UK: Half of horticulture businesses say that rising costs outstrip profits

Horticultural businesses are calling on the government to "stop the squeeze on growth" as rising employment taxes, energy bills and input costs push firms into declining profitability despite continued sales.

The Horticultural Trades Association's (HTA) latest quarterly Business Barometer shows significantly more businesses are behind their profit targets than ahead, with a net balance of -36% at the end of Q1 2026. This compares with -13% for sales, highlighting a widening gap between trading and profitability and the scale of the margin pressure businesses are now facing. Retailers were particularly affected, with a profit net balance of -46%.

Year-on-year figures further confirm the trend: while retailers, growers, and manufacturers reported an increase in their sales (+11% net balance), they also reported a sharp fall in profits (-27% net balance). This indicates that rising costs, rather than declining demand, are the primary drivers of this weaker performance.

HTA Members cited increases in the National Living Wage and employer National Insurance Contributions, alongside rising fuel and material costs, as the main causes of profit reduction. Businesses also reported the knock-on effect of wage increases pushing up pay structures, while weakened consumer confidence, linked in part to global instability, including the Iran conflict, is compounding the pressure.

The impact is now affecting longer-term business decisions, with investment intentions falling across all five tracked categories; just 62% of members plan at least one investment, down from 70% in the previous quarter and 74% in quarter 3 of 2025, showing the downward trend. Among those already behind profit expectations, 63% say they plan to cut or slow investment.

© Horticultural Trades Association

Confidence is also deteriorating. Medium-term outlook has fallen to 4.2 out of 7, while long-term confidence has dropped to 4.0 — the lowest level since the start of the pandemic.

While landscapers remain relatively resilient, with strong short-term pipelines, many report increasing difficulty converting new enquiries, suggesting cost pressures and weaker consumer confidence are beginning to affect future demand.

The HTA said the widening gap between sales and profit performance shows sustained cost pressures are now directly constraining growth and investment across the sector.

Fran Barnes, Chief Executive of the HTA, said: "Sales are holding up, but businesses are not seeing the benefit. Costs are rising faster than revenues, squeezing margins across our sector.

"This is not one single pressure, it is the cumulative effect of rising employment costs, higher energy bills, fuel, materials and increasing regulatory burden all landing at once.

"The increases in employer National Insurance and the National Living Wage alone are significant, particularly in a labour-intensive sector like ours, where it is estimated to have added £134 million to industry costs, but they also sit alongside a wider set of cost pressures that businesses simply cannot absorb indefinitely.

"We are now seeing the consequences. Profits are falling, investment is being delayed, and confidence is at its lowest level since the pandemic.

"If the government is serious about growth, it must address that cumulative cost burden. Without action, businesses will continue to scale back at a time when they should be investing, growing and creating jobs."

The HTA is calling for action to ease cost pressures, including extending energy support to horticultural businesses, a more responsive, streamlined, and investment-friendly business rates system, reducing regulatory and financial barriers to open up funding opportunities, and reducing trade friction with the EU.