UK Business Confidence Slips As Hiring Eases, With Hospitality And Foodservice Under Pressure

UK business confidence weakened sharply at the end of 2025, with employers scaling back hiring plans amid rising operating costs and lingering uncertainty about the economic outlook, according to a series of new surveys.

Recruitment industry data from KPMG and the Recruitment and Employment Confederation (REC) showed the UK jobs market cooled further in December, with permanent and temporary hiring both declining and employers increasingly cautious about taking on new staff. However, the report also noted that starting salaries for permanent roles rose at the fastest pace since May, driven by competition for skilled candidates.

Separate findings highlighted by The Guardian, drawing on surveys from KPMG/REC and accountancy firm BDO, suggested business leaders were concerned by cost pressures and weaker turnover expectations as the UK entered 2026. BDO’s optimism indicator was reported to have fallen to its lowest level in nearly five years, underlining the subdued mood across the wider economy.

What This Means For Fresh Produce: Softer Demand, Tighter Margins, More Value-Led Trading

For the fresh produce supply chain, softer business confidence isn’t just a macroeconomic headline — it often translates into tangible shifts in buying behaviour.

When hospitality and broader services are under pressure, operators tend to lean harder into:

• shorter menus and simplified SKUs

• price-locked ingredients

• reduced wastage and tighter forecasting

• more frozen/processed substitution

• and aggressive negotiation on fresh lines (particularly salad, berries, and higher-cost prepared produce).

At the same time, there is opportunity. As consumer spending becomes more cautious, foodservice increasingly looks for produce that supports value messaging (filling, flexible, low-cost-per-portion) — such as potatoes, onions, carrots, brassicas, apples, bananas, and citrus — as well as versatile ingredients that stretch across dishes.

Hospitality Still A Key Demand Engine — But Operators Are Fighting Headwinds

While hospitality remains crucial for volume, jobs, and innovation in the UK food economy, the sector has been operating under sustained strain.

Industry body UKHospitality has previously warned of continued contraction, reporting net closures averaging 62 per month (around two per day) and stating the sector was 14.2% smaller than in March 2020, with independent restaurants particularly affected.

Meanwhile, insolvency indicators have also remained elevated. Analysis referencing official insolvency statistics has pointed to month-on-month increases in accommodation and food services insolvencies, including a rise from 306 in June 2025 to 327 in July 2025 — among the highest monthly totals recorded in that period.

This matters for the fresh produce trade because hospitality and foodservice aren’t simply “another customer” — they’re often the route-to-market for:

• premium varietals and seasonal specials

• high-volume salad and garnish lines

• food-to-go innovation

• locally supplied and higher-welfare positioning.

When that channel is cautious, wholesalers and suppliers often feel it first, particularly those geared towards independents, casual dining, and contract catering.

A Market That Rewards Agility

Despite the cautious tone, the picture isn’t universally bleak. The KPMG/REC commentary suggested the downturn could prove temporary following a more stable second half of 2025, while manufacturers expressed some hope around government industrial strategy support — indicating the economy is not in freefall, but stuck in a “careful mode”.

For fresh produce businesses, the signals point to a trading environment that rewards:

• tight service levels

• flexible pack formats

• and sector-specific insight (particularly around labour availability and cost recovery).

In other words: it’s not the season for complacency — but it absolutely is the season for smart, supply-chain-led growth.