Business investment in hotels and restaurants also fell by £621m in 2020, dropping from £4.6bn in 2019 to £3.9bn.
The sector also recorded a big slump in the final quarter of the year with total business investment in Q4 2020 only reaching £898m, which was 22.2% (£256m) down year on year.
Furthemore, UK GDP shrank considerably last year due to the consequences of the Covid crisis, declining 9.8% compared with 9.9% in 2019, marking the worst annual performance on record.
Mark Tighe, CEO of business tax relief consultancy Catax, said: “It was a particularly difficult year for the hospitality sector and no surprise that its business investment figures trailed UK industry as a whole.
“However, consumers have a huge nestegg of accidental savings that will make itself felt as Covid restrictions fall away this summer.”
He added: “Hospitality is one of the key sectors primed to benefit strongly from an opening of the floodgates and we expect to see a dramatic improvement in the level of business investment this year.”