Staffing Costs Are the Biggest Challenge to the Growth of HORECA SMEs in the UK

The biggest barrier to growth for restaurants, hotels, cafes, and other accommodation businesses operating in the UK is no longer finding guests, but being able to hire staff.

The latest Business Confidence Report reported by The Caterer and prepared by alternative finance provider Capify shows that small and medium-sized enterprises (SMEs) in the hospitality sector are having to reassess their investment plans due to rising staffing costs, economic uncertainty, and access to finance issues.

The research is based on survey results from hundreds of SME owners and shows that labor-intensive HORECA businesses are under greater pressure compared to other sectors.

Tax Burden Now Determines Hiring Decisions

The most striking finding of the report is that 85% of businesses indicate that the greatest pressure on their hiring decisions comes from employment-related taxes and employer obligations.

Wage inflation and the legal burdens on employers are also exacerbating this situation.

Staff costs are already one of the largest items in the total operational costs of restaurant and hotel businesses. The increase in employer costs leaves businesses caught between two difficult decisions:

• Postponing new hires

• Trying to achieve higher productivity with the existing team

Both options can affect service quality in the long term.

Cost Increases Weaken Appetite for Growth

According to the research, approximately 70% of businesses report an increase in operating expenses in the last quarter.

As rising energy, rent, financing, and staffing costs pressure profitability, businesses are evaluating growth investments more cautiously.

Additionally, more than a third of businesses express that access to finance has become more difficult compared to previous periods.

This situation directly impacts new branch investments, renovation projects, and equipment upgrades.

Cash Flow Remains a Critical Issue

Another notable issue in the report is the collection problem.

More than 70% of SMEs say that delayed payments negatively affect their cash flow.

While the hospitality sector is not as dependent on invoice terms as some other sectors, strong cash flow is critical for:

• season management,

• inventory planning,

• equipment investments,

• staff wages

Extended collection periods can lead to delays in investment decisions.

High Expectations for Artificial Intelligence, Limited Results

Although many restaurant chains and hotel groups have increased their investments in artificial intelligence recently, small businesses are unable to progress at the same pace.

According to the research, 60% of businesses believe that artificial intelligence has not yet made a significant contribution to their operations.

Large-scale businesses actively use AI applications in areas such as:

• reservation management,

• guest services,

• marketing,

• revenue optimization

while small businesses are more cautious because they cannot clearly see the return on investment (ROI).

This result shows that technology alone is not a solution; the right usage scenarios and training investments are just as important as the software itself.

Finding Staff Is Still Not Easy

One in four businesses participating in the research indicates that the biggest human resource problem is finding qualified staff.

In particular, it is noted that the hiring process is becoming increasingly difficult for positions requiring experience, such as:

• chefs,

• restaurant managers,

• service managers,

• front office teams

This situation, combined with rising staffing costs, creates a double pressure for businesses.

Confidence Is Growing, but Cautious Optimism Persists

The report shows that confidence in the UK economy has increased compared to the first quarter of the year.

However, only 22% of businesses have a positive outlook on the economic outlook.

More than four businesses express that they feel less confident about the future compared to last year.

In contrast, the proportion of businesses that are "very confident" in their own operations has doubled, indicating that the sector is not entirely pessimistic.

Businesses want to grow, but they prefer to do so in a more controlled and lower-risk manner.

What Does This Mean for HORECA Businesses in Turkey?

Although the research covers the UK market, the trends emerging are also noteworthy for businesses in Turkey.

In Turkey, in recent years, the following issues have also been at the forefront of businesses' agendas:

• increasing labor costs,

• shortage of qualified workers,

• high staff turnover rates,

• financing costs,

• profitability pressure

Therefore, many businesses are focusing not only on increasing sales volume but also on enhancing employee productivity, improving shift planning, and managing operational costs more accurately.

For independent restaurants and small hotels, sustainable growth is now closely related not only to attracting more guests but also to maintaining the right team structure.

Stafflink's View

The key message from the Capify research is that the biggest risk to growth in the HORECA sector is no longer just a lack of demand. The real issue for businesses is managing rising labor costs without compromising service quality.

Similar pressures are becoming increasingly visible in Turkey as well. Reducing staff numbers may lower costs in the short term; however, the loss of experienced employees can lead to long-term consequences such as declining service quality and weakened guest loyalty.

In our view, businesses that will gain a competitive advantage in the coming period will be those that strengthen employee engagement, implement data-driven shift planning, use digital tools according to real operational needs, and evaluate technology investments not only from a cost-reduction perspective but also from a productivity-enhancement perspective.

Main Source

The Caterer — Employment costs emerge as biggest barrier to hospitality SME growth — July 27, 2026 - https://www.thecaterer.com/news/employment-costs-emerge-as-biggest-barrier-to-hospitality-sme-growth

Primary Source

UKHospitality — Member surveys and sector assessments on employment costs - https://www.ukhospitality.org.uk/insight/quarterly-members-survey/

Additional Verification Sources

Office for National Statistics (ONS) — UK labor and wage data - https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes