Published On: Thu, Feb 29th, 2024

UK economy to get ‘welcome and meaningful’ £8.6bn boost for one simple reason | Personal Finance | Finance

The UK’s economy will get a timely £8.6billion shot in the arm today – thanks to the leap year.

An analysis published by the Centre for Economic and Business Research (Cebr) suggested February 29 – which comes round just once every four years – would brong with it a “purely mathematical” but nevertheless “welcome and meaningful” contribution to gross domestic product (GDP).

A Cebr spokesman explained that though higher frequency economic statistics were seasonally- and calendar-adjusted, meaning the impact of extra working days was largely smoothed out, there was no adjustment for leap days in annual data.

He continued: As such, the additional day will provide this year’s economic output with a purely mathematical boost.”

GDP measures the monetary value of goods and services produced within a country in a given period of time, the spokesman pointed out.

They continued: “With 2024 being a leap year, the period of measurement is longer than usual.

“Meanwhile, this year will have two other working days through one less weekend day and one less bank holiday, which will also have a real effect on activity. This is because output generated during a given workday outweighs that of a weekend day or public holiday.

“However, this impact will likely be taken out of the official statistics as part of the regular working day adjustment process.”

Combining Cebr’s forecast for GDP with the split of activity across weekdays and weekends, the think tank estimated that the economy would receive a boost of £8.6 billion due to this week’s extra day, which will be captured in the official 2024 data.

The spokesman added: “This will be split between additional consumption of £5.1 billion, extra investment of £1.7 billion, and the remainder from other channels of activity.”

Across the other additional workdays, the Cebr is predicting a real output boost of around £6.3 billion, taking the total real impact of “working day fluctuations” to roughly £14.9 billion.

The spokesman concluded: “At a time when the UK economy is suffering from sluggish prospects, the leap day boost would represent a welcome and meaningful contribution to GDP.

“Indeed, the extra activity could contribute 0.3 percentage points to annual growth.

“The converse, of course, is that 2025 will suffer a downward effect by having fewer days than this year. By then, however, it is expected that sustained improvement in economic performance will be more than sufficient to offset this.”

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