The Queen’s Diamond Jubilee celebrations could hamper the economy’s recovery due to a reduction in economic output, the Bank of England has warned.
As part of the celebrations, British workers have been given an extra bank holiday, which could lead to a drop in economic activity.
The Bank of England has said that the four-day weekend might encourage some workers to take longer breaks, while some businesses might arrange extended closures.
Spencer Dale, the Bank of England’s chief economist, has said that there was an impact on the economy last year, when the Royal Wedding reduced economic growth by around 0.4%.
“The Jubilee will have a slightly bigger effect in part because it’s happening in June rather than April, so the ability for companies to make up that output within the quarter will be that much less.”
The central bank has said that there could be a similar impact on the UK’s economic recovery this year, with an expected reduction in GDP of 0.5% as a result of the Jubilee.
According to the Bank of England, this drop in economic output will make it harder for the British economy to recover in the second quarter of this year.
Despite the economic setback created by the Diamond Jubilee, the Bank of England has said that the London Olympic Games will have a positive impact on the UK’s economy.
But it was noted that the effects of the Games would be hard to determine, as while spending in some areas will go up, other industries are likely to see a negative impact.
The bank pointed to the Sydney Olympic Games in 2000 as an example, which boosted the Australian economy by around 0.75%. It estimated that similar spending levels at this year’s Games would boost the British economy by around 0.2%.
“Trying to work out how (the Olympics) will affect it is very difficult, but our best guess is that it’s likely to boost growth in the third quarter,” said Mr Dale.
“The combination of the bounce back (from the Jubilee) and the Olympics we could see growth being exaggerated by more than 0.5 percentage points,” he added.
There is likely to be a surge in spending in the run-up to the event, although tourism associated with the Games could be at the expense of other leisure activities.
The economic downturn has put a squeeze on finances, with many people’s credit debt soaring. To avoid building up credit card debt, invest in a prepaid credit card instead.