Lloyds Report: Why hospitality surged in June despite a slowdown in UK recovery

Summary 

  • The hospitality sector touched a 9 year high in its June output despite a majority of other sectors recording a slowdown, according to a survey by UK banking group Lloyds.
  • The hospitality sector’s output surged on the back of pent up demand post easing restrictions, rise in summer holiday bookings in domestic locations, and the UEFA 2020 tournament.
  • 11 of the 14 sectors’ output growth continued to accelerate, but at a slower pace than May due to a broader overhang of inflation and capacity concerns amongst other factors.

The UK’s hospitality sector witnessed the highest output growth rate in June despite a broader slowdown across other sectors, according to a survey by banking major Lloyds bank (LON: LLOY).

Pent up demand in pubs, restaurants, and other businesses in the hospitality sector helped drive output growth following the latest round of easing lockdown-like restrictions in May.

 

Hospitality sector shines

The June data for the travel and leisure sector recorded an output of 63.1, the highest since January 2012. A reading over 50 indicates a rise in output, whereas anything below 50 suggests a contraction.

According to the Lloyds report, in addition to easing lockdown rules, the sector was also boosted by an increase in domestic holiday bookings for the summer and the 2020 UEFA European Football Championship, which prompted customers to come to pubs and restaurants to watch the football matches.

This is the third consecutive month the sector has recorded a rise in its output. Previously, the travel and recreation sector had recorded a drop-in activity each month, starting from August 2020 up until April.

Also Read: UK construction sector expands at fastest pace in 24 years

Broader sector recovery continues at a slower pace

The report highlighted that only 5 out of the 14 sectors recorded a higher output growth rate on a month-on-month basis, of which the metal and mining sector witnessed the sharpest increase in monthly output, with a June reading of 65.1 compared to the reading of 62.0 in the month prior on the back of a surge in export orders.

The remaining 11 sectors had though continued to accelerating pace of output; however, the rate of growth had slowed down from the May’s reading. The sectors which recorded the slowest paced output growth in June included the transport sector, household products, and food and drink manufacturing sectors.

Airlines in the transport sector suffered a drop in international travel bookings due to the UK government’s traffic light system. The transport sector’s June reading stood at 51.8, dropping sharply from its May reading of 63.2.

Meanwhile, the household products sector’s reading was at 61.2, compared to its May reading of 68.5, due to a shift in consumer spending patterns, as UK residents chose to spend money outside rather than at home. It was also affected by a fall in exports.

Finally, the food and drink manufacturing sector’s June reading was at 60.5, down from May’s data of 67.3 due to the sector being impacted by a shortage in staff and similar to the household products sector, food and drink manufacturing also witnessed a fall in its exports during the month of June.

Also Read: Spike in Covid cases: Which sectors are likely to get impacted most?

The next 12-month outlook for UK businesses had a lower optimism due to inflationary and capacity related concerns, skilled staff shortages, and businesses struggling to meet pent up demand amid such pressures.

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