The extra public holiday for the coronation of British King Charles will put more pressure on the UK economy. Economists expect that the extra day off on Monday 8 May, during which financial markets in London will also remain closed, will contribute to lower GDP this month.
May 5, 2023
According to economists polled by Bloomberg News, Britain’s gross domestic product could fall to 0.7 percent in May. This may cause the economy to contract in the second quarter. According to ING economist James Smith, the temporary slowdown due to the extra day off is a significant reason “why GDP will turn negative in the second quarter.”
This will be the second time in a year that royal events have affected British growth. However, the experience of 2022, with additional days off in June and September, indicates that the effect is “less pronounced than in previous years,” Smith said.
For example, GDP fell just 0.1% in the third quarter of 2022, after an extra day around Queen Elizabeth’s funeral in September. This event caused most stores and restaurants to be closed for much of the day.
Sanjay Raja, an economist at Deutsche Bank, expects the extra holiday in May to cut GDP by 0.5 percent, contributing to a slight drop in output in the second quarter. “While sectors such as hospitality and entertainment are likely to thrive, other sectors will see a hit from the lost overtime,” said Raja. However, a drop in production due to an extra day off is usually followed by a quick recovery the following month.
According to ING economist Smith, the fact that royal events have less of an impact on the economy than in the past may be due to the consequences of closing less shopping streets. For example, more online shopping and more physical stores remain open than in the past. The impact on production has also decreased.
During Queen Elizabeth’s Golden Jubilee in June 2002, GDP fell by 2.2 percent in that month. In June 2012, production decreased by 1.4 percent due to the celebration of the Diamond Jubilee, and in June 2022, the Platinum Jubilee fell by only 0.7 percent. Gross domestic product also fell by 0.7 percent in September last year, the month in which the Queen’s funeral took place.
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