The Queen’s Diamond Jubilee celebrations could weigh down on the UK economy as it struggles to recover from recession, the Bank of England has said.
Businesses may organise extended closures due to the four-day holiday weekend brought about by the Queen’s celebrations, while individuals may choose to take longer breaks.
GDP is expected to be reduced by 0.5 per cent as a result, the Bank has warned, so the economy may find it difficult to pull clear of recession in the second quarter of 2012.
But the third quarter of the year is forecast to fare better, as the economy catches up with the fall in output due to the Jubilee and spending around the Olympic Games kicks in.
Comparisons can be drawn with last year’s royal wedding, when growth dropped by about 0.4 percentage points, according to the Bank’s chief economist Spencer Dale.
“The Jubilee will have a slightly bigger effect in part because it’s happening in June rather than April, so the ability for companies to make up that output within the quarter will be that much less,” said Dale.
Matthew Jaffa, the London senior development manager for the Federation of Small Businesses, said “entrepreneurial and innovative” firms would play the hand they are dealt.
Jaffa said: “Many businesses will still work the bank holiday and for many there could be an upturn in business because London is coming into the sun during the Diamond Jubilee and the Games.
“It could boost the tourism, leisure and hospitality industries, which have taken a hit in recent years.
“But we have concerns about the cluster of bank holidays, which also happened last year, with employees taking holidays and people off work for four days in a row. It stifles certain sectors of the economy.”
The Olympics is predicted to have a “slightly” positive impact on the economy in the year’s third quarter, although the Bank has said the effects of the event are hard to forecast.
There is likely to be “considerable expenditure” in the run up to and during the Games. The London Organising Committee of the Olympic Games had only spent a quarter of its £2bn budget by the end of the first quarter, said the Bank.
Jaffa said while larger businesses had been planning for two or three years for the Games, small and medium firms in London have only just got preparations into gear.
“What we’re seeing is once you get into double-digit days to the Games, you get businesses starting to click.”
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