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Royal Coronation Spells Trouble for UK Economy: Here’s Why

"King Charles III's Coronation Bank Holiday Threatens to Weigh Down British Economy"

The upcoming coronation of King Charles III in the United Kingdom has led to the announcement of an extra bank holiday, which experts predict will have a negative impact on the country’s economy. According to forecasters, the additional day off on May 8th will contribute to a 0.7% decline in GDP in May and could result in a minor contraction during the second quarter of the year. This will mark the second time in a year that royal events have had a negative impact on the UK’s economic growth, but analysts suggest that the impact of these events is decreasing.

Dan Hanson, an economist at Bloomberg Economics, stated that “We have pencilled in a 0.7% drop in GDP in May with a rebound of a similar magnitude in June.” James Smith, an economist at ING, believes that the temporary drag caused by the extra bank holiday is a key reason why the overall second quarter GDP will come in negative. However, Smith also noted that the impact of such events has become less pronounced in recent years, citing the extra bank holidays in June and September of 2022 as evidence.

Despite the negative impact of the coronation bank holiday, the UK’s economy has had a more resilient start in recent months than economists had expected. Many have revised their predictions for a recession this year, despite inflation remaining stuck in double digits. Survey data also suggests that the economy’s momentum is accelerating, which could be masked by the coronation’s drag on second-quarter growth.

Sanjay Raja, an economist at Deutsche Bank UK, predicts that the extra bank holiday will trim 0.5% from GDP in May, resulting in a small drop in output during the second quarter. While some industries such as hospitality and leisure are expected to do well during this time, others are likely to suffer due to the additional working day lost. Raja believes that professional services, factories, and construction will be among the sectors to lose out as work is put on hold.

In conclusion, while the extra bank holiday for King Charles III’s coronation is expected to have a negative impact on the UK’s economy, analysts suggest that the impact of such events is decreasing. Despite this setback, the UK’s economy has shown resilience in recent months and is expected to continue to gain momentum in the coming months.

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