The International Monetary Fund (IMF), an international financial body focused on sustainable economic growth, has pointed to furlough as an option. The Night Time Industries Association has also called for furlough in the first quarter of 2022, describing new measures as a “pseudo-lockdown”. IMF has warned new waves of Covid pose a “major risk” to the health of the UK economy in a new report. It warns the Government should “redeploy” most successful steps taken to protect businesses during previous Covid waves – if mandated closures are enforced.
In particular, it suggested “a furlough scheme and targeted support to the most vulnerable households and small businesses”.
Demand for a return of the scheme is growing in the UK.
CEO Mike Kill, of the Night Time Industries Association, said: “It is now clear that the Government have left the sector facing 12 days of Christmas misery, with no mandatory restrictions on trade but still a significant drop off – just as the Prime Minister did initially back in March 2020 before he eventually forced a lockdown.
“Night time businesses are particularly reliant on the festive period to get them through the rest of winter – without this, the result is a threat to the very survival of thousands of businesses and jobs.”
The trade body also wants to see VAT frozen at 12.5 percent and additional sector specific grants targeted at hospitality.
UK Hospitality has also backed the calls on VAT. Chief executive Kate Nicholls said: “We desperately need support if we are to survive this latest set of restrictions, and urge the Government to stand behind our industry.
“That means full business rates relief, grants, rent protection and extended VAT reductions.”
VAT was cut to five percent for hospitality during the pandemic before being increased to 12.5 percent from October this year.
It is set to return to 20 percent in March 2022.
However, the British Chambers of Commerce has called for it to be returned to five percent while requesting business rate relief be reinstated.
Melanie Baker, senior economist at Royal London Asset Management, warned: “Without pandemic support programmes like the furlough scheme in place, near-term disruption in demand for services may knock the recovery off course for longer.”
The IMF predicted UK growth would remain strong in the near-term with forecasts of 6.8 percent growth in 2021 and five percent in 2022.
But today’s report also warned of the risks of rising inflation, urging the Bank of England to avoid “inaction bias” and provide “careful communication”.
The Bank’s path forwards on interest rates has been overshadowed by uncertainty over the impact of Omicron on the UK’s economy.
Employment figures have seen a boom in workers on payroll – but warnings persist about businesses running intro difficulty in light of the Government’s Covid Plan B.
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Suren Thiru, head of economics at British Chambers of Commerce, said: “Although labour demand remains robust, Plan B may damage the jobs recovery by squeezing hiring intentions in those sectors most exposed to the new measures, including hospitality and retail, by diminishing their cashflow and dampening customer demand.”
If greater Covid restrictions do pose a problem, IMF managing director Kristalina Georgieva said the UK had the “fiscal space” to afford support measures.
Ms Georgieva added: “Should there be a need of more restrictive measures especially affecting contact-intensive services, then the policy support will have to be calibrated accordingly.”
A HM Treasury Spokesperson said: “We welcome the IMF’s report on the UK’s economic support package and their assessment that the UK economy is resilient, and recovered faster than expected because of this Government’s actions.
“The IMF specifically credited the UK’s ‘rapid’ vaccination campaign which allowed the ‘worst health impacts of the pandemic’ to be contained over the summer.
“With a resurgence of the virus, the most important thing we can do to safeguard the economic recovery is for everyone to get boosted now”