News

April 03, 2012

Diamond Jubilee will damage economy, warns Bank of England

Bank of England (BoE) Governor Sir Mervyn King has warned that the UK economy will shrink from April to June due to the Queen’s Diamond Jubilee bank holiday on 5 June, writes Georgina Harris.

In a statement to the House of Lord’s economic affairs committee, Sir Mervyn recalled 2011’s Royal Wedding double bank holiday, which stalled the economic recovery. Last year’s extended break is repeated this year with bank holidays on 4 and 5 June — the extra day due to the Queen’s Diamond Jubilee.

“We lose an extra day’s work because of the additional bank holiday,” said King. “We saw that last year and we would expect that to happen again this year.”

However, he said the Olympics later in the year would boost business, with the BoE anticipating the economy to grow by 1% through 2012.

In March’s Budget, the independent Office for Budget Responsibility increased its own forecast to 0.8% growth in 2012, while most economists also expected growth in the second half of the year to improve. 

However, a Forum of Private Business (FPB) spokesman said it’s extremely difficult to put a figure on exactly how much a bank holiday costs the economy.

“Last summer the Royal Wedding was forecast to set the economy back somewhere in the region of £6 billion, but that does not take into account the extra cash coming in from tourism, both foreign and native, and the huge extra public spend the occasion triggered,” he said.

“If every family in the country spends just an extra £20 on doing something to celebrate the Jubilee weekend that also translates into Treasury tax. We pay tax on alcohol and fuel — so a few bottles of wine, a trip to the seaside or a meal out all means revenue to offset the loss.”