April 29th, 2011
03:37 AM GMT
(CNN) – It’s not for nothing economics is called “the dismal science,’ so leave it to an economist to rain on today’s royal wedding in London.
As tens of thousands of tourists flock to London and hundreds of millions more watch on television and online, the assumed wisdom is that the influx of tourist dollars and attention will be good for the struggling UK economy.
Indeed, PricewaterhouseCoopers estimates that the city of London will reap £107 million ($177 million) commercially from the influx of revelers. Retail researcher Verdict estimates the boost to the UK economy could approach $1 billion.
Estimates of actual costs of the wedding vary wildly (and the royal family is reportedly paying most of the costs privately) but the security costs are estimated to hit £20 million ($33.2 million), according to the Daily Mail.
But the real cost to the British economy could be a 0.1% hit to UK GDP this year – “if you want to monetize that … that comes something between £1.5 billion to £2 billion ($2.5 billion to $3.3 billion),” said Philip Shaw, chief economist at Investec.
Why? Loss of productivity thanks to the April 29 holiday.
Coming after the four-day British Easter holiday, about 6 million workers are estimated to be taking three extra vacation days to have an 11-day holiday – which will inevitably hit the service and manufacturing sectors, Shaw said.
“While that may be great for some people, it’s effectively a day the UK economy has off and is not producing,” Shaw told CNN. Investec based its projection on the economic impact of the Queen’s 50th Anniversary celebration ceremonies to the British economy in 2002.
While the boost to tourism “might be true in terms of some gross effects, but really the net impact is that GDP will drop somewhat,” Shaw said.
What about the feel-good factor?
“That’s highly subjective,” Shaw said. “A few street parties here and there – particularly if the weather’s nice – could engender some sort of feel-good factor, we could see a little temporary boost in spending, but that’s very unscientific and very difficult to measure.
“Past experience suggests when there is positive impact of that nature, it tends to be fairly short-lived, and then it’s a sharp return to fundamentals,” Shaw said.
And the UK fundamentals are under pressure, with lower household spending, the spectre of inflation and the government’s push for deep austerity measures to cut government debt.
A day off may be a hit to productivity, but with all the bad news in the UK of late – and the world at large – maybe a holiday spent watching a royal romance is worth the cost.
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