European Businesses Ride Out the Omicron Wave

Despite record-high case numbers, the U.K. and other governments across Europe responded to Omicron with lighter restrictions than any previous wave of the virus, allowing businesses to remain open and Mr. Cook to break even.

“It was manageable,” said Mr. Cook, chief executive of All Star Lanes, which employs more than 200 people across its four venues in central London. “People did have the confidence to keep booking and largely they deferred to this year.”

The impact of Omicron in Europe has been more muted than previous Covid-19 waves, as governments responded to each successive surge of the virus with a lighter touch. Meanwhile individuals and businesses have, where possible, adapted to restrictions, minimizing the effects.

The result: Economic growth still slowed in Europe at the end of last year but far less than during earlier surges.

“Services are weakening but nowhere near to the extent that we’ve seen in previous waves,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics. “We’re probably already past it by now.”

In the U.K., Prime Minister Boris Johnson left the economy relatively open as Omicron swept through the country, while ramping up a booster vaccination campaign. Many continental European countries have limited the effects of the Omicron wave by beginning to loosen restrictions on the vaccinated and doing the opposite with the holdouts.

The eurozone economy expanded 0.3% in the fourth quarter of last year, well below the 4.6% for the entire year, Eurostat said on Monday. The U.K. economy is forecast to have grown by 1.2% in the fourth quarter, according to the National Institute of Economic and Social Research.

With the effects of the Omicron variant coming late in the year, most European economies booked strong growth overall in 2021. The French economy grew more than any year since 1969. Italy had its best showing in more than 40 years, while Germany grew a relatively modest 2.7% as supply-chain problems hit the country’s manufacturing sector particularly hard.

Mr. Cook said younger customers came back to the bowling venue as soon as the risk of infecting older relatives over the winter holidays had passed. He expects business to pick up quickly as people return to their offices. Many Christmas parties were postponed rather than canceled, which means some of the missed holiday revenue will be made up.

For many businesses, recovering the ground lost in the past two years is dependent in part on how durable the changes brought by the pandemic, such as remote working, are in coming months and years.

“People are living in a self-imposed lockdown, they don’t go to the office, they don’t eat out,” said Alessia Russo, who helps manage a sandwich shop in downtown Milan. “At least during the real lockdown the government gave some monetary aid to businesses.”

Ms. Russo’s shop used to often hit daily sales of €1,000, equivalent to about $1,115, before the pandemic. That had climbed back to about €500 in September and October of last year, but over the past week has averaged €170. A big catering job recently was canceled because several of the would-be attendees tested positive for the virus.

“Consumption will make or break the eurozone recovery this year,” said Nicola Nobile, an economist at Oxford Economics, which is forecasting a stagnant first quarter.

Across the continent there are signs of a return to normalcy in the business world. In-person fashion shows were held in recent weeks in Paris and Milan, and the Mobile World Congress, one of Europe’s biggest annual technology conferences, will go on in person in late February in Barcelona. Organizers say they are expecting 1,500 exhibitors and attendees from 150 countries.

There have been high-profile cancellations and postponements, including the World Economic Forum’s annual meeting in Davos, Switzerland, which had been scheduled for January and now is planned for early summer.

While services have continued to struggle as the pandemic enters its third year, manufacturers in most countries did well, but continue to face the triple challenge of surging energy costs, supply-chain bottlenecks and difficulty in procuring some raw materials.

“Companies aren’t worried about not having orders. They worry whether they can fill them on time and make a profit because of rising costs,” said Alessandro Spada, chairman of Assolombarda, an organization that represents about 7,000 companies with a total of more than 400,000 employees in northwest Italy.

Assolombarda estimates energy costs for companies will be four times as high as in 2021.

Lorenzo Vimercati, chairman of Meccanica Vimercati, which manufactures high-precision mechanical components for various industries, last year made up most of the ground lost in 2020. He managed to pass on the bulk of his increased costs—including a doubling of his electricity bill and a steep climb in the price of copper—but he is uncertain he can manage again this year. He is considering buying electricity together with a group of other manufacturers to increase their negotiating power.

“It’s hard to plan because there is so much uncertainty,” said Mr. Vimercati. “I’d sign now to replicate the revenue and profitability we booked last year.”

—Giovanni Legorano in Rome contributed to this article.

Write to Eric Sylvers at [email protected] and Isabel Coles at [email protected]