Friday 23 March 2018

Royal baby: Arrival will offer 'boost' to economy, says City

Photographers gather in front of the Lindo Wing of St Mary's Hospital, where Britain's Catherine, Duchess of Cambridge arrived to give birth
Photographers gather in front of the Lindo Wing of St Mary's Hospital, where Britain's Catherine, Duchess of Cambridge arrived to give birth

Emma Rowley,

Bring out the bunting. Economists have decided that the arrival of Baby Cambridge does not pose a threat to the UK's tentative recovery - and could even offer a small, temporary "boost" to growth.

The birth of the royal baby will have a limited yet "overwhelmingly positive" effect on UK growth, according to Howard Archer, chief UK economist at IHS Global Insight.

"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," he said.

The most obvious support to growth will come via a pick-up in retail sales as people buy souvenirs and commemorative merchandise, as well as alcohol to toast the birth, he said. Mr Archer also noted the lift bookies have already experienced as punters bet on the baby's sex and name.

In total, the Centre for Retail Research has estimated that the baby’s arrival could add more than £240m to the British economy as consumer spending gets a boost. That figure is based on people buying food and drink for celebrations at home and in pubs, as well as purchases and exports of souvenirs, toys and related books and media.

Mothercare shares were on Monday morning trading up 3pc at 481p. The babywear and equipment chain has been hoping that “buzz and excitement” from the birth of the Royal baby will lead to a pick-up in sales, predicting a slight increase in footfall through its stores as a result.

More broadly, Mr Archer said a "feel good factor" around the birth could translate into a fleeting improvement in consumer confidence, which would come with "no obvious negative economic repercussions".

That contrasts with the Royal Wedding in 2011, when an extra day's public holiday to mark the occasion impacted the UK's economic output as workers downed tools. However, the festivities did appear to help retailers, as indexes tracking consumer confidence showed sentiment enjoyed a leap.

Victoria Clarke, an economist at Investec, cautioned however that such surges in consumer sentiment tend to be short-lived, evaporating in the following month’s data. “Beyond the impact of memorabilia sales... you are then down to confidence and whether it lasts,” she said.

Mr Archer, too, acknowledged the limitations of the baby's ability to transform Britain's economic fortunes. "At the end of the day what influences people the most is their perception of the state of the economy and the employment outlook," he said.

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