Without a fuss, the UK financial services sector has returned to pre-pandemic levels and even added two percentage points of growth since February 2020, official figures showed last week.
Banks and insurance companies may have reduced their workforces, but customers continued to borrow and save, making the sector one of the few to have exceeded previous levels of activity.
As the UK’s mighty services industry, which generates around three-quarters of the national income, recovers, it is clear that banks and insurers are at the more resilient end of a spectrum that has seen some companies reach full fitness with astounding speed while others stutter back to life.
Real estate agents are another example, having earned commissions from tax cuts that triggered a surge in home purchases. The transport industry has also rebounded thanks to a boom in internet delivery and the IT sector is significantly larger than at the start of 2020, following the same newfound reliance on everything online.
Other sectors languished as restrictions forced them to close or kept customers away – among them the office services industry, which has suffered a deep recession since the order for people to work from home drew million workers from their office chairs.
The latest official service industry health check came out on Friday and showed that despite a rebound in April and May, hotel and restaurant revenues were 18% below their February 2020 level, and the arts, entertainment and recreation sector remained at 26% where it was 17 months ago.
It shows that while most moving parts of the service industry have recovered from the pandemic, at least in terms of turnover, significant pockets remain crippled by restrictions that will not fully ease until July 19. , and even then could be overtaken by a general fear of going out, if coronavirus infections hit 100,000 a day as predicted.
Martin Beck, senior economic adviser at forecasting group EY Item Club, said there had been some turnover in the service sector as some industries that recovered after the first lockdown gave way to those put on hold. sleep longer, who wake up now.
GDP figures for May showed the hospitality industry alone accounted for 0.7 percentage point of the 0.8% month-on-month increase, suggesting the ups and downs industries that make up the rest of the sector had largely offset each other.
Hospitality, however, makes up only 1.6% of the economy compared to financial services, which make up around 7%. The maintenance of cars and motorcycles generates 10.4% of service income, to which are added 7.6% of professional and technical services such as accounting and 13.9% generated by “real estate activities”.
In the fall, when the rebound in hospitality has faded and visiting a hotel or restaurant is likely to become as popular as it was before Covid-19, it’s these big service industries that will bear the burden.
“There are corners of the service sector that are still quite depressed and hopefully they will spend the next few months making a strong recovery,” Beck said. “But the spread of the Delta variant makes it harder to predict the pace of recovery, especially if some people are wary of socializing and hold back spending.”
Some service sectors may never experience the same level of activity as before Covid. Thousands of workers have already left the retail sector following the shift to online sales. Given the vacancies reported by companies that run warehouses and logistics companies, it appears that these workers are unable or unwilling to work in retail wholesale, processing internet orders, after years of dealing directly with customers in stores.
Most analysts predict that airports will return to life as they knew it in the decade before the coronavirus, but it could be that a temporary drop in business travel becomes permanent after employers forgo discounts for frequent flyers to meet carbon emissions targets. and online meeting becomes a permanent part of working life.
Jonathan Gillham, chief economist at consultancy PwC, said supermarkets had found they had to cope with falling demand as more people ate out. Online retailers suffered a drop in sales as consumers returned to the high street.
The quicksand of recovery, with many industries losing ground as others wake up, suggests “continued consumer caution”, he said, and that some sectors may struggle to attract consumers again. customers they relied on before.
“Companies, while adjusting incredibly well to lockdown conditions in the first quarter, may struggle to fully restore capacity to pre-Covid levels,” he said.