New report highlights cashflow challenges facing small food & drink businesses
Zempler Bank, the digital bank dedicated to making money simpler for UK businesses, today publishes new findings from its report ‘Feeling the Heat’, revealing a sector at breaking point but rapidly adapting in response.
The data shows confidence among operators remains low, with just under one-quarter (24%) saying they feel confident about growth and nearly one in five (18%) questioning their long-term viability. In response to ongoing economic challenges, 75% have raised prices in the past 12 months, 55% have cut staff hours and 48% have reduced opening days.
With a high profile campaign by celebrity chef Tom Kerridge to cut VAT for hospitality businesses and prime ministerial candidate Andy Burnham suggesting a review of business rates for pubs, for now many operators are taking increasingly risky measures to address cashflow challenges. Forty-two per cent are dipping into personal savings to cover shortfalls, 38% are delaying supplier payments, and one in ten have delayed paying staff wages.
The research also highlights how financial strains are driven by persistent structural challenges. Seasonal revenue fluctuations affect 60% of businesses, while 55% identify the gap between paying suppliers and receiving customer payments as a key pressure point. VAT thresholds add further strain, particularly for micro-businesses operating near the £90,000 registration limit.
Approval rates for small business lending have fallen from 50–60% three years ago to just 15% today, leaving many operators without viable options when cash gaps emerge. While most shortfalls are relatively modest, typically between £1,001 and £5,000 on a quarterly basis, they are increasingly forcing difficult and sometimes irreversible decisions.
In response, the research reveals a sector actively reinventing how it operates. Operators are adopting new models to maximise efficiency and revenue. From launching multiple ghost kitchen brands within a single premises to hosting rotating cuisine concepts in pubs, businesses are stretching existing assets to reach new customers without expanding physical footprints. All-day trading is also becoming more common, helping smooth income across different day parts.
One of the most notable shifts is a move away from major delivery aggregators. With platforms such as Deliveroo and Just Eat typically taking between 25% and 30% commission per order, many operators are reassessing whether the model is sustainable.
In response, businesses are investing in direct-to-customer channels, including owned apps, SMS marketing and loyalty schemes, to retain margins, control customer relationships and drive demand during quieter periods.
Alex Rice, chief product & customer officer at Zempler Bank: “Britain’s small food and drink businesses are hugely resilient and creative, but they are under extraordinary pressure. Many are being forced to make difficult short-term decisions just to survive, from dipping into personal savings to reducing staff hours. It’s important that it’s become a notable political issue.
“It’s not all doom and gloom and it’s great to see how quickly operators are adapting. From rethinking delivery models to creating entirely new revenue streams, the sector is evolving fast. Adaptability alone isn’t enough, these businesses need financial products that reflect how they actually trade. Real-time visibility, forward planning tools and flexible funding will be essential to help them navigate what remains a very challenging environment.”