Royal wedding no tonic for fragile recovery

LONDON Thu Apr 28, 2011 5:55pm EDT

Crowds walk along Whitehall which will be part of the Royal Wedding Procession Route, in central London April 27, 2011. Britain's Prince William will marry Kate Middleton at Westminster Abbey on April 29th. REUTERS/Toby Melville

Crowds walk along Whitehall which will be part of the Royal Wedding Procession Route, in central London April 27, 2011. Britain's Prince William will marry Kate Middleton at Westminster Abbey on April 29th.

Credit: Reuters/Toby Melville

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LONDON (Reuters) - Tourist trade may rocket and sales of memorabilia soar but Prince William's wedding to Kate Middleton is unlikely to provide the boost to the economy that the government hopes.

The Confederation of British Industry reckons an extra public holiday typically costs the economy around 6 billion pounds in lost output.

Even accounting for the feel-good factor the historic occasion will impart and the boost to London attractions from an influx of wealthy foreign visitors, the wedding is not the "unadulterated good news" Prime Minister David Cameron called it.

History shows that one-off public holidays have a lasting negative impact on GDP.

The last time Britons got an extra public holiday was to celebrate Queen Elizabeth's Golden Jubilee in June 2002. In that month industrial production fell by over 4 percent and services by over 2 percent. Output in both sectors did not return to pre-June levels for some time, official data show.

In 1981, when Prince Charles married Diana, the economy contracted by 1.2 percent despite the boost to tourism that the July wedding brought.

Investec economist Philip Shaw reckons the royal nuptials will knock a quarter of a percentage point off second-quarter GDP growth -- not good news given that the economy has essentially stagnated since September.

The impact of the royal wedding, an unusually hot April and a late Easter will in general complicate life for economists, still reeling from their failure to predict Britain's lurch into reverse at the end of last year.

FEEL-GOOD FACTOR

The wedding may be a welcome distraction for Britons more used to news of job cuts and soaring prices, but it is unlikely to unleash a wave of indulgence.

Consumer confidence has slumped to levels not seen since the recession and pollster GfK NOP told Reuters the royal wedding was unlikely to turn the tide.

"It may provide a feel-good factor, but it's unlikely to make people feel any more confident about their own finances," said Nick Moon, managing director of the polling group.

Paradoxically, the cost of hosting the ceremony will actually add to GDP.

The Middletons and the royal family are paying for the service, reception and honeymoon.

With a huge security operation adding to outlays on couture, flowers and entertainment, the overall price tag for the families and taxpayer could top 20 million pounds. But this pales in comparison to the loss of a working day.

"Although some of the loss of output will be countered by increased demand, the net impact will undoubtedly be negative," said Stephen Lewis at Monument Securities.

The timing of the royal wedding, squeezed between two long weekends, is unfortunate as it means the influx of foreign tourists is likely to be matched by an exodus of Britons overseas.

Ryanair says passengers flying into its three London airports have risen by 10 percent in the run-up to the wedding, but so have passengers flying out.

Other travel operators are also benefiting.

"With Easter, the royal wedding and the first May bank holidays being so close, many holidaymakers are taking only three days leave to enjoy an 11 night holiday and head for some early summer sun," said Ian Ailles of Thomas Cook.

(Editing by Paul Casciato)

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