Service sector

Hospitality companies saw Omicron hit in December as service sector growth slowed

The problems faced by travel, leisure and hospitality businesses across the UK have worsened in the past month, according to a respected monthly survey.

Growth in the services sector slowed to its lowest point since February as the Omicron variant of Covid-19 swept across the country in December.

The UK broke its previous record for daily coronavirus cases reported during the month and many people stayed home ahead of Christmas, a vital time for the hospitality industry.

Pubs and restaurants that would normally host family meals, office Christmas parties and meetings have instead faced a series of cancellations.

The closely watched IHS Markit CIPS UK Services PMI survey was 53.6 last month, down from 58.5 in November.

Any score above 50 represents growth, so the sector is growing, but at its slowest pace in the 10 months since the economy began to reopen from winter shutdowns.

However, analysts expected December’s score to be 0.4 points lower, according to an average compiled by Pantheon Macroeconomics.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply (CIPS) said: “Uncertainty and volatility in the services sector returned at the end of last year with a sudden drop in demand, and overall growth in activity was the weakest since February 2021. .

“This not unexpected turn of events was a direct result of increased pandemic restrictions as the number of festive activities were reduced by consumers affected by Covid.”

A good thing for the sector is that companies have been under much less pressure in the past month.

Many had struggled to keep up with growing demand for most of last year, but backlogs rose to their lowest level since March, the survey showed.

However, businesses are still facing pressure from staff absences and supply shortages, and costs are rising, although they have slowed from November’s record high.

Businesses were generally positive at the start of the new year, with around 55% expecting business to pick up in 2022, and just 10% believing it will decline.

Tim Moore, Chief Economics Officer at IHS Markit, said: “Despite concerns about weaker economic growth heading into the new year, service providers reported strong confidence in the business outlook. longer term.

“The level of optimism has remained stable since the fall, suggesting that most companies foresee only a temporary impact on demand for the Omicron variant.”