Are bank holidays good for the economy?Posted On 3/5/2022
The average bank holiday costs the economy £2.3 billion. Considering the fragile state of the economy, the argument that we should reduce the number of days we enjoy off work is understandable.
The average employee in the UK working full time works 1,647 hours a year. The average Korean works 2,191. That’s the equivalent of working nearly 4 more months a year at the British rate. Even the average US worker works more than we do at 1,695 hours a year. Only in the decadent European economy do people work shorter hours than in the UK.
One of the reasons why we work such short hours is our bank holidays. In a regular year, there are eight bank holidays in England and Wales and 261 weekdays. The bank holidays mean that eight of these 261 weekdays, or 3% of weekdays, are taken as time off by many workers. This puts downward pressure on productivity and hence GDP.
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.
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.
Our rough and ready calculations show that if the eight regular bank holidays were cancelled in an average year, annual GDP would rise by about 1.3%, or £19 billion. This means that each regular bank holiday makes annual GDP about 0.16% lower than it otherwise would have been. In a normal year, each of the eight regular bank holidays will result in £2.3 billion of forgone GDP. The two Easter bank holidays we are all currently enjoying come with a price tag of 0.3% of GDP, about £4.7 billion.
Special one-off bank holidays, such as the Jubilee, weigh less heavily on the economy than the eight normal bank holidays. This is because the tourism sector can get some benefit from additional foreign visitors and consumption might also be boosted by more than on a regular bank holiday. Nevertheless, these special bank holidays depress GDP as well – the Department of Culture Media and Sport estimates that the Royal Wedding cost the UK £1.2 billion or 0.08% of GDP.
We probably have too many bank holidays in April and May, and when people take annual leave to bridge over some of the holidays, business lost momentum and this probably contributed to the rather weak economic performance over the year.
Should we reduce the number of Bank Holidays and make Easter Monday a working day as in the US? This is more a social than an economic judgement. Money is not the only thing and a healthy lifestyle needs time off to reflect and relax.
Maybe the solution is not in reducing the number of days off but more in spacing them out a bit better over the year.