A big story of the first four-and-a-bit months of 2021 has been a recovery for UK assets with the domestic-facing FTSE 250 index reaching all-time highs and sterling recently hitting $1.42 against the dollar for the first time since 2018.

Sentiment towards the UK has been boosted by the successful vaccine rollout and the steady easing of coronavirus restrictions.

However, there are now fears that the Indian variant which chief medical officer Chris Whitty has confirmed is more transmissible than the Kent variant, could jeopardise the timing of a move to the final step on the roadmap and a full reopening of the economy, potentially undermining the recovery.

That could be a particular problem for the leisure, hospitality and travel sectors where shares have made an impressive recovery since the start of the year.

Performance hasn’t been entirely based on hope either, with several trading updates showing stronger than expected trading when bars and restaurants could operate outdoors from 12 April. This suggested strong pent-up demand, despite unseasonably cold weather experienced throughout April.

Shares in premium bar operator Revolution Bars (RBG:AIM), Cineworld (CINE), Fulham Shore (FUL:AIM) and Restaurant Group (RTN:AIM) have all roughly doubled over the last six months.

Meanwhile, the emergence of the Indian variant could slow countries transitioning to the UK Government’s travel green list, including popular destinations like Spain, Greece and Turkey which are all on the amber or red list, and is something that could impact some travel firms more than others.

Tour operator Jet2 (JET2:AIM) and online package holiday provider On The Beach (OTB) seem to have been vindicated by their more cautious view in anticipation of lower demand and restrictions potentially staying in place longer than expected, with Jet2 not restarting holidays until 24 June and On The Beach not taking bookings for holidays before 31 August.

Firms which seem more likely to be impacted are TUI (TUI) and budget airline EasyJet (EZJ), who have started selling holidays from 17 May to amber list countries, with the latter saying it would let people ‘make up their own mind about their holiday’.

TUI has been particularly bullish on the outlook for holidays this summer with plans to operate at 75% of its summer 2019 capacity, perhaps reflected by its need to bring in as much as cash as possible.

The latest setback brings the share gains over the last six months into question with TUI and EasyJet up 72% and 30% respectively while Jet2 shares are only up 3% and, On The Beach, has seen its shares fall 6%.

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