Business

07.22.13

The Royal Baby Is Already Making Britain Better

Can a single royal infant rescue England’s lame economy? It certainly won’t hurt! In fact, baby Cambridge will likely provide a jolt bigger than the royal wedding, writes Daniel Gross.

Still in the grips of David Cameron’s unpopular austerity program, the British economy in the first quarter of 2013 expanded by a mere 0.3 percent from the fourth quarter of 2012.

Luckily, Kate Middleton’s royal birth pangs will provide a jolt of much-needed stimulus.

Think of it this way: stimulus is a force that causes money on the sidelines to be spent sooner rather than later, and the impending birth is already doing that. News crews are converging from around the world, buying airplane tickets, (insanely expensive) hotel rooms, and food. Domestic and foreign tourists will flood London. As happens with every spectacle, a lot of merchandise will be moved. “In the royal wedding, there was some pickup in retail sales at the time,” notes Howard Archer, an economist at IHS Global Insight. Expect a boatload of commemorative coins, plates, T-shirts, and baby tchotchkes of all sorts to be sold. Alcohol sales may also pick up as people toast the royal child. Meanwhile, Britain’s bookmakers are raking it in as punters place bets on the child’s name and gender. (Top picks so far: Alexandra and George.)

Of course, other recent royal pageants and spectacles have been something of a mixed bag, economically speaking. But there’s one important difference here, Archer notes. While the 2011 royal wedding and last year’s Diamond Jubilee for Queen Elizabeth II provided stimulus, the government also declared an extra public holiday for those events. So while retail sales got a jolt, a lot of businesses, offices, stores, and factories shut down for the day. “There was quite a hit to output,” says Archer.

Video screenshot

Journalists struggled to fill air time while awaiting the birth of the royal baby.

Since there will be no holiday for the royal birth, the U.K. economy will get the upside of a royal event without the downside of idled capacity.

Then there are the less tangible benefits: when people feel good about themselves, their lives, and their nations, they tend to spend a little more. And the U.K. is on something of a run with the royal wedding, the 2012 Olympics in London, Andy Murray’s victory at Wimbledon, and Chris Froome’s triumph at the Tour de France. England’s cricket team is currently sticking it to Australia in the Ashes tournament. The weather has been uncharacteristically pleasant. And so a nation that is chronically pessimistic and downbeat about its own prospects is suddenly acquiring something of a strut. Consumer confidence in June soared to a two-year high!

Add it all up, and the birth will have an economic impact that is “limited, albeit overwhelmingly positive,” Archer said. “At the margin, the royal birth may provide the economy with a temporary, small positive boost at a time when it seems to be increasingly moving in the right direction.”

Oh, baby!