The warning follows the news that UK employment has reached a record high of 32.5 million.
With levels of employment historically high, businesses are concerned about their ability to access labour and fill vacancies, an issue that is likely to worsen if migration is seriously reduced following Brexit.
UKHospitality Chief Executive Kate Nicholls said: “Historically low unemployment and high employment is driving labour shortages in sectors like hospitality. Our members are reporting that they are finding it increasingly difficult to fill vacancies. Businesses are concerned that they will not be able to find the employees they need to continue to grow.
“This is only going to be exacerbated if the Government continues down the path of seriously restricting migration post-Brexit. We need a future immigration system that meets the needs of the UK economy, not one based on inflexible ideology. We need workers from the EU to bolster our home-grown workforces and keep pace with growth, particularly with unemployment historically low.
“According to the new data, wage rates are growing, on average, by 3.3%, but wage rates in the sector are growing even faster. The sector is working hard to fill vacancies and invest in their domestic workforces, but their efforts will be undermined if there simply aren’t enough bodies to fill empty roles.
“Undermining hospitality businesses’ ability to invest and grow is only going to have a negative effect on the high street. Ultimately, customers are going to feel this knock-on effect if high street businesses are destabilised and unable to hire and grow.”