Businesses that have borne the brunt of Covid-19 restrictions helped the economic recovery to accelerate in the UK during May, according to the latest Lloyds Bank UK Recovery Tracker.
Eleven of the 14 sectors monitored by the tracker reported faster output growth month-on-month during May, up from nine in April, as the UK moved further out of lockdown.
The tourism and recreation (62.4 in May versus 51.9 in April) and transport (63.2 versus 53.5) sectors reported the sharpest rise in output growth month-on-month.
A reading above 50 signals output is rising, while a reading below 50 indicates output is contracting.
The former – which includes pubs, hotels, restaurants and travel agents – and the latter – which includes bus and rail operators, and providers of logistics services – both benefited from a release of pent-up consumer demand and domestic travel resuming during May.
However, what is unclear is the extent of the impact that the four-week delay to further easing of lockdown restrictions will have on these sectors.
While the output of every UK sector monitored by the tracker grew for the second consecutive month in May, healthcare growth slowed most markedly month-on-month (52.5 versus 58.5), making it the worst performing sector monitored by the tracker for the first time since April 2019.
Some pharmaceutical businesses commented on a slowdown in client spending after the surge in order volumes earlier in the pandemic.
Tourism and recreation also reported an increase in employment for the first time since January last year as businesses benefitted from the relaxation of lockdown restrictions.
Re-opening and pent-up consumer demand have already led to talk of labour shortages.
However, it is likely that the delay to further easing of restrictions could see some reduction in hiring pressures – at least in the short term.
Jeavon Lolay, head of economics and market insight, Lloyds Bank Commercial Banking, said: “When we look at the pace of growth, sectors that have been acutely affected by Covid-19 restrictions are now outpacing sectors that have been able to operate more freely during lockdown.
“Whether the four-week delay to further easing of restrictions will impact this trend is unclear.
“But while the delay is understandably disappointing for many businesses, there’s no denying that the economy is now on a much sounder footing.”
Image: Louis Hansel