According to the company’s UK Recovery Tracker, the overall pace of the UK’s recovery slowed in December, even though 10 of the 14 sectors monitored reportedly saw an expansion in output.
Consumer-facing businesses "felt the brunt" of the impact from Omicron, with the tourism, hospitality and transportation sectors "acutely" affected.
Activity in the tourism and recreation sector – which includes pubs, hotels, restaurants and leisure facilities – contracted for the first time in nine months in December (43.2) as concern over the Omicron variant impacted consumer behaviour.
A reading above 50 signals output is rising, while a reading below 50 indicates contraction.
UK transportation – which includes airlines, hauliers and rail operators – experienced its first loss in momentum for four months, recording its weakest output growth since August 2021 (54.3).
In October, the travel and tourism sector was the country’s fastest growing industry for the second successive month. But in November, it saw the most widespread price rises of any sector.
The number of firms reporting an inability to meet demand due to staff or material shortages continued to ease from its peak in September 2021. However, the level remained elevated relative to the long-term average.
All of the fourteen UK sectors monitored by the Tracker reported rising input costs in December, with wages remaining a key driver of costs.
Overall, UK firms were 4.3 times more likely than the long-run average to report an increase in their wage bills as businesses sought to attract and retain skilled talent, up from 3.8 times in November.
Jeavon Lolay, head of economics and market insight at Lloyds Bank Commercial Banking, said consumer-facing businesses, like those in travel and hospitality, "unsurprisingly bore the brunt" of consumer concern over the Omicron variant in December.
"The cost backdrop remained acute as higher energy prices and wage bills pushed up firms’ expenses," he added.
"It’s no surprise that an increasing number of firms plan to raise their prices in the year ahead, indicating rising and potentially sustained domestic inflationary pressure."
