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David Cameron earlier this year described 2012, studded with the diamond jubilee and the Olympics, as the year Britain must “go for it”.
That was before consumers took fright at the UK’s economic prospects, plunging the country into a double-dip recession.
With preparations in full swing for the start of the jubilee celebrations next weekend and the Olympics just over two months away, the prime minister’s plea to the British public now has more than a touch of urgency about it.
Analysts downplay the overall impact of the so-called “summer of events” on gross domestic product. Moody’s, the rating agency, says the Olympics will have only a marginal impact on the UK economy, although the hotel sector should do well.
The four-day jubilee festivities will also knock back UK productivity, say economists. But that has not stopped consumer businesses talking up the idea of a spending revival, built on patriotism and the party spirit. Executives say Britons need an excuse to spend, and many are hoping that the jubilee will do just that.
“People will take a weekend break from the gloom,” says Neil Saunders, managing director of Conlumino, the retail consultancy. “It’s a really nice time to forget troubles a bit, and I think consumers will splash out as a result.”
Retailers should benefit from sales of jubilee-themed merchandise, while the extra bank holiday is expected to bolster food sales, as Britons spend time with their friends and families, or maybe hold street parties.
Justin King, chief executive of J Sainsbury, has said that the sales uplift could be equivalent to that of Easter, the second-biggest event in the calendar for retailers after Christmas. “Both of these events, the Olympics and the jubilee are catching the customers’ imagination,” he said recently. “It’s an opportunity like no other. [There are] real reasons to be cheerful. Hopefully [it will] lift the national mood.”
Marc Bolland, chief executive of Marks and Spencer, said this week that 40 per cent of the retailer’s customers said they would be celebrating around the jubilee. About 50 per cent are saving money for spending during the Olympics, he said.
“We need the summer as a positive impulse. People … are already planning [to spend/save] a bit of their money for that,” he said.
Charles Wilson, chief executive of cash and carry wholesaler Booker, said many of his customers, which include independent shops, pubs and restaurants, were gearing up for the jubilee. “The diamond jubilee is shaping up well,” he said.
Shoppers could also be tempted to splash out on a new outfit for a jubilee party or Olympic-themed event. Andrew Moore, head of non-food at Asda, whose George clothing range has emphasised red white and blue in its collections, said recently that sales of jubilee-themed outfits were already proving popular.
London’s hotels, which have enjoyed strong revenue growth this year, are looking more towards the Olympics than the jubilee for a positive uplift. There has been a flurry of new openings in the capital this year in readiness.
Some analysts and executives have been concerned that some regular foreign visitors could be discouraged by the Olympics coming to town. But several operators in London say expected revenues per room in the Olympic period of late July to mid-August are strong, and will remain so until at least the end of the Paralympics in mid-September.
For all consumer businesses, Britain’s unpredictable weather will be an important determinant of the summer’s success. Last year, store groups were boosted by the royal wedding coinciding with an early heatwave.
Clive Black, analyst at Shore Capital, says as temperatures soar, so do sales of meat, particularly chicken and beef burgers for barbecues, as well as salads, beer, wine and ice-cream. Fresh foods tend to have a higher margin than groceries, so these sales are very profitable for supermarkets. “The weather is the real icing on the cake,” he says.
But some analysts are fearful that any jubilee, Olympic and hot-weather boost could be short lived. “I do not think that a few commemoration plates are really going to make a significant difference to retail spending,” says Richard Hyman, strategic adviser to Deloitte.
He argues that the Olympics have been overhyped as many people are likely to leave London and spend overseas on holiday to avoid the games. “When the dust has settled, and everything is divvied up, I am not sure how much of an economic benefit it’s going to be. We have got a depressed economy, and there is no way of getting way from it.”
All told, the prime minister’s appeal to “go for it” during the summer celebrations looks likely to result in either a short sprint or worse, a false start.