The UK economy grew at its slowest pace in almost a year in January as hospitality, leisure and travel businesses felt the impact of the Omicron variant.

The monthly flash PMI (purchasing managers’ index) estimate of activity from IHS Markit and the Chartered Institute of Procurement and Supply reported a two-speed recovery with an easing of supply-chain bottlenecks for manufacturing offset by weakness in consumer-facing service companies.

Service sector growth eased for a third month, according to the survey, amid reports from businesses of a loss of momentum caused by pandemic disruptions and very subdued demand.

Amid widespread reports of severe cost pressures, the IHS Markit/Cips measure of output fell from 53.6 to 53.4 in January – its lowest level in 11 months. Any finding above 50 denotes that the economy is expanding rather than contracting.

Chris Williamson, IHS Markit’s chief business economist, said: “A resilient rate of economic growth in the UK during January masks wide variations across different sectors. Consumer-facing businesses have been hit hard by Omicron, and manufacturers have reported a further worrying weakening of order book growth but other business sectors have remained encouragingly robust.

“Looking ahead, while the Omicron wave meant the hospitality sector has sunk into a third steep downturn, these restrictions are now easing, meaning this downturn should be brief. Many business and financial services companies have, meanwhile, been far less affected by Omicron and saw business growth accelerate at the start of the year.”

The gloomy picture for consumer-facing parts of the service sector contrasted with a report from Lloyds Bank showing spending on debit cards in the first two weeks of 2022 up by 27{ca50f33ff0a75f6c51f642a1a091bd073b72460168f6c3dc01c3669895f0a27f} on the same period in 2020, before the onset of the Covid-19 pandemic. While less was spent on commuting and holidays, there were sharp increases in payments in restaurants and bars, shops and cinemas, the bank said.

Flash PMI estimates for the eurozone showed activity in the service sector affected by Omicron, with growth slowing to its weakest in 11 months. Germany, France, Italy and Spain – the four biggest economies – have all tightened restrictions in recent weeks.

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Omicron pushes UK business growth to 11-month low

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