Introduction
The UK Leisure and Hospitality sectors have, for some time now, been weathering a perfect storm: stubborn inflation, rising wage bills and cautious consumers. This won’t be new news to Owners and Operators and my intention is not to teach you to suck eggs, but more to summarise my insights on current trading challenges and to provide my thoughts, from a career at the coalface of Leisure strategy, on how to best ride rising costs in UK Leisure and Hospitality industries in the short term and establish a flexible operating strategy to provide both stability and growth in the longer term.
Survey data paints a stark picture, with nearly all hospitality leaders saying staffing and overhead costs jumped in 2024 and industry bodies warn this “cocktail of costs” (from energy to taxes) is now unprecedented and potentially unsustainable. In practice, many leisure and hospitality businesses face a squeeze in which like-for-like revenues barely outpace inflation, therefore, real margin gains must come from a smarter P&L strategy. Fully evaluated cost management, not just simply cutting line items, has to be an integral part of the action plan.
Economic headwinds in Leisure & Hospitality
Even as inflation cools from its peak, latest government measures threaten to blanket cost operators. Recent budgets have loaded leisure and hospitality with higher taxes and labour costs including rising employer NI, business rates and multiple years of above inflation increases in National Living Wage. Not to mention, a reduction in the age which triggers the maximum NLW rate since 2024. Analysts have warned, and Owners and Operators are fully aware, businesses need to act now to contend with higher staff costs and operating expenses ahead, and vulnerable businesses may not survive. UKHospitality quantifies this burden: April 2025 alone will add roughly £3.4 billion in extra annual costs for the sector and only about 1 in 7 operators feels optimistic today. In short, 2025 has the potential to be a case of the “have nots and the haves”, with those unable to absorb or pass on these new costs likely to struggle to remain viable, while better capitalised businesses have an opportunity to seize market share.
Payroll is an especially thorny issue: the NLW jumped 10% in April 2024, with the age at which the top rate becomes payable reducing from 23 to 21 and the rate increased by a further 6.7% from April 2025. Furthermore, changes to employer NI calculations are driving staff costs exponentially higher. Energy and insurance costs, though easing from 2022 peaks, remain structurally higher than pre-COVID. On the demand side, households are still trimming leisure spend and surveys find over a third of consumers intend to cut back on eating out. The bigger picture suggests many businesses in the sector have already, or very quickly will be forced to look at cutting headcount, freezing investment, reducing hours or a combination of all of the above. Against this backdrop, owners and operators cannot survive by waiting for better times, they must act decisively now.
Beyond blunt cuts: strategic cost management
From my own personal experience and from analysing current market pressures, the appropriate course of action now is to sharpen strategy, not just to cut budgets. A recent CFO survey emphasizes this shift. Although a reasonably significant 41% of UK firms are trimming budgets to fight “shrinkflation”, more leaders are focusing on future proofing, with targeted investment in technology and considered process changes. In other words, the smartest path to margin protection is careful financial analysis and selective investment. Rather than across the board cuts, I would advise owners and operators to treat costs as investments in value. For example, transparently rationalising pricing can actually preserve loyalty and one recent study found 55% of consumers accept modest price hikes if they understand the reason (higher quality experience or higher uncontrollable costs).
In practice, this means performing granular P&L and cost per guest or cost to serve analyses to spot where efficiencies deliver real profit and reallocating resources to the most profitable activities. This then also raises the ever relevant question in leisure and hospitality of in-house versus outsourced. I have worked with and seen very effective results under both and of course, a hybrid of both. However, I recognise each business will have different payback scenarios when evaluating the right way to move forwards, particularly those where seasonality and low season strategy are more relevant. Many operators are already rebalancing: one report notes 34% of companies have started bringing previously outsourced services in-house to regain cost control. In hospitality specifically, this might mean focusing on the most valuable customer segments, adjusting service levels in those low season or off-peak periods, or bundling services (like room+breakfast or event packages) to smooth revenue. It also means safeguarding guest experience: the aim is to cut waste and optimise spend without eroding the product quality and brand reputation, both of which have likely taken a long time to build.
I recall recently speaking with a restaurant owner who had identified one of its most popular menu items had become unprofitable as a consequence of increased costs . They chose to tackle this by tweaking the recipe and portion size (substituting one expensive ingredient) and explaining the change to customers. This cut the food cost by nearly 10% and in subsequent customer satisfaction surveys, there was no impact on overall scores. That kind of targeted menu engineering; adjusting portions, ingredients or pricing on key items is a powerful tactic, but one that has to be appropriately considered and executed. Industry reports show seasonal, localised menu changes alone have trimmed food costs by up to 10% in practice. Similarly, rather than cutting kitchen or service staff indiscriminately, many teams are using technology to schedule smarter. Workforce management software, if properly planned, strategically implemented and smartly rolled out to teams, can reduce annual labour costs by circa 5%, optimising shifts and potentially eliminating overtime. In short, the goal is to squeeze inefficiency out of every process so that every pound spent is aligned to profit.
Practical levers to protect margins
Owners and Operators should, in my opinion, target the big ticket lines where smart changes can effectively be shown to pay for themselves in the short term and yield tangible benefits in the longer term. Energy is one example. The average UK pub now spends about 5% of turnover on power and gas, so even modest efficiency retrofits or smart controls can yield a quick return on investment. Many venues have found that simply installing LED lighting, motion sensor heating/cooling, or energy management software drives measurable savings within a reasonable time frame, without sacrificing comfort for staff or overall experience for guests.
On the supply side, rising commodity prices demand a hard look at procurement. Food and drink inflation has been especially acute, with official data showing restaurant ingredient costs up a staggering 17% in the last year. This should sharpen focus on renegotiating contracts, switching to local suppliers or adjusting minimum order quantities, all of which can potentially bring some immediate relief. In fact, one practical tip is to refresh the menu to use more seasonal and / or local produce. Under this strategy, many operators have shown they have been able to cut food costs by up to 10%. Smarter inventory management also matters. I was somewhat shocked to read recently that the UK hospitality sector wastes over £3.2 billion of food annually. My summation of this is that operators have to consider how they can streamline menus (fewer recipes, overlapping ingredients) and utilise technology, for example, inventory management software, to positively impact stock holding levels whilst ensuring product quality and variety is preserved.
Labour and service are no less strategic. We’ve already discussed opportunities with evolved strategies in labour scheduling tools. Similarly, self-service and automation (QR ordering, mobile check-in, online booking upsells) can have a significant impact in driving operational efficiency and guest experience by freeing up staff to focus on high touch tasks. Notably, venues that introduce self ordering tablets or QR menus often see higher table turn rates and increased spend per head, not only driving efficiency by also turning a tech investment into extra revenue.
I also recognise pricing can be reframed as a margin lever. Rather than across the board hikes, more and more operators are now working with dynamic pricing or tiered offerings. A pub might offer premium menu items or tasting experiences alongside core offerings, giving customers more choice while improving spend per head. I am also an advocate of upselling strategies. In my past life, referred to as “owning the visit” was a fundamental strategy to maximise conversion across products. Converting an already committed and captive consumer to secondary spend should be a primary strategic objective in businesses where this opportunity exists. In single revenue stream operations, I would encourage businesses to consider where secondary spend opportunities could be explored.
Collectively, these thoughts and observations illustrate a bigger point. Managing rising costs in the UK leisure and Hospitality sectors is not about gutting the guest experience, but about reallocating spend to its highest value uses. It’s about making sure every pound of cost contributes in the most effective and efficient way to margin. This strategic mindset, deep diving into cost drivers, cutting waste, improving efficiency and innovating revenue streams, is what separates winners from survivors in this challenging environment.
The CFO’s role: deep-diving for effective margin control
As a CFO consultant with significant experience in retail, leisure and hospitality sectors, I work with operators to turn the above principles into action. We don’t just propose cutting headcount or budgets, we dive into each business’s cost structure, interview managers and operators and use benchmarking and market data to reach robust and effective change strategies. I also bring a COO perspective, with multiple years of experience running business operations alongside responsibility for Finance strategy.
Our approach is to provide owners and operators with fully costed and realistic levers. These levers can be considered individually, or as a suite of tools, which can be implemented at a pace that works for the business. We can also support implementation where necessary, whether that be in terms of system procurement, employee workshops or front end / back end training.
Crucially, this expert lens ensures our strategies protect what really matters to guests. We recognise that driving cost efficiency should never translate into cold rooms or slow service and should never compromise on health and safety. Where maintaining alignment to a Company’s overall business and finance strategy permits, we often recommend reallocating some savings back into business operations, where, for example, benefits can be driven from effective spending in areas such as customer experience or staff training. In our experience, operators who optimise back-end costs can quite comfortably maintain (or even enhance) front-end quality and experience.
For operators facing today’s squeeze, having seasoned financial guidance, with a fresh eye on analysing business performance is invaluable. A CFO consultant can bring real life experience, fresh benchmarks and tools, from advanced forecasting and sensitivity modelling to vendor audit processes, that in-house teams may lack bandwidth to deploy. By partnering with management, we help plan sustainable budgets, refine pricing models and pursue the right capital investments. The outcome is not just surviving the current storm, but emerging leaner and more competitive.
Closing Insight
The current landscape may be daunting, but with the right strategic financial leadership, it also presents an opportunity to rethink, reset, and emerge stronger. Owners and operators who act decisively, armed with robust data, a deep understanding of cost levers and a willingness to challenge assumptions, will not only protect their margins today, but shape a more profitable and agile business for tomorrow. For a deeper discussion of these strategies, keep an eye out for our upcoming Insights post “Driving Margins in UK Hospitality: Beyond the Basics of Cost-Cutting”. This article will walk through the themes above in more detail and show how leading leisure and hospitality businesses are implementing them today. If you are a leisure or hospitality leader grappling with cost pressures or margin dilution, don’t hesitate to reach out. Managing rising costs in the UK leisure and hospitality markets is one of our specialties. I am confident we can help you protect your margins while keeping guests delighted.