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Roaring 20s as Brits spend big in pubs, hotels, and restaurants

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Soccer Football - Euro 2020 - Fans gather ahead of Ukraine v England - The Thistleberry pub, Newcastle-under-Lyme, Britain - July 3, 2021 England fans celebrate scoring a goal Action Images via Reuters/Carl Recine
The tourism and recreation sector, which includes pubs, hotels, restaurants and travel agents, recorded its strongest output growth since January 2012. Photo: Reuters

UK’s hospitality sector flourished in June, with its output growing at the fastest rate in nine years, as lockdown restrictions around the country ease up.

This comes as domestic tourism was on the rise and Brits flocked to pubs to see UEFA Euro 2020 football matches.

The tourism and recreation sector, which includes pubs, hotels, restaurants and travel agents, recorded its strongest output growth (63.1) since January 2012, according to the Lloyds Bank (LLOY.L) Recovery Tracker.

A reading above 50 signals output is rising, while a reading below 50 indicates output is contracting.

Between August 2020 and April 2021, the sector’s output had fallen every month since August 2020.

Overall, the metals and mining manufacturing sector reported the sharpest rise in output growth month-on-month (65.1 in June versus 62 in May) due to a spike in new export orders, as global demand for raw materials continued to surge.

However, not all sectors fared well.

Transport businesses (51.8 in June, down from 63.2 in May) including airlines and rail operators experienced a slump in bookings for international travel, with the government's traffic light system meaning Brits returning from a majority of countries need to quarantine upon their return to the UK.

Read more: Families facing £160 rise in cost of food shop, industry warns

Household products (61.2, down from 68.5 in May) and food and drink manufacturing (60.5, down from 67.3) reported the sharpest slowdowns in the pace of their growth.

Manufacturers of household products were impacted by people spending more time outside, while food and drink producers dealt with by staff shortages. Both sectors also reported a drop in exports.

Looking forward, the report said inflation and capacity pressure has pushed down optimism about the future.

Only the transport sector saw a consistent rise in optimism month-on-month, with hopes over looser overseas travel restrictions going forward helping to lift growth expectations to the highest level since April 2015.

The drop in overall business optimism was driven by business concerns over inflation, constrained capacity and staff shortages more generally.

Thirteen of the 14 sectors monitored recorded a rise in backlogged orders, leading to the largest rise in uncompleted work since 1999.

And only five out 14 sectors posted faster month-on-month growth.

“The slowdown of output growth across the majority of sectors shows we are entering a new phase of the UK’s recovery,” Jeavon Lolay, head of economics and market insight, Lloyds Bank Commercial Banking, said.

“A slowdown in output growth reflects the challenges firms are navigating to meet increased demand for their goods and services".

Meanwhile, Scott Barton, managing director, corporate and institutional coverage, Lloyds Bank Commercial Banking warned that with infections rising sharply as a result of the spread of the Delta variant, alongside price pressures and skilled labour shortages, businesses still face challenges ahead.

Watch: What is inflation and why is it important?