Why UK pubs are closing: The hidden costs behind the crisis

The Red Lion has stood proudly in the heart of Little Bramford for over two centuries. It’s seen locals through two world wars, recessions, and generations of celebrations. But last month, landlord Sarah Mitchell made the heartbreaking decision to shut its doors for good.

“We were still busy,” Sarah says. “Locals were coming in, supporting us. But once you added up the energy bills, card fees, taxes, and everything else, it just didn’t add up anymore.”

While The Red Lion and Sarah are fictional, their story mirrors the harsh reality faced by hundreds of real pub owners across the UK today.

According to the British Beer and Pub Association (BBPA), an estimated 378 pubs will permanently close in 2025, up from 350 in 2024, that’s nearly one closure every single day.

And it’s not for lack of customers. What’s really pushing pubs to the brink are rising operating costs, card processing fees, business rates, and inflation-linked expenses, all of which are quietly draining profits until staying open becomes unsustainable.

In this article, we’ll explore the real reasons behind the UK pub closure crisis, highlight the hidden costs that are hurting bar owners the most, and share practical solutions that can help publicans like you fight back.

The UK pub crisis: Why so many local pubs are shutting down

It's becoming increasingly common to see boarded-up pubs on British high streets, places that were once the beating heart of their communities. These closures aren’t just economic losses; they represent a slow erosion of local culture and connection.

According to the British Beer and Pub Association (BBPA), the 378 pubs expected to close in 2025 will result in over 5,600 job losses across the sector. The impact goes beyond pub owners, it hits breweries, local suppliers, and entire communities that rely on pubs as a vital social hub.

Recent data from PwC’s retail analysis shows that of the 851 pub closures in 2024, around:

• One third reopened under new chains
• One third became independent pubs
• The remaining third stayed vacant or were converted to other uses

Regional data from CAMRA paints an uneven picture. London leads with a 1% annual pub closure rate, followed by the East and West Midlands at 0.9%. The North East shows more resilience, with just 0.3% of pubs closing yearly. Still, even in the best-performing regions, beloved community spaces are vanishing.

A report by the Centre for Cities shows a stark contrast in hospitality spending across the country. In wealthier areas like London, York, and Edinburgh, consumers spend roughly £1 in every £4 on dining out. In more economically challenged cities such as Bradford, Wigan, and Stoke, it’s closer to £1 in £10, leaving many pubs struggling to stay afloat.

Since the year 2000, over 15,000 pubs in the UK have permanently closed, according to BBPA figures. Behind these numbers are stories of lost livelihoods and the slow disappearance of local gathering places that have served communities for generations.

Rising costs, tax pressures and energy bills: What’s hurting UK pubs most in 2025

British pubs today are caught in a perfect storm of rising costs and changing customer behaviour.

One of the biggest blows came in April 2025, when the government cut business rate relief from 75% to 40%. That change alone has increased fixed costs for hospitality businesses already running on tight margins.

Energy prices remain a serious concern. David Wigham, Commercial Director at Admiral Taverns, which operates over 1,600 pubs, told a parliamentary committee that energy bills are still up to twice as high as they were before the Ukraine war. The Federation of Small Businesses (FSB) says pubs are especially exposed to these rising costs for three reasons:

•  Customers resist price increases
• The industry remains energy inefficient
•  Many venues still suffer from reduced cash flow following COVID-19

Tax burdens are adding further pressure. The British Beer and Pub Association (BBPA) reports that £1 in every £4 spent on beer goes directly to the Treasury through a combination of beer duty and VAT. And now, the new Extended Producer Responsibility (EPR) rules are adding nearly £60 million a year to sector costs, mainly for recycling glass bottles.

That means pubs are essentially being taxed twice, once for selling alcohol, and again for the environmental impact of packaging.

And while inflation rises, weekday footfall is falling. The shift to hybrid and remote working since the pandemic has dramatically reduced after-work trade. For pubs that once relied on commuter crowds, this behavioural change has left a gap in revenue that’s proven hard to fill.

Card payment fees: The hidden cost eating into UK pub profits

While energy bills and business rates make headlines, one of the most overlooked threats to pub profitability in the UK is card payment processing fees.

Across the industry, pubs typically pay between 1.5% and 3.5% per card transaction. That might seem minor, but for a sector where, according to the British Beer and Pub Association (BBPA), 80% of all revenue goes straight back out in taxes and fixed costs, these fees quietly eat away at already thin margins.

And the shift toward card usage is accelerating. A Lightspeed survey found that 34% of UK customers now prefer contactless payments, while just 18% still use cash. Although this trend adds convenience for customers, it creates higher, unavoidable costs for venues, particularly because UK law doesn’t allow businesses to pass processing fees onto customers.

The maths paints a stark picture. Most pubs earn 78% to 80% of their gross profit from drinks, but after expenses, their net profit margin drops to around 10% to 15%. So a 2.5% transaction fee can easily wipe out over 20% of that actual profit on every card sale.

For example, if a local pub processes £5,000 in card transactions each week, annual processing fees can reach £5,700 or more. That amount could cover part-time staff wages, utility bills, or a portion of business rates.

Worse still, these costs are deducted immediately. While rent or stock orders can often be delayed or negotiated, card processing fees are taken out at the point of sale, putting instant pressure on cash flow.

For many pubs already operating on a knife-edge, this isn’t just a cost, it’s a ticking time bomb for viability.

Why even busy pubs are struggling to survive in 2025

On the surface, many UK pubs look like they’re thriving, with regular customers, busy weekends, and strong drinks sales. But the reality behind the bar is far more fragile.

According to the British Beer and Pub Association (BBPA), most pubs earn high gross margins on beverages, typically around 78% to 80%. That means a pint costing £1 to serve might sell for £4.50. But after staffing, utilities, business rates, VAT, and card processing fees, net profit margins often fall to just 10% to 15%  or lower.

This margin pressure is getting worse. A 2025 hospitality outlook by RSM UK found that 35% of consumers plan to cut back on spending in pubs and restaurants this year. The same report shows that like-for-like sales in 2024 often failed to keep pace with inflation, making it harder for pubs to raise prices without losing trade.

More alarmingly, research from Bailey’s suggests that one in five UK pubs is now technically insolvent, operating with negative assets on their balance sheets. For these businesses, even a small increase in fixed costs can tip the balance into closure.

Seasonal swings only make things tougher. During the winter months, pub sales can drop by up to 50% compared to the summer. But fixed costs like card processing fees remain constant as a percentage of every transaction, no matter how little revenue is coming in.

Emma McClarkin, CEO of the BBPA, sums it up bluntly:

“Pubs are doing well, but most of the money that comes in goes right back out in bills and taxes. For a lot of people, it’s impossible to make money, which too often means pubs have to turn off the lights for good.”

Even the best-run, busiest pubs aren’t immune. When structural costs outpace flexibility, survival becomes less about customer numbers and more about margins.

Cost-cutting solutions and new revenue streams for UK pubs

While the challenges facing pubs in the UK are very real, forward-thinking landlords are discovering that modern technology can help cut costs, not just add to them.

Today’s online payment systems go well beyond basic card processing. Many now include tools for:

• Tracking sales in real time
•  Analysing customer behaviour
• Managing stock and staff schedules
•  Driving loyalty and repeat business

This shift gives pub owners greater visibility and control over where their money goes and where they can claw back margins.

Smarter payment platforms: Flat fees, faster settlements, greater control

Traditional card processors typically charge 1.5% to 3.5% per transaction, often eating up 20% to 30% of a pub’s net profit on every sale. But newer solutions like Wonderful’s One app are rewriting the rules.

While not built specifically for hospitality, Wonderful offers a flat-fee model that is gaining traction with cost-conscious small businesses like pubs. Their pricing offers:

•  £9.99/month for up to 1,000 transactions
•  Zero percentage-based fees
•  Instant payments and next-working-day settlements

This can equate to thousands of pounds in annual savings, without waiting days for funds or navigating complex tiered pricing.

Mobile POS and table payments: Speeding up service, not just saving costs

Mobile POS systems, including Wonderful’s One app, enable table-side payments, helping pubs:

•  Serve more customers with fewer staff
• Reduce queues at the bar
• Improve the guest experience

Meanwhile, platforms like Lightspeed offer hospitality-specific POS features, such as:

• Integrated customer loyalty tools
• Real-time inventory control
• Reporting dashboards tailored for pubs and bars

While these systems may still involve standard card fees, the increase in customer retention and efficiency can offset the cost over time.

QR ordering and online payments: Better flow, with considered use

Some pubs are embracing QR code ordering and contactless digital payments to handle high volumes during peak times. These systems help manage staffing gaps and reduce wait times, especially for venues with beer gardens or large tables.

However, it’s important to note:

• Online card processing fees are typically higher
• These platforms are most cost-effective for high-turnover settings
•  Integration with fixed-fee processors is key to keeping margins intact

Offer cash incentives legally

Under UK law, pubs can’t charge extra for card payments but they can legally offer discounts for cash. Done right, these schemes can reduce card usage from 80% to 55% to 60%, delivering significant savings in processing fees without discouraging spend.

Use analytics to plug leaks in profit

Many modern POS systems like Shopify POS or Square for Restaurants include built-in analytics dashboards that let pub operators:

• Identify peak trading hours
• Highlight top-selling items
• Track spend-per-head

This insight can help optimise:

• Staff rotas
• Stock purchasing
• Promotions and happy hours

Better operational decisions = more margin preserved.

Survival strategies for UK pubs: Beyond payment processing

While cutting card fees and upgrading your POS can ease some pressure, they’re only one part of the survival toolkit. Smart pub operators are thinking bigger, tapping into energy grants, diversifying income, and pushing for fairer taxes to stay competitive and resilient in 2025 and beyond. 

Energy efficiency: Cut bills, tap into government grants

Energy remains one of the biggest fixed costs for pubs, second only to labour. But help is on the way.

The Labour government’s £6 billion commitment to energy efficiency opens the door for big savings. Key funding streams include:

• £1.5 billion added to the Boiler Upgrade Scheme
•  £400 million in new business energy grants (starting in 2025)

According to Energy UK, basic improvements can save an average pub £445 per year, and switching to a heat pump can knock off another £340 from annual heating costs.

For pubs operating through tough winters, these aren't just savings, they’re lifelines.

Room for growth: Turning pubs into places to stay

One of the biggest post-pandemic wins for pubs? Accommodation.

Recent research shows:

• 67% of pub operators say accommodation revenue is steady or growing
•  56% expect further growth in 2025
• And 79% of guests value “friendly and welcoming staff” over hotel polish

Adding rooms, even a few upstairs, provides higher-margin income, spreads fixed costs, and protects against the ongoing dip in alcohol-led revenues.

As RSM’s hospitality report points out, “Pubs are expanding into accommodation and food services” and many are thriving because of it.

Business rates reform: Why speaking up matters

One of the hardest hits this year came in April, when business rates relief dropped from 75% to 40%. The difference has hit small pubs especially hard.

While the government has pledged £1.5 billion in transitional support and promised “permanently lower tax rates” from 2026–27, the reality today is tougher.

That’s why more pub operators are getting involved with industry groups to push for changes during the ongoing business rates consultation. Advocacy now could shape fairer policies tomorrow and reduce a major structural burden for years to come.

Saving UK pub culture: What can be done now

Time is running out for many pubs across the UK and action is needed now, not years down the line. While trade bodies like the British Beer and Pub Association (BBPA) continue to push for long-term reforms such as fairer business rates, changes aren’t expected until 2026 at the earliest. As BBPA CEO Emma McClarkin warned, that delay might be "too late for some pubs already on the brink."

So what can pub owners and industry leaders do in the meantime?

1. Start with a full cost audit

Many pub operators are still paying outdated or above-market processing fees simply because they haven’t reviewed their contracts. A full audit of your costs, especially around payment systems, energy, and supply can uncover quick wins. Payment processing, in particular, is often overlooked but can quietly eat into already-thin margins.

2. Tap into group discounts

You don’t have to go it alone. Organisations like the Federation of Small Businesses (FSB) and regional pub groups have negotiated group rates on card processing and energy contracts, offering the kinds of deals usually reserved for big chains. If you're not already a member, joining could quickly pay for itself.

3. Push for policy change together

The BBPA reports that the pub and beer industry supports over one million jobs and contributes more than £34 billion to the UK economy annually. That economic footprint should command attention but only if the sector speaks with a unified voice. Many pub operators are getting involved in industry advocacy to influence the upcoming business rates review and ensure pubs are treated fairly.

4. Encourage customers to support smart

Card fees may feel like a hidden cost, but many customers are willing to help once they understand. Some pubs are encouraging cash payments or low-cost alternatives by simply explaining how fees affect small businesses. Transparency builds loyalty and savings.

5. Don’t wait for government timelines

Unfortunately, real reform could be years away. In Scotland, for example, the business rates review won’t even be completed until late 2026, with implementation not expected until 2029. Similar timelines apply across England and Wales. That means hundreds of pubs risk closure long before help arrives.

While the fight for long-term policy reform continues, pub owners still have power right now through smarter cost management, collective action, and community engagement. It’s not just about surviving; it’s about preserving the unique role pubs play in British life.

The future of British pubs: Is there still hope?

Running a pub in today’s climate isn’t just tough, it’s becoming a numbers game many are struggling to win. Card fees are only one piece of a growing cost puzzle that includes sky-high business rates, energy bills, staff wages, and compliance expenses. The margins are shrinking, and the stakes couldn’t be higher.

Yet amid all the challenges, there’s still a path forward, if operators can stay focused, stay informed, and stay agile.

Technology can help but it must be smart tech

Adopting digital tools can make a real difference, but not all systems are created equal. Pub owners need to weigh the total cost of ownership, not just flashy features or low processing rates. The right payment solution should offer operational benefits, like inventory tracking, customer loyalty, and analytics while keeping hidden costs low.

This is about more than profits, it’s about culture

The British pub is more than just a business. It's a place where neighbours meet, communities form, and heritage lives on. Every closure doesn’t just represent a financial failure, it’s a cultural loss. But to preserve this tradition, we need to equip pub owners with tools that actually work and policies that recognise their value.

Act now, not later

The bottom line? Britain faces a choice:

• Act quickly to help pubs adapt and survive
•  Or risk losing an irreplaceable part of our cultural and community fabric

For pub operators, the message is clear: Know your costs, challenge outdated contracts, explore smarter tech, and speak up because saving your business today could mean saving British pub culture tomorrow.

FAQ

Why are so many pubs closing in the UK?

Operating costs are outpacing earnings. Higher energy bills, tax pressure and wage hikes are squeezing margins, especially for community and wet-led pubs.

What kind of pubs are most at risk?

Independent and rural pubs. Without strong food sales or footfall, these venues can’t offset rising costs or compete with chains offering discounts and deals.

How bad is the pub closure rate in 2025?

One pub per day is expected to close. That’s around 365 closures this year, showing that pressure isn’t easing despite signs of broader economic recovery.

How do energy prices affect pubs?

They erode already thin margins. Pubs use more energy than most venues due to refrigeration, lighting and kitchen needs, making energy hikes especially damaging.

Are customers spending less in pubs?

Yes, many are cutting back. With the cost of living still high, people are visiting pubs less often, and when they do, they're spending more cautiously.

What support are pub owners calling for?

Fairer business rates, targeted energy relief and VAT reforms. Trade bodies argue these are essential to stop closures and protect community hubs.

Can local action help save pubs?

Absolutely. Supporting local events, visiting regularly and spreading the word helps pubs stay afloat. Community-owned models are also growing in popularity.

Are chains also closing venues?

Yes, but independents are hit harder. Chains can move resources and negotiate better terms, while single-site owners face every cost increase alone.

Are card processing fees hurting pubs?

Yes, they cut into every sale. Fees can reach 3.5%. Pubs can cut costs by switching to providers like Square, Zettle, or Wonderful, offering cash discounts, or using integrated POS systems to track and manage fees better.

Can pubs encourage cash payments to cut costs?

Yes, offering small discounts for cash can reduce processing fees and improve cash flow. It's legal if framed as a discount, not a surcharge. Many pubs save hundreds per month by encouraging cash over cards.

Photo by Soyoung Han on Unsplash