The Royal Wedding, the Economy, and the Pound

Last Friday, one of the largest events this decade took place in the U.K. Prince William, the second in the line of succession to the Commonwealth realms, got married to commoner Catherine “Kate” Middleton.

Saying the affair was grand would be an understatement, as more than an estimated 2 billion people tuned in to the event. Do you know how big 2 billion is? That’s almost a third of the world’s entire population!

But as girls worldwide gushed over the wedding wondering when their very own prince charming will arrive, macroeconomic nerds like me had another question in mind. I asked myself, “What does the Royal Wedding mean for U.K.’s economy?”

The Good

Consumer and government spending as a result of the Royal Wedding surged off the charts. Hotels in London were packed to the brim, various memorabilia were made and sold, and over 5,000 street parties were held. According to economists, the event probably gave London about 107 million GBP in profits.

Also, the fact that this single event drew so much interest is a good sign for the Olympics, which London will be hosting in 2012. If the Royal wedding was able to attract so much attention, what more an event ten times bigger!

More importantly, the Royal Wedding will probably have a positive influence on the overall sentiment of the British and the rest of the world. Kate Middleton was not born into royalty.

The wealth of her family was the result of innovation, hard work, and good business sense. By pointing to Kate’s background, the royal family could encourage entrepreneurs to chase their own dreams and aspirations.

With effects like that, why doesn’t the U.K. doesn’t hold Royal Weddings daily?!

The Bad

The answer to that is simple: while Britons were busy partyin’ their hearts out, they were missing out on an entire day of work – a lost opportunity to make money! The British Retail Consortium says that single day of partyin’ could have cost the U.K. up to 6 billion GBP in lost output.

Of course, the negative effects work holidays have on GDP can easily stack up, especially if you consider that the U.K. just celebrated a four-day weekend in celebration of Easter, and that yesterday was a bank holiday in the U.K. as well. Estimates say that the disruptions in April could trim up to 1.5% of the quarterly GDP!

Another drawback is the huge security expense. Yes, it’s true that most of the wedding expenses were covered by the bride’s and grooms’ wealthy families. But the government is actually footing the bill for one of the biggest expenses – security.

The government is expected to be slapped with a 20 million GBP bill for what has been called the most expensive security event EVER. That doesn’t exactly help the government with its plans to cut back on spending and trim its national debt, does it?

The Pound

Now let’s cut to the chase: what does this mean for the pound? Well, it all depends on how this will ultimately affect GDP. If the wedding can continue to encourage spending and tourism in the coming weeks and months, then maybe this will turn out to be a boost for GDP and the pound.

But right now, if we focus on the lost output figures, it seems as though it’s more negative than positive. That being said, if this shaves off growth from the U.K.’s GDP, then it could shave a few pips off the pound as well.

Now that we’ve dissected the Royal Wedding from an economic standpoint, I’m beginning to wonder whether the royal couple would’ve been better off with a simple Las Vegas drive-through wedding!