The hospitality and tourism sector, encompassing the likes of pubs, hotels and restaurants, faced higher inflationary pressures than any of the other 13 areas monitored by the Bank of Scotland/Lloyds UK Sector Tracker. The hard-hit sector registered 86.1 on the tracker’s measure of cost inflation. Meanwhile, UK-based car makers (82.7) and technology manufacturers (83) also faced significant price rises between October and November, driven by ongoing supply chain problems, particularly for key electrical items such as semiconductors.
The tracker’s composite input cost index - which measures cost rises across both the main manufacturing and services sectors - showed that, overall, cost inflation across the economy accelerated month-on-month (76.7 versus 75.7 in October). In November, the UK had the sharpest rate of cost inflation of all 13 countries monitored by the wider tracker - a position the UK has held more times than any of its global counterparts over the past 12 months. However, the number of sectors recording a rise in output nudged up to three out of the 14 sectors monitored by the tracker, up from two in October.
In response to the panel survey, the number of firms reporting falling sales due to price increases rose sharply, reaching 15 times the long-term average, up from ten times higher in October. November’s result was the second highest level for this measure on record and only marginally below the high registered in April, in the immediate aftermath of the start of the conflict in Ukraine. Businesses were, overall, still growing their workforces with seven of 14 sectors showing a rise in staffing levels. However, rising costs and weaker demand meant the rate that companies are adding workers fell to its slowest pace since February 2021, when swathes of the economy were hit by lockdown restrictions.
Scott Barton, managing director, Lloyds Bank corporate and institutional banking, said: “Confidence is low among businesses, with firms understandably concerned about future economic conditions. Last month’s autumn statement will have given management teams some reassurance when it comes to future fiscal direction. However, the wider economic landscape makes it difficult for them to accurately plan and allocate resources. In such uncertain times, it will be critical to regularly review the factors that are fundamental to resilience and performance to deliver a firm base for long-term success.”
Jeavon Lolay, head of economics and market insight at Lloyds Bank corporate and institutional banking, said: “While silver linings can be found within the latest official GDP, employment and inflation data, the broader UK backdrop remains one of slowing economic activity amid elevated price pressures and low confidence. Our report highlights that demand and price conditions remain very challenging across almost all sectors of the economy. This poses major challenges for policymakers, particularly the Bank of England as it considers how much higher borrowing costs need to rise to get inflation back to 2 per cent on a sustainable basis.”