(Bloomberg) -- The bank holiday to celebrate Queen Elizabeth II’s 70 years on the throne may tip the UK economy into contraction but save it from the technical definition of a recession.
The day off on Thursday to mark the jubilee will shave a half percentage point off gross domestic product in the second quarter, according to an estimate by Bloomberg Economics based on previous holidays.
That, along with reduced output from the health care sector as the government’s coronavirus test and trace program winds down, would be the UK economy will shrink 0.4% in the quarter in the BI forecast by economist Dan Hanson. The lost output from offices and factories closing for the day would likely accrue to the following months, preventing the economy from shrinking from two consecutive quarters.
The estimate highlights Britain’s bumpy recovery from coronavirus lockdowns. While output surged strongly after restaurants and bars were allowed to reopen, consumer confidence has plunged in recent months with a surge in energy bills and taxes.
That and inflation at a 40-year high threatens to drag the economy into stagnation or even an outright decline. Chancellor of the Exchequer Rishi Sunak’s announcement last week of £15 billion ($19 billion) of extra support for households will cushion the blow.
There is also a risk that people take an additional one or two days’ leave to complement the long weekend. Silvia Dall’Angelo, senior economist at Federated Hermes Ltd., said that “hangover effect” may give rise to further output losses.
At least, that’s the hope of Jeannie Stachniewska, 30, a solicitor whose wedding plans were a “pandemic casualty” in 2020 and 2021. She finally plans to tie the knot on Friday, June 3.
“Thursday is our set up day so it’s great that it’s a bank holiday because no one will have to take annual leave to help us out,” she said. “Everyone will be very hungover on both the Monday and the Tuesday.”
Hanson estimates the economy will grow 0.3% in the third quarter, meaning the UK will avoid two quarters of negative growth.
Campaigners led by Brendan Cox, co-founder of the Together Coalition, have called on the government to make the bank holiday an annual fixture. Dall’Angelo said that other European countries already have more national holidays than the UK so the comparative loss of output would be minimal.
“Extra time off can help people to have clearer minds so in the bigger picture, this could have economic benefits,” she said.