comes amid ongoing concerns over inflation and weaker consumer sentiment.
Some of the pressure faced by firms was attributed to conflict in the Middle East and its impact on fuel prices, while consumer confidence was found to have fallen to its lowest level since 2023.
In addition, more than a third (36%) of hospitality leaders said their revenue fell year on year in the latest quarter – the highest proportion since the start of 2024.
Rising costs have also hit profits, with 34% of respondents reporting lower profits.
Commenting on the findings, NIQ director hospitality operators and food EMEA Karl Chessell said: “A dip in hospitality leaders’ optimism was inevitable after geopolitical turmoil and domestic economic concerns in the second quarter.
“The confidence of operators and consumers alike is bumping along the bottom, and relentless pressures on costs are threatening the future of businesses and jobs across the sector.”
Calls for support
Looking ahead, 82% of leaders were concerned about higher food and drink prices, while 75% were worried about rising employment costs.
VAT (73%) and business rates (67%) were also highlighted as major concerns.
The findings add to repeated calls for Government support, with industry leaders prioritising a VAT cut, changes to National Insurance contributions, more sustainable wage increases and reform of the business rates system.
“The case for Government help on tax, employment and costs is now more compelling than ever,” Chessell continued.
“Support would unlock immediate economic benefits by freeing up businesses to invest in their venues and people, and to revisit prices for their guests.
“Hospitality is at the heart of the UK’s economy, job creation and local communities, and the arrival of a new Prime Minister is an opportunity to give the sector the support it deserves.”
