Pubs and nightclubs which experienced a Covid bounce back face being wiped out due to the cost of living crisis, industry bosses warn.
A new report on the night time economy - which also looks at how music venues, theatres and cinemas are faring - found that most are in "survival" rather than "thrive" mode.
This is despite the number of jobs recovering to pre-pandemic levels, and even reaching record levels in some sectors.
It comes as business brace themselves for a 101% increase in bills this quarter compared to a year ago.
The NTIA Night Time Economy report warns that the industry is operating on even smaller margins than ever as customers' budgets are squeezed and energy prices soar.
In a statement the Night Time Industries Association (NTIA) said: "One positive thing to emerge out of the study was that jobs have recovered to pre-pandemic levels and are at an all-time high in some sectors.
"However, as we head further into a cost of living crisis despite the bounce back in jobs and firm numbers, consumer spend, sector income, productivity and profitability, continue to struggle .
"This suggests that the industry is operating on ever smaller margins and a large proportion of firms are in ‘survive’ rather than ‘thrive’ mode – employing staff to operate but having to exist with much lower income and low (or no) margins."
It has sparked calls for additional support in the upcoming Budget, such as a cut in VAT.
Michael Kill, chief executive of the NTIA, said: “The report shows some small signs of recovery, but it is clear that the industry is some way behind the rest of the economy.
"It is now vitally important that the Government take the proactive step to cut VAT in the March budget, for all businesses across the hospitality and night time economy sectors, allowing the sector the financial headroom to recover.”
Meanwhile Sacha Lord, chairman of the NTIA and Night Time Economy Advisor in Greater Manchester, said: “The Government has failed Independent business operators and the cultural sector across the UK.
“The report produced by the NTIA shows how hard these sectors have been hit over the last few years, delivering a stark reality of the challenges faced by the industry.
“It is now vitally important that the Government, armed with this report, do everything possible to protect these vitally important businesses, that deliver beyond economic impact, but are vital to social cohesion, nightlife and domestic tourism and the mental health and well being of the UK.”
It comes after a report by UKHospitality warned at the end of last month that businesses expect a 101% increase in energy bills this quarter, compared to the same period last year.
Of businesses surveyed, 56% reported increased standing charges, while 42% had reduced their daily opening hours and more than a third had cut the number of days they opened.
Organisations represented by UKHospitality said in a joint statement: “Hospitality businesses and representatives have consistently warned that the exclusion of the sector from additional energy support means venues are facing unsustainable hikes in their energy bills.
“These survey results reinforce those warnings, demonstrating the extent of this energy devastation on venues with bills set to almost double as a result of support significantly reducing. Arriving on top of the 101% increase compared to this time last year, the hit to the sector could not come at a worse time.
“Despite continually raising the alarm over energy suppliers’ unscrupulous behaviour during this crisis, we continue to see these companies relentlessly pursue excess profits at the expense of hard-working businesses and undermining the Government’s significant investment."
