Sunday, May 1, 2011
How Much Did Royal Wedding Cost Britain?
APRIL 29, 2011, 6:02 PM ET
My print column this week examines the various figures reported in the media about the economic cost of Friday’s royal wedding. The concern was that because the
economy would shut down for the national holiday, productivity would grind to a halt. U.K.
Though some reports put the cost as high as $50 billion, “My answer is a firm ‘no’ to a $50 billion wedding cost,” said Voxi Heinrich Amavilah, a researcher on economic growth and technological change who has studied the cost of holidays.
Howard Archer, HIS’s chief U.K. and Eurozone economist, wrote in an email, “Over the year as a whole, the loss to the economy should be pretty modest. At the most, it may shave off 0.1 [percentage points] off second-quarter GDP growth, but it may well not even be that much.” That would translate into less than $1 billion.
One higher estimate, of a loss of about $10 billion, was attributed to the Confederation of British Industry, which in 2007 issued a press release saying an “extra bank holiday would cost economy up to six billion pounds.” The CBI didn’t explain its reasoning behind that estimate, and it’s unclear whether that estimate would apply, anyway, to the royal wedding. “The royal wedding is a day for national celebration, and under these unique circumstances a one-off additional bank holiday is appropriate,” a CBI spokesman said.
Others attributed a loss of about $5 billion to the
’s department for Business, Innovation & Skills. “This is based on Office of National Statistics assessments of the Jubilee Bank U.K. Holiday that will happen in 2012,” a BIS spokesman said. But an ONS spokesman said, “I am unaware of any ONS work on next year’s Diamond Jubilee, and it would be very unusual for us to make forecasts of that sort in any case. Also, I’m afraid there is no analysis that allows us to quantify the economic effect of a holiday.”
Toby Sargent, spokesman for the
’s department of Culture, Media and Sport, cleared up the confusion somewhat about that $5 billion estimate: “It’s a very inexact figure. It’s one we have been working up and testing in light of next year’s bank holiday. A number of people have taken that ballpark figure and assumed it applies to the royal wedding. It is very back-of-the-envelope at this point.” U.K.
Stephen Lea, economic psychologist at the University of Exeter, attributed some of the exaggerated numbers to hype. “There is a huge amount of hype about the wedding,” Lea wrote in an email. “This has two effects, which between them probably explain the disparity: (i) the media, especially the more excitable elements of them, will take the biggest estimate of any number relating to it that they can find; but (ii) more people will stop work, and do more non-work things (whether it is joining a street party or fleeing to Dublin), than on a typical bank holiday.”
Part of the fuzziness around these lost-productivity estimates is that converting a working day into a holiday isn’t equivalent to wiping out the productivity of a working day. One example: Earlier this week, I emailed Neil Saunders, consulting director of Verdict Research, to ask aboutthe firm’s estimate of how the wedding would boost spending. Saunders’s reply arrived by email just a minute before an email from a Verdict publicist saying Saunders was unavailable to comment because he was on holiday this week. That demonstrates how many jobs allow workers to get some work done remotely even when they are technically off-duty, and some work is shifted to before or after the holiday. “The country doesn’t completely grind to a halt,” Saunders said.
Also, Friday’s holiday was unlike most, since it involved a royal wedding and national celebrations (and all the accompanying memorabilia for sale. And lessons from the bank holiday around the queen’s golden jubilee in 2002, which seemed to shift productivity around in the calendar, remain unclear. “In this case, a little more uncertainty is attached to the British GDP loss estimates because crown-prince matrimonial ceremonies do not occur very often, around once every three decades or so,” Tom Fullerton, economist at the University of Texas at El Paso, wrote in an email. “Of course, the British proclivity for declaring public holidays is so exaggerated, it is a wonder GDP is a non-negative number at all there.”
Marcus Scheiblecker, economist at the Austrian Institute of Economic Research, has studiedholidays in
and finds they do take a small toll. “One working day more in a year raises GDP of that year by 0.1% in Austria ,” Scheiblecker wrote in an email. However, he thought the additional activity around the royal wedding could change things. “During this time other sectors have to produce and to work more,” Scheiblecker said. “This could well overcompensate negative effects so that all in all the effects on the total economy is positive.” Austria
Some studies suggest national holidays even can boost economic activity, though it is unclear how applicable these studies are to the
A 2008 paper assessing the potential effect of adding national holidays in U.K. Hong Kong found adding one holiday could increase GDP by 0.34%. Co-author Bala Ramasamy, an economist at the China Europe International Business School in Shanghai, thinks the potential for economic gain in the U.K. is even higher, because the country produces more of the goods that will be consumed and because the royal wedding is likely to boost spending more than a garden-variety national holiday.
“We believe that it’s possible that the increase in consumption (and so GDP) could match the shortfall in production due to the extra day holiday,” Ramasamy wrote in an email. “In fact, we will argue that the increase in production after the long holidays will be higher as workers come back refreshed and eager to get back to work! Thus, we would expect a small positive gain in GDP as a result of the royal-wedding holiday.”
Purdue University economic statistician Michael Levine says that may be too rosy a forecast because the U.K.’s economy has a different mix of sectors than Hong Kong’s. “Gains in the retail, hotel, restaurant and hospitality sectors will have to be measured against the background of losses in the manufacturing and banking sector,” Levine wrote in an email.
Courtesy:The Wall Street Journal