How an extra bank holiday could help revive the economy

The CEBR thinks sectors such as retail, catering and hospitality could benefit by as much as half a billion pounds from extra spending while any lost productivity could be made back in as little as a month, James Moore writes

An extra bank holiday could give a boost to the high street stores badly hit by the coronavirus crisis (AFP)

Bank holidays are often accompanied by grim analyses of their cost to the economy.

One such report was produced by the Centre for Economic and Business Research, and it still gets quoted quite often. But now the CEBR has looked at the other side of the coin: their potential benefit.

That's relevant because the number of days of bank holiday in the UK is very low by international standards – just eight in the year – and because of the mooted plans to create an additional one this year, in October.

Part of the rationale for the new one is to give the industries that have suffered the most in the coronavirus crisis (retail, tourism, hospitality etc) a much-needed leg up.

Here’s the good bit: it could have a considerable impact.

According to the CEBR's Douglas McWilliams, retail sales are typically boosted by 15 per cent per day over a bank holiday.

McWilliams notes that there is a change to the mix when set against what you might see during a normal weekend – a bias towards furniture, gardening and DIY, for example. But a boost is a boost is a boost.

Hospitality and catering, meanwhile, get a 20 per cent uplift.

Based on 2019 spending levels, the extra day off could generate additional spending of £180m at retail outlets and an additional £40m for hospitality and catering.

But it gets better because there are reasons to believe that the boost from a new bank holiday might be bigger than usual, given that it would come at the end of a period of enforced abstinence.

It could even double spending, which would get us close to half a billion pounds. Not too shabby.

What about the costs of an extra paid day off for British workers, and the impact on sectors that won’t benefit from the predicted spendathon? It should be noted that some of them have suffered too.

The good news is that the effect might not be as big as it looks.

Not many parts of UK plc are working at full capacity, and even though the proportion may increase by October, the CEBR thinks any lost productivity could be made up in as little as a month.

Bear in mind the shape of the modern economy: many people now work in jobs where they have a certain amount of work to complete, which doesn’t much change if there’s a bank holiday in a particular week.

Maybe they work harder in the run-up; maybe they work harder in the following weeks in order to get everything done. The extra day off is still welcome and improves morale because it’s a day with family and/or friends and away from their screens.

Some businesses, particularly those with balance sheets wrecked by the virus, may still take a hit: manufacturers, for example, or builders. Their employees don’t typically work in front of a screen.

The impact on them could, however, be minimised through a willingness on the part of both staff and management to be flexible. Asking people to behave like grown-ups is still quite a radical idea in parts of the British workplace. Those who give it a whirl might find it grows on them.

Regardless, based on the CEBR's analysis, there’s little to lose and a lot to gain from having not just one extra public holiday but perhaps two or three.

You might have guessed what’s coming. If you take the argument to its logical conclusion, and add ten, and then ten more, and ten more, you eventually get to the four-day week, which I’ve discussed before.

The CEBR can see benefits, although it says it would need to be “carefully costed”.

Quite so. But shorter hours are more productive hours, and moving in that direction could help address Britain’s nagging productivity gap.

The fly in the ointment is, obviously, the virus. There will be no economic boost from an October bank holiday if the outbreak is still raging and everyone is still indoors. That might be the result if too many people head outdoors during the current bank holiday.

That said, if we get lucky, and the outlook is brighter by the autumn, there will be pressure to make the extra day a permanent part of the calendar.

It should happen. If you look at it in terms of costs vs benefits, the latter greatly outweigh the former.