An extra bank holiday in October this year could give the parts of the economy hit hardest by the coronavirus pandemic a £500 million boost without any financially harmful side-effects, research suggests.
The Centre for Economics and Business Research said that the hospitality, tourism and retail sectors would benefit as people get out and about or do more gardening and embark on DIY projects.
Last week it emerged that the government was considering plans put forward by Visit Britain, the tourism agency, for the extra holiday to make up for the two that the industry lost in May to the lockdown.
“The case in favour of the holiday is that it should boost the retail, tourism and hospitality industries,” the CEBR, an economics consultancy, said. “This year it would be quite likely that the boosts to spending after a period of enforced abstinence might well be double the usual.”
Its analysis of economic patterns over normal bank holidays showed that retail sales get a 15 per cent boost and hospitality and catering activity rise by 20 per cent. That normally would equate to £220 million of activity, which it doubled to reflect pent-up demand. On top of that, the research body estimated an additional £50 million boost to tourism. Those gains would be more than offset by the fall in output as other businesses close, but the lost productivity would be recovered quickly.
“Our very rough and ready calculation is that daily GDP might initially be reduced by £1.8 billion by loss of activity from an additional bank holiday but most of that would have been recovered within a month,” the CEBR said.
In 2012, it estimated that every bank holiday cost Britain £2.3 billion, but it has revised the estimate because people are far more able to work remotely. The earlier analysis was used against Labour in last year’s election when it proposed to increase the number of UK bank holidays by four to mark the patron saints of England, Wales, Scotland and Ireland. Britain has fewer bank holidays than most leading economies, at eight compared with an average of twelve in the G20.