Optimism among hospitality leaders has dropped to 35% over the next 12 months, according to a survey by NIQ and Zonal.

The figure represents a fall of two percentage points since May and a 16 percentage point drop since the start of 2026. Confidence in the hospitality sector as a whole stands at 21%.

Rising operational costs, lower footfall and cautious consumer spending continue to pressure margins. Around 41% of leaders reported a decline in footfall, compared to 34% who experienced an increase. Although the football World Cup drove pub trade, venues not screening matches did not experience similar gains. Hot weather also reduced dining out trips.

Only 41% of businesses reported a year-on-year increase in quarterly revenue, despite price rises. Just over half – 52% – reported that profitability had dropped, or that their business was unviable or operating at a loss.

In the independent sector, 16% of single-site operator leaders feel optimistic about the coming year.

Employment costs have grown by an average of 10.7% per person over two years. Higher labour costs were cited as a concern by 85% of leaders, while 85% also faced energy price increases over the last three months following oil supply disruptions.

Food and drink inflation concerns were highlighted by 69% of respondents, with 67% raising concerns regarding VAT. Interest rates and high energy costs remain secondary pressures.

Hospitality groups have welcomed existing business rates relief for pubs, clubs, and music venues. Almost half of respondents – 47% – feel optimistic that Prime Minister Andy Burnham will benefit the sector, compared to 26% who are pessimistic.

Karl Chessell, director of hospitality operators and food, EMEA at NIQ, said: “The World Cup and hot weather should have boosted hospitality this Summer, but any benefits have been outweighed by relentless challenges. Falling visits and rising costs are a hugely damaging combination and it is no surprise to see that leaders’ confidence is running so low – especially among smaller businesses. With conflicts and the climate fuelling market volatility, there is little respite in sight on inflation.

“More positively, there are encouraging signs of support from the new Prime Minister, and the forthcoming Budget could be a lifeline for thousands of hospitality businesses and jobs. From VAT to rates to National Insurance contributions to alcohol duty, there are many levers that the government can immediately pull to ease the pressure on operators. Doing so would quickly unlock investment and new jobs and help kickstart the economic growth that the country needs.”

Tim Chapman, chief commercial officer at Zonal, said: “What is most striking about this research is that, despite the challenging operating environment, just how much operators are continuing to invest where they can – in their estates, in their teams, in technology, and in the experiences that keep guests coming back.

“That being said, there’s no hiding from the fact that confidence in the sector is flat at best. Recent Government moves, however, such as business rates relief, are creating some optimism as we look to the rest of 2026 and beyond.”

He added: “Hopes appear to be further boosted by the possibility of a VAT cut for the sector in this autumn’s budget – something which the sector has fought long and hard for and which is very well supported by both operators and consumers alike.”