With many unknowns surrounding the new Omicron variant of Covid 19, experts are speculating the effect the new variant may have on the growth of the economy in the coming year.
If Omicron proves to be milder than previous variants and cause less serious illness, it is said that the British economy could recover to its pre-pandemic size by next Summer.
If no further restrictions are imposed on the UK economy it is estimated that the economy will grow over 4% in 2022 and a further 2% in the following year.
The discovery of the Omicron variant has somewhat obscured the current projections of economic recovery with analysts predicting the first interest rate rise in over three years.
If Omicron continues to spread quickly and vaccines prove ineffective at stopping the spread, experts believe that the UK economy will struggle to withstand more national lockdowns and will see a less than 2% growth next year.
Current consumer spending has slowed as people have become more cautious about catching the new variant. However, if Omicron is confirmed to be milder than previous variants then consumer spending could return to prior levels.
Inflation has already risen dramatically this year reaching over 3% in August and with it set to soar to around 5.8% next Spring pressure is mounting for the Bank of England to crack down on the ever-rising inflation rates.
If Omicron is found to be more transmissible than other variants and vaccines less effective, supply chains could further be affected, driving up inflation for longer than already anticipated.
The chief economist of the OECD has predicted two outcomes facing both the UK and international economy if Omicron is found to be more severe than first thought. The first is the disruption to supply chains and inflated prices that come with less availability. The second discusses more serious restrictions on social mobility which could lead to a fast decline in inflation which is unsustainable.
If cases continue to rise calls for the government to support households and businesses could rise again. Pubs, bars, and restaurants are already reporting an influx of Christmas cancellations after worries about the strength of the new variant.
Decisions from the Bank of England about interest rates take place in mid-December with rises forecast.
