Service sector

Omicron Pushes UK Business Growth to Low in 11 Years | Economy

The UK economy grew at its slowest pace for nearly a year in January as hospitality, leisure and travel businesses felt the impact of the Omicron variant.

The monthly flash PMI (Purchasing Managers Index) estimate of activity from IHS Markit and the Chartered Institute of Procurement and Supply reported a two-speed recovery with an easing of bottlenecks in the supply chain for the manufacturing sector offset by the weakness of service companies in contact with consumers.

Growth in the services sector slowed for a third month, the survey showed, amid reports from businesses of a loss of momentum caused by pandemic disruptions and very subdued demand.

Amid numerous reports of severe cost pressures, the IHS Markit/Cips production measure fell from 53.6 to 53.4 in January – its lowest level in 11 months. Any result above 50 indicates that the economy is expanding rather than contracting.

Chris Williamson, chief economist at IHS Markit, said: “A resilient rate of economic growth in the UK in January masks wide variations between different sectors. Consumer-facing businesses were hit hard by Omicron, and manufacturers reported a worrying further weakening in order book growth, but other business sectors remained encouragingly strong.

Sign up for the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

“Looking ahead, while the Omicron wave meant the hospitality sector was plunged into a third sharp downturn, these restrictions are now being eased, meaning this downturn is expected to be brief. Many business services companies and financial services were much less affected by Omicron and saw their growth accelerate at the start of the year.

The grim picture from parts of the consumer-facing services sector contrasts with a Lloyds Bank report showing spending on debit cards in the first two weeks of 2022 was up 27% from the same period in 2020, before the start of Covid-19. pandemic. While less spending was spent on travel and vacations, there was a surge in payments to restaurants and bars, shops and cinemas, the bank said.

Flash PMI estimates for the Eurozone showed activity in the services sector impacted by Omicron, with growth slowing to its lowest level in 11 months. Germany, France, Italy and Spain – the four largest economies – have all tightened restrictions in recent weeks.