Lloyds Banking: UK hotel companies lead the pack as production contracts

Hotel businesses overtook the rest of the UK economy for the first time in over nine years in September, according to the latest Lloyds Bank UK Recovery Tracker.

Tourism and leisure (62.2) – which includes pubs, hotels, restaurants, leisure facilities and travel agents – was the fastest growing UK sector monitored by the Tracker for the first time since January 2012. A reading above 50 signals output is rising, while a reading below 50 indicates contraction.

The industry has benefited from strong consumer demand for large-scale events, such as concerts and music festivals, and the relaxation and simplification of international travel rules in England, resulting in an increase the number of people booking holidays abroad and more tourists visiting the UK.

Transport operators also benefited from an easing of travel restrictions and an increase in home-work trips, leading to a sharp rebound in the sector’s production month-on-month (55.9 in September against 42.9 in August ).

Additionally, tourism and recreation has become the only service sector to record the strongest monthly output growth since before the pandemic. 10 of the 14 UK sectors monitored by the Tracker saw production increase in September, up from nine in August. However, the picture was mixed for the manufacturing sectors. The output of automakers (44.5) and producers of metals and mining (49.2) and household goods (46.6) contracted sharply in September due to shortages of materials and personnel. As a result, service companies have outperformed manufacturers to the greatest extent since January.

Prices are rising in all UK sectors

Meanwhile, the input cost inflation rate in September was the second highest in Tracker’s history, as energy prices skyrocketed and demand for labor grew. intensified.

This led to the 14 UK sectors monitored by the Tracker to increase their prices, with transport operators and manufacturers of chemicals, food and drink, industrial products and metals and mining products registering the largest increases in month to month.

Jeavon Lolay, Head of Economics and Market Intelligence, Lloyds Bank Commercial Banking, said: “While the number of growth mode sectors increased last month, we are now firmly in a phase of economic recovery where big jumps in activity will not occur every month. other sectors in September as they continue to benefit from relaxations in COVID-19 restrictions and resurgent consumer demand.

“As the UK economy continues to move closer to its pre-pandemic peak, logistical challenges, higher energy prices and uncertainty over the trajectory of the virus as winter approaches. are key risks. Policymakers will need to be cautious in order to protect the recovery, with important fiscal and monetary policy decisions expected in the weeks and months ahead. “

Scott Barton, Managing Director, Corporate and Institutional Coverage, Lloyds Bank Commercial Banking, said: “The spectacular developments in the energy market in recent weeks represent a new challenge for UK businesses and households.

“As manufacturers bear the brunt of supply chain pressures, most companies must factor the likelihood of continued price pressure into their plans for the coming months.”

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