“Some economists said the June holiday could dent GDP by 0.5% in the second quarter as firms closed and people took extra leave, though they conceded this could be made up by sales of jubilee souvenirs, food and drink purchases for street parties, and tourist revenue.”
The Guardian, 6 February 2012
“The Queen’s diamond jubilee celebrations could damage economic growth in the UK this year, economists have warned. Despite the expected boost to retail and tourism, economists estimate that the extra bank holiday on June 5 could reduce gross domestic product (GDP) in the second quarter of the year by 0.5%”
Sky News, 7 February 2012
The Guardian, Scotsman and Sky News all reported yesterday and today that “some economists” predict that the Queen’s Diamond Jubilee Bank Holiday could dent Gross Domestic Product (GDP) by 0.5 per cent in the second quarter.
Britain’s GDP currently stands at £1.4 trillion, therefore estimating the cost to be around £7 billion.
But the Guardian also cited ‘economists’ as stating that this figure will be offset by increased public expenditure on celebrations.
So what is the source of this estimation and how do the figures stack up against official estimates?
Sky News and the Scotsman both base their statements on evidence given by Alan Clarke, an economist for ScotiaBank, and Howard Archer, an economist for IHS Global Insight. It is highly likely that the Guardian is referring to these sources, even if neither economist is mentioned in its article.
Full Fact has made enquiries to confirm that this is indeed the case.
Mr Clarke stated the following:
“I expect a drag on growth of at least as much as during the Kate and William wedding, and possibly more.
“The royal wedding fell around Easter, when people normally take time off work. That probably diluted the effect on growth last year, which the ONS (Office for National Statistics) estimated to be worth around 0.5% of GDP.
“That isn’t the case in June when this extra bank holiday will fall. So the disturbance could actually provoke a very low GDP reading for the second quarter.”
This is, of course, just one economist’s comment, and the term ‘some economists’ suggests there may be relevant others.
Furthermore, it is currently unclear whether this prediction is based on a particular research report, so Full Fact has made further enquiries to see if additional information can be established.
Mr Clarke’s source to indicate the impact of the bank holiday is the Office of National Statistics (ONS) report on growth in Q2 2011. The ONS predicted that a combination of the Royal Wedding and accompanying bank holiday, the Japanese Tsunami and warm weather in April could have prevented further growth of 0.5 per cent in Q2 of 2011. This would amount to around £7 billion.
However the ONS are clear that they do not make estimations for the exact impact of the Royal Wedding alone and therefore it would appear assumpitous to believe that the event would have cost as much as £7 billion.
In fact, the Department for Culture, Media and Sport (DCMS), which is responsible for organising the celebrations, made a worst case scenario estimation its Impact Assessment which calculated that the bank holiday will have a maximum cost of £3.5 billion. This amounts to around 0.25 per cent of GDP, half the figure cited by the Guardian.
In reality, however, the DCMS estimates that the cost will be about £1.2 billion. This cost is in fact around 0.08 per cent of GDP:
The Guardian also notes that economists ‘conceded’ that increased public expenditure may mean that the difference in GDP may be ‘made up’ (i.e. offset to some extent). This statement is likely to refer to the comments of Howard Archer of IHS Global Insight.
Mr Archer states that:
“The major cost to the economy is that it is an extra day’s public holiday. In addition, more people than normal may well take off time from work to have an extended break. This could lead to some smaller companies shutting down for a few days.”
He added: “There will be some beneficial factors to the economy – notably sales of jubilee-related souvenirs, and also sales of food and drink for street parties. Some tourists may also be attracted by the jubilee pageantry and events.”
It must be noted that at no point in this source does Mr Archer state that the effects of the bank holiday will be ‘made up’ by the ‘sales’ and events he describes, only that these events may be beneficial to the economy. Hence, we cannot say for sure that the costs will be entirely offest as indicated in the pieces.
Additionally it must be said that the DCMS accounts for predicted increases in spending in its Impact Assessment, thus meaning that this spending is included in the estimated £1.2 billion that the Jubilee public holiday will cost the economy.
It appears that Sky News and the Scotsman each accurately report the information provided by economists. The Guardian did not divulge the evidence behind its claims bus seems likely to have employed the same sources in its piece.
However Full Fact is yet to find evidence that the 0.5 per cent loss in GDP can be offset by increased expenditure, as suggested in the articles.
As for the estimate of 0.5 per cent, we can see that the official estimation of the Jubilee holiday cost to the UK economy is lower than the 0.5 per cent cited by Mr Clarke.
The DCMS Impact Assessment estimates that the cost would be around £1.2 billion, which equates to around 0.08 per cent of GDP, but could be as high as £3.5 billion (0.25 per cent of GDP).
The Guardian have confirmed to us that the said economists were indeed the source of their article, via the Press Association.