UK hospitality sector declines at fastest pace since lockdown


Tourism and recreation experienced the fastest fall in output of any UK business sector last month, the latest data shows.

Output in the sector, which includes pubs, hotels and restaurants, declined at the fastest pace since February 2021, when the UK was last in lockdown, with a tracker score of 36.3 in September, according to the Lloyds Bank UK Recovery Tracker. Any reading below 50 indicates contraction.

The drop was caused by demand falling for a fourth consecutive month – to a tracker score of 38.5 last month – as consumers reined in spending amid rising inflation.

However, five of the 14 UK sectors that make up the tracker reported faster growth in output in September, compared with just three the previous month. A tracker reading above 50 indicates expansion.

Output growth was highest among software service providers at 55.8, down from 63.1 in August, followed by healthcare firms, rising to 53.6 from 47.8.

The tracker showed that overall input cost inflation for businesses intensified in September for the first time since May. The increase was driven by rising energy prices for manufacturers, which exceeded a previous peak during the 2008 oil price shock.

Jeavon Lolay, the head of economics and market insight for commercial banking at Lloyds, said: “While we expect UK inflation to remain stubbornly high in the coming months, there are clear signs of an easing in pipeline cost pressures in our latest UK Sector Tracker report.”

Between the second and third quarters this year, the average pace of input cost inflation slowed in all 14 sectors monitored by the tracker. This was supported by easing wage and shipping cost pressures – with reports of higher shipping costs reaching a 21-month low in September. The pace of inflation in prices charged to customers slowed in 12 sectors.

“That’s not to say that businesses won’t continue to face intense cost pressures, but suggests that peak inflation is near,” said Lolay. “This will be welcome news for both businesses and consumers.”

However, he said the recent news that the energy price guarantee scheme from April would prioritise support for the most vulnerable means that what happens to wholesale energy prices will, again, have a significant bearing on UK inflation from then on.

“The Bank of England will need to assess carefully prospects for both inflation and growth as it considers just how much more tightening is needed,” he added.

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