The trade body has warned that without Tier 3 support for firms currently in Tier 2 the industry will face widespread job losses in weeks.
The warnings come as London and Essex are told they will face tougher restrictions from Saturday 17 October.
Tier 2 means a ban on household mixing in pubs and restaurants, while the rule of six will apply outdoors and hospitality establishments will have to close by 10pm.
Kate Nicholls, chief executive of UKHospitality, said: “Being moved into Tier 2 is a curse for businesses.
“They will be trapped in a no-man’s land of being open, but with severe restrictions that will significantly hit custom, all while unable to access the job support available in Tier 3. It is the worst of both worlds for businesses.”
She added: “Venues in London have already taken a hit due to the dip in inbound tourism and with people increasingly working from home. A move into Tier 2 will now be catastrophic for some of them and it is only going to be made worse by the end of the furlough scheme in under two weeks.”
The news follows the announcements made on 12 October that placed areas in the North West, such as Liverpool, on very high-alert..
However, Nicholls added that without the “Tier 3 job support to Tier 2 businesses” there will be “catastrophic business closures and widespread job losses in the capital as early as 1 November”.