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Hopes of Wedding Boost for U.K. Economy Are ‘Wishful Thinking’

Royal wedding trinket boxes sit on display at a souvenir store in London, U.K., on Wednesday, April 6, 2011. The wedding of Prince William, second in line to the British throne, and Catherine Middleton on April 29 will be watched by about 2 billion people worldwide. Photographer: Chris Ratcliffe/Bloomberg
Royal wedding trinket boxes sit on display at a souvenir store in London, U.K., on Wednesday, April 6, 2011. The wedding of Prince William, second in line to the British throne, and Catherine Middleton on April 29 will be watched by about 2 billion people worldwide. Photographer: Chris Ratcliffe/Bloomberg

April 26 (Bloomberg) -- Prime Minister David Cameron called the wedding of Prince William and Kate Middleton “unadulterated good news.” As Britain prepares for a second consecutive four-day weekend, business groups and economists beg to differ.

The Federation of Small Businesses calculates the extra public holiday to mark the nuptials in London’s Westminster Abbey on April 29 may cost the economy as much as 6 billion pounds ($9.8 billion). That’s 10 times the 620 million pounds Verdict Research, a unit of Datamonitor Plc, estimates that sales of wedding memorabilia might add to the economy.

“It would be wishful thinking to hope this would make people feel significantly better or spend more money,” Jonathan Loynes, chief European economist at Capital Economics Ltd. in London, said in a telephone interview. “While these things can have a short-term impact on the timing of economic activity, they don’t tend to have any sort of lasting effect.”

Cameron could use some royal-wedding relief to distract Britons from their economic woes. The government increased the sales tax this year and is cutting 310,000 public-sector jobs to shrink the budget deficit. Gross domestic product shrank 0.5 percent in the fourth quarter, and inflation is double the Bank of England’s target, eating away at savings and spending power.

Output may also be hit by workers deciding to take three days off this week to secure 11 days of leisure, following from last weekend’s Easter break and with the May Day holiday to be celebrated May 2.

Throwing a ‘Sickie’

The wedding “may take people’s minds off the budget cuts, but the effect will be short-lived,” Andrew Hawkins, chairman of polling company ComRes Ltd., said in a telephone interview. “For every person who splashes out on a commemoration ashtray, there will be someone else who thinks it barely worth returning to work for three days so throws a sickie.”

Even though the wedding will boost retail sales this month, the event “won’t change the fundamentally weak conditions likely to undermine consumer confidence for some time yet,” British Retail Consortium Director-General Stephen Robertson said in an e-mailed statement.

U.K. consumer confidence increased last month, according to the Nationwide Building Society, though the reading in February was the lowest since it began compiling the index in 2004. The Bank of England left its benchmark interest rate at a record low of 0.5 percent this month, citing concerns about the effects on shoppers of an increase.

‘Most Romantic’

Airlines and tourism companies are among the businesses seeking to capitalize on the wedding. Crawley, England-based TUI Travel Plc, Europe’s largest tour operator, promised a limited number of couples the “most romantic weekend of the year” at 295 euros ($430) per person in a three-star hotel.

After Tesco Plc, the U.K.’s largest supermarket company, sold for 16 pounds a replica of the designer dress Middleton -- baptized Catherine Elizabeth -- wore on the day of her engagement, retailers have stocked up on commemorative mugs, thimbles and plates.

John Lewis Plc, the country’s biggest department-store operator, is offering an octagonal plate decorated with a crown and an entwined C and W from the Royal Crown Derby Porcelain Co. for 145 pounds.

Estimates of the contribution of Britain’s royal family to the economy suggest they outweigh the costs to the public purse.

Visitor Attraction

The most recent Royal Public Finances annual report showed that expenditure on William’s grandmother, Queen Elizabeth II, and her household totaled 38 million pounds in the year ending March 2010. Visit Britain, the official U.K. tourism agency, calculates that the monarchy draws enough visitors every year to generate about 500 million pounds of revenue.

When William’s parents, Prince Charles and Lady Diana Spencer, got married in 1981, an additional 600,000 people visited the capital. A repeat this week might benefit the economy by as much as 50 million pounds, according to Visit Britain, though it notes that tourism in general has increased in the past 30 years.

When Queen Elizabeth, then just a princess, married Prince Philip in 1947, it was against a backdrop of food rationing and post-World War II weariness.

Millions enjoyed the novelty of listening to a live radio broadcast, while 200,000 visited an exhibit of wedding gifts organized by Buckingham Palace. Though austerity under Cameron’s government hasn’t stretched to food rationing, this week’s event will be more modest than the 1981 wedding of Charles and Diana.

Parents Pay

The ceremony, the lunch and the evening dinner will be paid for by Charles and the queen, while Kate’s parents, self-made millionaires who run their own company, Party Pieces, have also promised to contribute.

The government will cover the cost of policing, security, and cleaning. Middleton will arrive at Westminster Abbey in a car, a cheaper option than the glass coach used by Diana. The newlyweds will return to Buckingham Palace in the same open-air carriage used in 1981, a 1902 state landau built for King Edward VII’s coronation.

Just one week after the wedding, one of the two parties in Cameron’s coalition government faces defeat in a referendum on overhauling the system to elect House of Commons lawmakers. The premier’s Conservatives are backing the status quo and their Liberal Democrat partners demand change. That may add political turmoil to the economic gloom.

“Governments like to think they can do things to make people happy like give them the day off for the royal wedding -- that’s not true,” Hawkins said.

To contact the reporters on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.net; Svenja O’Donnell in London at sodonnell@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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