Tuesday 19 April 2011

So, will the Royal Wedding break really cost us £30 billion?

The Royal Wedding preparations are causing a little bit of cognitive dissonance for the leader writers at Paul Dacre's Daily Mail.

Closed for Business

For some, the break has already begun. And with more public holidays to come, it won’t be until three days after the Royal wedding that Britain gets fully back into the rhythm of work.

Yes, the nation should warmly celebrate the wedding. But are those Jeremiahs completely wrong, who question the wisdom of a £30billion break in the depths of the worst debt crisis in our history?

Now, imagine what they would say if there wasn't a Bank holiday for the Royal Wedding!

Perhaps the Dacre rule is that its always worth giving Jeremiahs a hearing, up to a point, as long as they don't get carried away with their miserabilism.

Still, the Mail backs up its concern with a news report, albeit with a rather tentative headline for its report The everlasting Easter holiday that could cost the nation £30 billion.

Experts warn the economic impact will be devastating, with many firms forced to shut down due to lack of staff and depressed demand.

It could knock up to £30billion off economic output, according to a gloomy prediction from accountants RSM Tenon.

There will be winners, however, including the tourist industry, retailers and airlines. EasyJet yesterday described the next two weeks as a ‘once-in-a-lifetime bank holiday extravaganza’.

Well, that has got their name in the papers, but it will be interesting to see how they have worked it out. The Mail's report suggests that the analysis may just depend on ignoring the fact that we do have an Easter break every year, for example, even if Prince William is not getting married.

As a result, there are just 18 working days in April. RSM Tenon calculates a typical bank holiday costs the economy about £6billion. But the upcoming four could amount to a £30billion loss.

I couldn't yet find any information or a press release on the RSM Tenon website to give the non back of an envelope basis for the figure.

£x million/billion lost to business is a media staple. I am not in a position to comment on the specific study, since it doesn't seem to have been published yet. But there are often grounds for suspicion at the methodology by which such claims are calculated, particularly if such scenarios sometimes assume that little or none of the "lost" output is recovered or displaced, so that economic activity which would have taken place on the bank holiday takes place when firms return to work, or if insufficient account is taken to studying how productivity changes on the other days of a four day working week.

It would be good to hear from anybody who has any academic references about such media reports, or the way to get the methodology right.

And, when the Daily Mail news pages calls a prediction "gloomy" it is a signal that it may just be creeping towards the implausibly high end of the scale.


T.N.T. said...

By the same logic we should get rid of all Bank Holidays including Christmas and Easter, because the resulting lost output must run into hundreds of billions of pounds... we could run several dozen 'No2AV' campaigns with that money. :-)

And we should have a 7-day working week as well (I think they tried that in the USSR once - nice to see the Mail endorsing the Marxist/Leninist position).

But I guess, what do you expect from the Mail? Not rational argument, that's for sure.

Will Chapman said...

This surely isn't the result of a thorough economic review? There are too many unanswered what-ifs. For example, what is the positive effect of people spending money on the days off (i.e. tourist trade, pubs, etc).
And the idea that banning all Bank Holidays would improve the economy needs also to take into account the negative effect that would have on worker's morale & well-being, trade union reaction, and, of course, the detrimental effect on the tourist economy.