The prospects for economic recovery in the UK appear to be disrupted due to the latest threat from the Omicron coronavirus variant and the ongoing supply chain disruption problems.
While it is still unclear about the ‘dangers’ of the new variant, most countries around the world have taken early steps to tighten border controls.
KPMG UK warns Gross Domestic Product (GDP) growth is likely to decline in the first half of next year if more sanctions are introduced to combat Omicron.
According to its key scenario, KPMG sees the UK government reinstating restrictions on social movement in January and February 2022, the economy will contract by around 2% in the first quarter of next year. It will also slow growth to 2.6% from 6.7% this year.
In another scenario, if a significant increase in Covid-19 cases triggers another blockade in early 2022, it will trigger a sharp fall in GDP to around 4.2% in the first quarter, dragging next year’s growth to just 1.8%.
Although the growth momentum is expected to slow until a booster vaccine is launched to stop the increase in cases, the full impact of the variant will depend on the increase in Covid cases and the number of social incarceration restrictions implemented.
Meanwhile, the CBI reduced its UK economic growth forecast due to the still -plaguing supply chain disruption to 6.9% this year from 8.2% previously, and to 5.1% for 2022 from an initial expectation of 6.1%.
Following the global supply chain problems, the CBI suggested that governments need to take new measures to curb from experiencing a fall in business investment in the future.
