When the local closes, what takes its place?

Hospitality businesses do more than serve food and drink. They’re the places where communities gather, where careers begin and where many entrepreneurs take their shot. The sector is under real pressure, but the operators who understand that pressure clearly, are finding ways through it.

Hospitality has always been one of the most entrepreneurial corners of the British economy. It absorbs people from all backgrounds, turns skill and passion into businesses, and puts down roots in communities like few other industries. The conditions for starting and sustaining an independent F&B business have become harder in recent years, but the sector’s resilience and ability to reinvent itself remains resolute.

In the last three years, access to capital has tightened significantly, rising employment costs have squeezed margins and the pipeline of new operators and staff faces more barriers than it once did. Kanya Paramaguru, policy advisor at the Federation of Small Businesses (FSB), also highlights the impact of business rates.

“All businesses with premises are liable for business rates, and if they’re not exempt, then the bill must be paid before a business has made its first penny of turnover, let alone profit. Business rates deter investment in local communities. Lessening the burden they present would give new ventures a chance to flourish, and would encourage thriving high streets,” she says. Unlike most other taxes, business rates don’t fall when revenue falls, which makes them uniquely punitive for the independent, location-rooted businesses like pubs, restaurants and cafés that communities depend on most.

Henry Poultney, public affairs consultant at the Nationwide Caterers Association (NCASS), has spent years working with independent F&B businesses and knows what’s at stake: “When a café or pub closes, that’s not just a business, it’s a lost part of the infrastructure of that place.” The operators that stay open, and the new ones that manage to start, are doing something that goes beyond running a business.

The funding landscape has changed

Mark Hughes, director of growth at payments provider CreatePay, works closely with F&B businesses through funding and payments. The shift in access to capital he’s observed over the past three years is eye-opening: approval rates for F&B businesses seeking some form of funding have fallen from between 50% and 60% to around 15%. Of those declined, the majority are no longer operating six months later, not because their businesses were necessarily unviable but because they ran out of time to find an alternative.

Hughes identifies a widening gap between the data-literate, financially disciplined and quick-to-adapt operators who are thriving, and those who are struggling to respond to new challenges. The encouraging outcome here is that the gap isn’t about the quality of the food or the strength of the concept, it’s about financial management, which is a learnable skill.

Jalal Uddin, Chief Sales Officer (CSO) of online ordering platform OrderE and smart Point of Sale (POS) system OrderVox, works with more than a thousand independent hospitality businesses and is seeing them adapt in real time. Operators are pivoting their formats – Indian and Pakistani restaurants reinventing themselves as fusion concepts, varying menus and finding new customers. Pizza and fried chicken shops reporting stronger order numbers, adapting after slow starts.

Many operators have responded to cost pressure by focusing on their busiest days and closing on quieter ones, reducing utility and staffing costs without sacrificing revenue. “The new generation, they’re taking over the businesses,” says Uddin. “They’re forcing businesses to change from one type to another, adding more menus, creating fusion restaurants. This trend is helping them to survive.”

Hospitality as a career destination

Jane Pendlebury, CEO of the Hospitality Professionals Association (HOSPA), points to yet another reason that makes the sector worth fighting for. Hospitality has historically been one of the most accessible sectors for young people to find a first job, develop real-world skills and in many cases start a career that leads to opening their own business.

Yet the cumulative increase in National Minimum Wage and employer National Insurance contributions is making it harder for operators to sustain entry level roles. This, Pendlebury points out, “Risks depriving young workers of vital entry points into the workforce.” Protecting those entry points is good for the businesses that create them, vital in developing the next generation of operators and essential to the communities that rely on them. 

Holding communities together

From the village pub to the high street café, F&B businesses are focal points for community life in a way that no other type of business quite replicates. They’re daily places where people work remotely, catch up on the gossip and mark special occasions. Where a new chef turns a struggling takeaway into something the neighbourhood talks about.

The pub has long been the beating heart of British communities, a gathering place for pre-match Dutch courage and post-funeral remembrance or simply seeing a friendly face on a quiet Tuesday night. These are fundamental functions of any happy community, and losing the businesses that enable them puts them in real jeopardy.

That community value carries political weight too and can be a showcase for operator resilience. Paramaguru points to when a business rates increase threatened pubs across the country, the sector’s response – with landlords reportedly threatening to bar MPs from their locals – contributed to the government reversing its decision. “There’s a cultural element that the MPs understood,” she says. “If they were locked out of their pubs, that would damage their image as elected representatives.”

Poultney’s observation that business closures are “lost infrastructure that erodes community” shows how the hospitality sector should be valued. It needs recognition rather than sympathy because the operators keeping their doors open, adapting and innovating, play a huge role in our daily lives.

Zempler Bank works with hospitality businesses across the UK. We support restaurants, cafes, pubs, food trucks, and more. Our business accounts come with built in tools to help you stay on top of cashflow — from £0 per month.