Britain should be “ready to redeploy” furlough aid if it faces a virulent COVID-19 wave requiring widespread lockdowns, the International Monetary Fund (IMF) has said.

The IMF said fresh waves of the pandemic and the uncertainty they bring represented the “major risk” to the economic outlook.

It pointed to a “mild slowdown” in growth in the new year as latest restrictions designed to tackle the spread of the Omicron variant bite.

The IMF said Omicron risked creating further supply chain problems and inflationary pressures – but that “if it or a future outbreak is more virulent this could weigh on confidence and demand”.

It added: “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 programmes.”

The IMF cited “a furlough scheme and targeted support to the most vulnerable households and small businesses” as examples of such programmes.

Its comments were published as part of the IMF’s regular health-check of the UK economy.