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For richer, for poorer: do public holidays help or hinder economic growth?

By Dan Atkinson

13:07, 23 August 2018

The last Monday in this month is, invariably, the August bank holiday in England and Wales, making a welcome long weekend for millions and, traditionally, marking the end of the summer.

But however popular public holidays may be, what is their economic impact? After all, those factories, offices and warehouses closed for the day, by definition, are contributing nothing to gross domestic product (GDP). On the other hand, as Britons flock to the seaside, the shops and sports fixtures, money is being spent and growth generated.

So, are bank holidays a drag or a boost to the economy? And, if the former, does it matter as long as the workforce returns refreshed to its labours?

Losers outnumber winners

There are eight bank holidays in the UK. Scotland and Northern Ireland take some of their days at different times, but in England and Wales two of the holidays are religious (Christmas Day and Good Friday), two exist because they are next to religious festivals (Boxing Day on 26 December and Easter Bank Holiday on the day after Easter), and four are secular: New Year’s Day, May Bank Holiday, Spring Bank Holiday and, of course, the August holiday.

The most recent, detailed study of the effect of public holidays was conducted in 2012 by the independent consultancy, the Centre for Economics and Business Research (CEBR). On the one hand, it found that a bank holiday “puts downward pressure on productivity and hence GDP”. But: “On the other hand, people often use bank holidays to spend money – for example the Easter holidays are the peak time for spending on garden equipment and DIY.”

Do the two balance each other out? Not according to CEBR, which noted: “The sectors that lose from bank holidays are offices, factories and construction sites. These sectors account for about 47% of the economy. Those that gain are retail, wholesale, hotels and restaurants. These sectors account for about 14% of the economy.”

In what it admitted was a rough and ready calculation, CEBR said each bank holiday cost £2.3 billion in foregone GDP, making more than £18 billion for all eight holidays.

This year, CEBR said events had moved on since 2012, not only in terms of data for GDP but also in terms of the spread of flexible working. Yet these figures are the best we currently have.

They provide useful ammunition for those who would reduce or even eliminate the number of public holidays enjoyed by the UK every year. Not only are such holidays economically wasteful, they argue, but are hopelessly out of date, reflecting a world before statutory entitlement to paid leave and before mass foreign travel, when bank-holiday factory outings and picnics on a windswept beach were highlights of the year for millions of people.

In the modern world, they quip, banks do not need holidays.

Four more holidays?

While perhaps conceding that Christmas Day and New Year’s Day ought to remain (after all, even workaholic America takes these as public holidays), critics see no justification for the two holidays in May or the one in August, which seem little more thandates on which there are no postal services and reduced public transport.

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Supporters of public holidays agree that they are currently bunched towards the front end of the year – New Year’s Day, Good Friday, Easter Monday and the two May holidays – and add that it makes little sense for there to be none at all between August Bank Holiday and Christmas Day.

But, they add, the answer is not to abolish bank holidays but either to spread them more evenly (perhaps shifting the early May holiday to the autumn) or awarding ourselves more of them. The opposition Labour Party is committed to giving the UK another four public holidays, one each for the patron saints of the constituent parts of the country: St George (England) on 23 April and St David (Wales) on 1 March.

St Andrew (Scotland) and St Patrick (Northern Ireland) are already public holidays, on 30 November and 17 March respectively, so either a second day could be awarded next to the festival in question, or a separate public holiday created in both cases.

For now, by international standards, Britain’s eight public holidays are not excessive, given there are 11 in Italy, nine in Germany and 11 in France.

This last country was the scene of a recent experiment in abolishing a bank holiday, in 2004. The previous year, France had been shocked by the deaths of about 15,000 elderly people during a heat wave, and the abolition of the holiday on Whit Monday, the day after Whit Sunday, also known as Pentecost, was seen by President Jacques Chirac’s administration as an ingenious partial solution.

Money isn’t everything

By turning Whit Monday into an ordinary working day, the thinking went, extra economic activity would generate more income, and a special 0.3% tax on this income would finance better care for older people.

Amid uproar from unions and others, the day was declared to be a “day of solidarity” on which workers would donate their wages for that day to a special fund for the care of elderly and disabled people, with employers contributing as well. This, too, was watered down as protests grew, and in 2008 Whit Monday was restored to the holiday calendar. This year, it fell on 21 May.

Could it have worked? Well, possibly, although the disputatious nature of the French labour market makes a judgment difficult.

As for the UK situation, let CEBR have the last word, “Should we reduce the number of bank holidays...This is more a social than an economic judgment. Money is not the only thing and a healthy lifestyle needs time off to reflect and relax.”

Millions of British people would agree wholeheartedly, not least as they enjoy this long weekend.

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