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The number of hospitality and leisure businesses in critical financial distress rose 17.5% year on year to 4,481 in Q2 2026, according to the latest Red Flag Alert from Begbies Traynor Group (BTG), as businesses continue to face higher operating, employment and tax costs.
The increase was almost double the 9% rise recorded across UK businesses, with the number of companies in critical financial distress reaching 53,756 nationally. Within hospitality and leisure, leisure and cultural activities recorded the largest annual increase in critical distress at 27.1%, followed by hotels and accommodation at 26.6%. Meanwhile, bars and restaurants also saw an increase by 10.9%.
The figures come as hospitality and leisure businesses contend with higher employment, tax and supply chain costs, alongside weaker demand and continued economic uncertainty. There were 40,298 hospitality and leisure businesses in significant financial distress during the quarter, broadly unchanged from the previous year, with a 0.02% decline.
Licensed restaurants accounted for the largest number of businesses in significant distress, at 6,645, up 1.3% year on year. Public houses and bars followed with 5,438 businesses, down 4.4%, while unlicensed restaurants and cafes recorded 5,236, down 2.6%. The group’s analysis also identified at least 7,600 jobs at high risk across 1,382 hospitality and leisure businesses in critical financial distress that report employee numbers through Companies House. The actual figure could be higher because not all businesses disclose employee numbers.
Across the wider UK economy, the number of businesses in significant financial distress increased 1% year on year to 674,030 in Q2 2026, highlighting the broader pressure on businesses as the hospitality and leisure sector records a sharper increase in critical distress.
Julie Palmer, managing partner at BTG, said: “It is no surprise to see hospitality and leisure businesses at the sharp end of increasing financial distress. They have long been warning that the increasing costs, shrinking margins and waning demand have been a cocktail for trouble and with no end in sight likely, we have seen many calling last orders for the final time.”
Palmer added that National Insurance contribution and National Minimum Wage increases, alongside proposed changes to zero-hours contracts, could continue to put pressure on the sector.
She added: “Policy decisions like the 20% business rates relief will help relieve some of the pressure in the short term, but it doesn’t account for all of the areas of hospitality and leisure, nor does it set a path for long-term recovery. Leaders will be looking for more meaningful and future-gazing support from the new government to turn the dial on high costs and low spending to allow margins to increase again. Like in any sector, there will be winners and losers and not everyone will be able to avoid distress or closure. However, those who can survive for long enough for conditions to brighten and support to come to fruition will be the operators who make it through.”
Meanwhile, Adam Humphrey, partner at BTG, said: “On the ground, we are seeing the potential for rescue and recovery, with plenty of the larger players in the sector setting the example by taking early steps to avoid distress. For instance, we have seen pub chains looking to sell parts of their estate that aren’t performing or hotel groups looking into sale and leaseback options to unlock capital and build more flexibility into their property strategy.
“While the larger groups have the means to make these kinds of decisions, smaller players and independent businesses may not think they have the same level of flexibility. It is true that distress has impacted the SME end of most sectors compared with the larger firms, but the principals still stand. The earlier you act, the more options you have, which stands you in better stead for not only recovering but building a platform for sustainable growth. Waiting for the market to change, policy to land or demand to miraculously pick up overnight will soon see hospitality and leisure firms run out of runway and it is much harder to avoid insolvency once the distress has cemented and the options available have disappeared.”
The number of hospitality and leisure businesses in critical financial distress rose 17.5% year on year to 4,481 in Q2 2026, according to the latest Red Flag Alert from Begbies Traynor Group (BTG), as businesses continue to face higher operating, employment and tax costs.
The increase was almost double the 9% rise recorded across UK businesses, with the number of companies in critical financial distress reaching 53,756 nationally. Within hospitality and leisure, leisure and cultural activities recorded the largest annual increase in critical distress at 27.1%, followed by hotels and accommodation at 26.6%. Meanwhile, bars and restaurants also saw an increase by 10.9%.
The figures come as hospitality and leisure businesses contend with higher employment, tax and supply chain costs, alongside weaker demand and continued economic uncertainty. There were 40,298 hospitality and leisure businesses in significant financial distress during the quarter, broadly unchanged from the previous year, with a 0.02% decline.
Licensed restaurants accounted for the largest number of businesses in significant distress, at 6,645, up 1.3% year on year. Public houses and bars followed with 5,438 businesses, down 4.4%, while unlicensed restaurants and cafes recorded 5,236, down 2.6%. The group’s analysis also identified at least 7,600 jobs at high risk across 1,382 hospitality and leisure businesses in critical financial distress that report employee numbers through Companies House. The actual figure could be higher because not all businesses disclose employee numbers.
Across the wider UK economy, the number of businesses in significant financial distress increased 1% year on year to 674,030 in Q2 2026, highlighting the broader pressure on businesses as the hospitality and leisure sector records a sharper increase in critical distress.
Julie Palmer, managing partner at BTG, said: “It is no surprise to see hospitality and leisure businesses at the sharp end of increasing financial distress. They have long been warning that the increasing costs, shrinking margins and waning demand have been a cocktail for trouble and with no end in sight likely, we have seen many calling last orders for the final time.”
Palmer added that National Insurance contribution and National Minimum Wage increases, alongside proposed changes to zero-hours contracts, could continue to put pressure on the sector.
She added: “Policy decisions like the 20% business rates relief will help relieve some of the pressure in the short term, but it doesn’t account for all of the areas of hospitality and leisure, nor does it set a path for long-term recovery. Leaders will be looking for more meaningful and future-gazing support from the new government to turn the dial on high costs and low spending to allow margins to increase again. Like in any sector, there will be winners and losers and not everyone will be able to avoid distress or closure. However, those who can survive for long enough for conditions to brighten and support to come to fruition will be the operators who make it through.”
Meanwhile, Adam Humphrey, partner at BTG, said: “On the ground, we are seeing the potential for rescue and recovery, with plenty of the larger players in the sector setting the example by taking early steps to avoid distress. For instance, we have seen pub chains looking to sell parts of their estate that aren’t performing or hotel groups looking into sale and leaseback options to unlock capital and build more flexibility into their property strategy.
“While the larger groups have the means to make these kinds of decisions, smaller players and independent businesses may not think they have the same level of flexibility. It is true that distress has impacted the SME end of most sectors compared with the larger firms, but the principals still stand. The earlier you act, the more options you have, which stands you in better stead for not only recovering but building a platform for sustainable growth. Waiting for the market to change, policy to land or demand to miraculously pick up overnight will soon see hospitality and leisure firms run out of runway and it is much harder to avoid insolvency once the distress has cemented and the options available have disappeared.”
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It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution
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