We don’t yet know whether the Omicron variant will drastically accelerate the spread of coronavirus, or whether it will circumvent parts of the immune system. Nor can we be sure that the ‘light’ coronavirus restrictions announced at the weekend will be enough to combat the new strain.
We can be certain, however, that these measures will come with an economic cost that politicians are, at least publicly, understating. Face masks are once again compulsory in shops and on public transport in England, and UK arrivals will need to take PCR tests within two days of landing, isolating until they get their result.
But the major economic threat stems from the tightening of self-isolation rules for contacts of those testing positive for Omicron (ten days, regardless of vaccination status) and the fear that this will trigger another ‘pingdemic’. The one in July probably shaved 0.5 per cent off GDP that month, and the impact now could be even greater, given it’s school term time and labour shortages are worsening. The economist Julian Jessop has warned that the pingdemic alone could knock as much as 1 per cent off GDP in December, costing our economy at least £2 billion.
Other economic effects are harder to quantify. We can expect the travel industry, which was already in a critical condition after nearly two years of disruption, to take a big hit. The value of IAG, which owns British Airways, fell by nearly 15 per cent on Friday. Travel-related companies also fared badly on the FTSE 250, with the cruise operator Carnival and easyJet falling by around 10 per cent.
Dark clouds are also gathering around inbound tourism. With international arrivals needing a PCR test within two days of arrival, and now forced to self-isolate until they receive a negative result, many travellers will decide it’s simply not worth the risk – or additional cost – of coming to Britain, especially for a weekend trip.