Queen’s funeral could push U.K. into ‘technical recession’: economic forecast

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The death of Queen Elizabeth II could be a blow that sends the United Kingdom’s already strained economy into a “technological recession”, according to an economic projection, as some Canadians are also worried about the impact of the national holiday on the country’s businesses. Ring the warning bell. ,

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The forecast follows economic data released earlier this week that showed UK gross domestic product (GDP) growth was weaker than expected in July.

With the British economy already contracting in the second quarter of the year, another consecutive quarter of decline will push the country into recession, by some economists’ definitions.

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Researchers at Pantheon Macroeconomics said in a note to clients on Tuesday that they expect the bank holiday for the Queen’s funeral on 19 September will have a further impact on the UK economy.

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Notably, the projection calls for September GDP to shrink 0.2 percent as a result of the holiday, which will close shops and restaurants as the country mourns the loss of its longest-reigning monarch.

“Following the news of an additional public holiday for the Queen’s funeral this month, it is very finely balanced whether GDP falls again on a quarter-on-quarter basis…

The UK bank holiday does not force all businesses to close or take employees off work, but does provide options on a case-by-case basis.

The Pantheon forecast used the June economic impact as the basis for the September estimates, as there were two additional public holidays associated with the Queen’s Platinum Jubilee celebrations in that month.

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The Pantheon noted that the September 19 holiday hit could be greater than that of June because some businesses that remained open for the jubilee could close next week “as a mark of respect.”

While the report highlights the risk of a recession associated with the holiday, Pantheon ultimately expects GDP to remain stable with second-quarter figures — enough to stave off a slowdown in the third quarter.

But the British economy is already falling on shaky ground, with Paul Dales, chief UK economist at Capital Economics, suggesting in a recent note that the country is “probably already in recession.”

Britain is currently facing a cost and energy crisis associated with Russia’s war in Ukraine. Prime Minister Liz Truss’ plan to reduce utility costs in October will “help” but not be enough to stop the country’s GDP from falling in the coming quarters, Dales wrote on Monday.

In light of the Queen’s death, the Bank of England extended its benchmark interest rate decision by a week to 22 September.

Pantheon said that “recent developments” have “strengthened the case” for the central bank to raise it by half a percentage point instead of 75 basis points.

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Dales said in his note that he also expects a 50-basis-point move.

Similar concerns are being raised domestically about the impact on the economy, with Prime Minister Justin Trudeau’s announcement on Tuesday that Canada will also hold a federal holiday on September 19 to mark the Queen’s funeral.

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The Liberal government has scheduled the following Monday as a holiday, but it will be left to the provinces to decide whether workers will be paid on 19 September.

The PEI says it will, for example, have a provincial holiday, but Quebec has said it will not. Ontario also would not have a provincial holiday, instead Premier Doug Ford announced a “day of mourning” with a moment of silence.

The Canadian Federation of Independent Business (CFIB) urged provinces not to declare Monday a statutory holiday, calling a six-day notice for such a move “deeply unfair to small businesses”.

CFIB President Dan Kelly said in a statement, “Small businesses are already struggling with labor shortages and are required to lay off their employees without notice or pay half-time, which would be extremely costly or One day there will be a loss in productivity.” The statutory holiday would “cost the economy billions”.

There is no official cost estimate for the Queen’s funeral, which includes flowers and expenses such as a military procession and fly-over, but journalist and Royals researcher Emily Stedman says the Queen Mother’s funeral in 2002 is a possible benchmark. what to expect.

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The cost of that incident was approximately £5.6 million (C$13.7 million based on exchange rates at the time), Stedman says, with £4 million going to the security alone.

She expects that the events of King Charles III’s coronation will still cost “in the millions” but should be of a “smaller scale” than the rites of previous monarchs.

The coronation of Queen Elizabeth II in 1953 would cost around £46 million in figures today (C$69.6M), Stedman says, adding he expects a “similar figure to the coronation of Charles”.

But Britain’s “rather volatile economic climate” could make the royal family look back on the grandeur of the ceremony, she adds.

“We are actually living in very worrying times financially,” she says.

“These two events, the funeral of the Queen and the coronation of King Charles, will come out of taxpayer money that we have funded by the government. So I think there is a lot of concern about the cost of these upcoming events and its impact on the economy. “

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Source: globalnews.ca

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