Service sector growth cools as Omicron fears sweep travel and hospitality industries

Growth in the UK’s crucial services sector has slowed to its lowest point since February as the problems faced by the travel, leisure and hospitality industries intensify.

The closely watched IHS Markit/Cips UK Services PMI survey registered 53.6 last month, from 58.5 in November.

Any score above 50 denotes growth, so the sector remains in expansion territory, but at its weakest rate in the ten months since the economy started to reopen after the winter lockdowns.

However, analysts had expected December’s score would be 0.4 points worse, according to an average compiled by Pantheon Macroeconomics.

The sprawling services sector accounts for about four-fifths of the UK economy and includes the likes of hospitality businesses. Picture: Lisa Ferguson

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (Cips) said: “Uncertainty and volatility in the services sector returned at the end of last year with a sudden drop in demand, and overall activity growth was the lowest since February 2021.

“This not-unexpected turn of events was the direct result of increased pandemic restrictions as the number of festive activities were reduced by Covid-concerned consumers.”

Ulas Akincilar, head of trading at online trading provider Infinox, said: “Despite the market’s Omicron fears, the UK’s dominant services industry saw a wobble rather than a wipeout in December.”

One silver lining for the sector was that businesses were put under a lot less strain last month.

Many had been struggling to keep up with spiking demand for most of the last year, but backlogs of work grew by their lowest amount since March, the survey showed.

However, companies are still facing pressures from staff absences and supply shortages, and costs are rising.

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