Yahoo Finance IMF warns UK may have to bring back furlough scheme amid Omicron threat
The International Monetary Fund (IMF) has said the UK may need to bring back some of the programmes it introduced to help see the economy through the pandemic, including the furlough scheme.
This comes as the country announced its first death from the new Omicron COVID variant and has decided to ramp up its vaccine programme by turning football stadiums into vaccine sites.
“In the event of a virulent COVID-19 wave requiring widespread mandated closures, the authorities should be ready to redeploy a subset of the most successful previous exceptional programs (such as a furlough scheme and targeted support to the most vulnerable households and small businesses), but with due attention to lessons learned about their design (including tapering and timely sunset),” the IMF said in its report.
It said that the UK’s recovery has been faster than expected amid strong continued policy support and thanks to a rapid vaccination campaign.
But it also said capacity constraints and rising price pressures have emerged while new COVID-19 variants pose downside risks to the UK's outlook.
It expects inflation to peak at about 5.5% in the spring of 2022, before gradually returning to target of 2% by early 2024.
The IMF has also urged the Bank of England to avoid “inaction bias” as it gears up for a key vote on Thursday on when to hike interest rates in the face of high inflation.
The report said growth will likely remain strong in the near-term, but so too will price pressures.
“Our forecast sees elevated growth of about 6.8% in 2021 and 5% in 2022, with a mild slowdown in the first quarter of 2022 due to newly introduced restrictions, and supply bottlenecks still prevalent in the first half of next year."
Read more: European markets surge as UK to turn football grounds into vaccine centres
This comes a fourth national lockdown could be on the cards for millions of people in England.
Ministers are working on plans for a further tightening of social restrictions if the Omicron outbreak worsens over the holiday period.
In a speech at the IMF, UK chancellor Rishi Sunak said: “The most important thing we can do to safeguard the economic recovery and protect the British people’s lives and livelihoods, is for everyone to get boosted now.”
He said the government’s £400bn ($530bn) COVID support package will continue to help businesses well into spring next year.
He acknowledged the IMF had rightly pointed out that the UK faces real challenges in the months to come, but highlighted the fact that it said the economy is “resilient”.
“Our economic plan goes further in three crucial areas: to help working people with the cost of living; to stabilise our public finances; and to invest in our future growth," said the chancellor.
He reiterated some of his government’s initiatives such as increasing the national living wage to £9.50 from April and the fuel duty freeze and said that as a result of some difficult decisions "our deficit is expected to stabilise and our national debt to fall”.
