Getting stuck into 2026 - what are we seeing so far?

Getting stuck into 2026: what are we seeing so far….

With an eye on our local owner-managed business communities, we’re expecting to see (and are already seeing) lots of activity, both positive, and not so positive. Whilst there’s that early hint of Spring (we’re sure it’s on the way!)… this is also one of the toughest trading windows of the year.

 

Taking the leisure and hospitality industry, an area in which we tend to see an increase in activity at this time of year, due to trading conditions in the sector and our locality within communities heavily reliant on the sector, 2026 is proving to be no different. 

 

Christmas is traditionally a time when all in the leisure and hospitality industry hunker down, roll their sleeves up and get stuck into what is perhaps, the busiest season (other than Summer).

 

New Year then becomes a significant challenge for most in the industry – that horrible period between January and March, when we all see the offers coming in of 50% off meals, cheap hotel deals, and more, all an effort by the industry to try and coax consumers to spend with them.

 

For many owner‑managed businesses, in whatever industry, one question that looms large in this period is “do we go again and can cashflows support the business?”. 

 

Included below is a brief summary of what we see, here at PSB, as driving the pressure, across both leisure & hospitality and the wider owner-managed business landscape. 

 

Living Wage Increases

Whilst most would agree that higher wages for those at the lower end of pay scales is the right principle, the associated cost for labour‑intensive sectors will add significant costs at a time when margins are already low. For some, the increases will tip the business from “tight” to “unviable.”

 

Tips:
- Re‑examine staffing structures (rota efficiency, multi‑skilling).
- Review pricing – can small, regular increases prevent sudden shocks.
- Monitor wages‑to‑turnover ratios regularly to ensure the balance of costs ‘make sense’

 

Energy Costs

Energy prices have stabilised but remain significantly higher than before the energy crisis hit a couple of years ago. For many businesses, energy is still one of the biggest factors triggering restructuring conversations.

 

Tips:
- Review energy consumption – is there any wastage or costs that don’t make sense.

- Consider fixed‑term contracts to avoid the impact of any future price volatility.

-Be prudent/realistic, building in higher energy costs within cashflows.

 

National Insurance & Employment Costs

Businesses are now feeling the full impact of NIC increases - particularly in sectors with a high number of employees in lower wage bands. Combined with forthcoming changes to employment rights, staffing is becoming more expensive year on year.

 

Tips:
- Complete a full employment cost review (NIC + pensions + holiday pay), to ensure you understand the business position fully.
- Are there any  obvious areas in which costs could be saved, without detrimental impact on the business.
- Are there any areas where productivity might be improved across the team.

 

Business Rates

Temporary reliefs have ended for many in the leisure and hospitality sector. Coupled with revaluations for rates purposes, hitting in April 2026, further strains on cashflows are set to hit right across the SME world.

 

Tips:
- Check any new valuations as soon as they’re issued.
- Consider whether there is any scope to challenge the revaluation.

-   Include any revisions in cashflows to understand the impact of increased payments in 2026/27.

 

Brexit & Covid Aftershocks

We are only now seeing the full impact of the fallout from Brexit and Covid, including staff shortages (particularly for businesses reliant on flexible labour and niche skills), supply delays and higher import/admin costs, all affecting operations and cashflows.

 

Tips:
- Understand the staffing needs of the business, and look at the gaps – consider how the business can best respond.

-   Strengthen supplier relationships and consider diversifying to others, if appropriate.

-   Operate consistent ordering patterns (as much as possible) to secure best deals and stabilise costs.

 

What’s Hitting the Wider SME Landscape

 

Weak Consumer Confidence

Discretionary spending remains low - many businesses are experiencing seasonal dips and consumers are choosing their moments to spend, rather than spontaneously spending. 

 

Tip:
- Understand cashflows and keep a close eye on weekly sales trends, to better enable you to adjust quickly.

 

Rising Costs Across Suppliers, Insurance & Rent

Cost pressures are everywhere - even with reported falls in inflation, actual costs are still higher than in recent years.

 

Tip:
- Ensure cashflows build in realistic contingencies (e.g. 5–10%).

 

Regulatory Pressures

From new employment law requirements to Companies House changes, owner‑managed businesses face increasing admin and compliance burdens.

 

Tips:
- Ensure you understand what requirements are changing and when.

-   If the business has the available cash, consider outsourcing regulatory tasks (remembering that penalties etc are far more expensive.

 

Shrinking Cash Reserves

It was reported that a low percentage of SMEs entered 2026 with reduced or limited cash buffers. Even profitable businesses reported that they were struggling with cashflow demands.

 

Tips:
- Understand cashflows….an absolute must for any business owner (our number 1 must!)

-   Forecast cash weekly, not monthly.

-   Use credit facilities available - prioritise supplier payments strategically, paying on time but not too early, unless cash permits and it makes sense.

-   Seek advice for cashflow problems early – before things become a real problem.

 

Cybersecurity & Technology Pressures

Businesses face new challenges in digital adaptation - from AI adoption to increased cybersecurity risk.

 

Tips:
- Ensure managing these risks are considered and acted on as soon as possible. 

- Ensure staff are aware of risks and procedures – human ‘error’ is still reported as the main vulnerability for cybersecurity and technology problems.

 

Summary

The leisure and hospitality industry and wider SME sector remain resilient but the pressures they face are felt across the UK.

 

This year will be pivotal- early planning, honest forecasting and proactive cost and cashflow management will give business owners the best chance of surviving and hopefully thriving in 2026.