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

The death of Queen Elizabeth II could be the blow that sends the already strained UK economy into a “technical recession”, according to one economic forecast, as some Canadians also sound the alarm about the day’s effects. holidays for the country’s businesses.

The forecast is based on economic data released earlier this week, showing UK gross domestic product (GDP) growth weaker than expected in July.

With the UK economy already shrinking in the second quarter of the year, another consecutive quarter of contraction will push the country into Depressionas defined by some economists.

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Researchers at Pantheon Macroeconomics said in a note to clients on Tuesday that they expected the bank holiday for the queen’s funeral on September 19 to take an additional hit to the economy. UK.

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Specifically, the forecast calls for September GDP to fall 0.2% from normal levels due to the holiday season, prompting shops and restaurants to close as the country mourns its longest-reigning monarch.

“Following news of an extra holiday to the queen’s funeral this month, it’s very balanced on whether GDP falls back on a quarter-on-quarter basis… thus leading to a technical recession,” Pantheon notes. suggestions.

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Trudeau announces Canada will be given a national holiday to mark the death of Queen Elizabeth II

Trudeau announces Canada will be given a national holiday to mark the death of Queen Elizabeth II

UK bank holidays do not force all businesses to close or furlough employees, but provide an option on a case-by-case basis.

The Pantheon forecast used June’s economic impact as the basis for September’s forecast, as that month features two additional public holidays tied to the queen’s Platinum Jubilee celebrations.

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The Pantheon noted that the September 19 holiday season may be larger than June as some businesses that are still open for the holiday year may “close as a sign of respect” next week.

While the report highlights the risk of a recession related to the holiday, in the end, Pantheon still expects GDP to hold steady with Q2 figures – just enough to stave off a recession in Q3.

Still, the UK economy is on the cusp of uncertainty heading into the fall, as Capital Economics chief economist Paul Dales suggested in a recent note that the country is “probably already in recession”.

The UK is currently facing an energy and cost of living crisis tied to Russia’s war in Ukraine. Dales said Prime Minister Liz Truss’ October plan to cap utility costs “will help” but will not be enough to prevent the country’s GDP from falling in the coming quarters, Dales wrote on Monday.

The Bank of England has given its benchmark interest rate decision an extra week to September 22 after the queen’s death.

Pantheon said that “recent developments” have “strengthened the case” for the central bank to raise rates 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.

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Canada’s concerns about economic impact

With Prime Minister Justin Trudeau’s announcement on Tuesday that Canada will also celebrate a federal holiday on September 19 To mark the queen’s funeral, similar concerns are being raised domestically about the impact on the economy.

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The Liberal Government has set the coming Monday as a public holiday, but it will be up to the provinces to decide if workers will get paid leave on September 19.

PEI said it would take a provincial holiday, for example, but Quebec has said it won’t. Ontario will also not have a provincial holiday, with Premier Doug Ford instead announcing a “national day of mourning” with a moment of silence.

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

“Small businesses are grappling with labor shortages, and asking them to close or pay their employees half-and-half without notice would be extremely costly or lead to a loss of productivity for a day, ” CFIB president Dan Kelly said in a statement. statutory holidays will “cost the economy billions of dollars.”

“Smaller scale” of expected events amid “unstable economic climate”

There is no official cost estimate for the queen’s funeral, which will inevitably include expenses such as flowers, military processions and planes, but journalist and royal researcher Emily Stedman said the funeral The Queen’s funeral in 2002 is a viable benchmark for what to expect.

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That event cost about £5.6 million ($13.7 million based on exchange rates at the time), Stedman said, with £4 million going for security alone.

She hopes events for King Charles III’s coronation will still cost “millions of dollars”, but should be on a “smaller scale” than the rites for previous kings.

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Queen Elizabeth II’s coffin prepares to move to London as mass mourners pay their respects

Queen Elizabeth II’s coffin prepares to move to London as mass mourners pay their respects

Stedman said Queen Elizabeth II’s coronation in 1953 would cost around £46 million in today’s figures ($69.6 million), adding that she expected a “comparable figure.” for Charles’ coronation”.

But the UK’s “quite shaky economic environment” could prompt the royal family to downsize the size of the ceremony, she added.

“We’re really living in quite an economic anxiety,” she said.

“These two events, the queen’s funeral and King Charles’ coronation, will come from taxpayer dollars that we are funded by the government. So I imagine there is a lot of concern around the cost of these upcoming events and the impact this has on the economy.”

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– with files from Global News’ Anne Gaviola

© 2022 Global News, a division of Corus Entertainment Inc.

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