Hospitality Job Cuts Continue Despite Services Sector Growth

The UK’s services sector reported renewed growth last month, but employment across hospitality and other consumer-facing industries kept falling — extending a jobs slump that has now lasted almost two years, new data shows.

Figures from S&P Global Market Intelligence revealed that private sector employment has been cut for the 22nd consecutive month, with pubs, restaurants, cafés, hairdressers and professional services firms among those continuing to reduce headcount.

The decline in jobs comes despite an uptick in overall business activity. The UK’s composite purchasing managers’ index — a closely watched leading indicator of economic performance — rose to 52.2 in July, comfortably above the 50-point threshold that separates growth from contraction.

The gap between rising output and falling employment has drawn comparisons with previous downturns. Analysts noted that the current run of job losses has now outlasted the employment fallout seen during both the 2008 financial crisis and the collapse of the dotcom bubble.

“Sobering” figures for hospitality

Tim Moore, economics director at S&P Global Market Intelligence, said the resilience in trading had not been enough to halt the losses.

“A rebound in both activity and new business could not prevent a further decline in staffing numbers, with job losses seen for the twenty-second consecutive month,” he said.

The continued cuts follow Chancellor Rachel Reeves’ first Budget in October 2024, which introduced a £26 billion increase in employer taxes. Businesses have since pointed to a combination of pressures behind their reluctance to hire, including above-inflation rises to the minimum wage — particularly for younger workers — higher employer National Insurance contributions, rising wage bills more broadly, and additional compliance burdens introduced under the Employment Rights Act.

Official figures show the toll this has taken on the labour market. Since Labour came to power, the unemployment rate has climbed from 4.4 per cent to 4.9 per cent — equivalent to around 150,000 more people out of work. That figure does not capture the wider pool of economically inactive people, such as those who have moved into education, retirement, or who are not actively seeking employment.

Sector calls for support

Allen Simpson, chief executive of UKHospitality, said the figures reflected what operators have been warning about for months.
“These figures are sobering, though sadly not surprising,” he said. “The past two Budgets have inflicted more than £5 billion of additional annual costs onto hospitality businesses.”
He added that the sector’s ability to provide entry-level opportunities was being undermined at a time of rising youth unemployment.

“At the same time, we have record numbers of unemployed young people… denied the chance to earn their first salary in their local pub or restaurant,” Mr Simpson said.
The findings will add to pressure on the Treasury ahead of the Autumn Budget, with hospitality leaders continuing to call for a reduction in the tax and regulatory burden facing operators as the sector struggles to translate a pickup in trade into job creation.