An idea for boosting Q2 GDP growth by 0.4%
UK policymakers are always in the market for new ideas for boosting the level of UK GDP, but at the moment their need looks a little greater than usual. Today saw another weak release for GDP growth, which came in flat for Q4.
Here’s an idea for permanently increasing the level of UK GDP: switch all the bank holidays that normally happen on Mondays to instead be on Fridays.
There’s a lack of hard data on Fridays being (on average) the least productive day of the week but it’s a view commonly held and there’s a body of informal data to back it up. For example, this source, based on users of project management software suggests users are 35% less active on Fridays based on tasks created or completed. This source, based on another project management software package suggests Fridays are 18% less productive than Mondays based on tasks completed. A survey of 300 managers found that only 3% think Friday is the most productive day of the week.
In 2020, in England, Scotland and Wales there will be 4 bank holidays on Mondays, including the substitute day for Boxing Day (which falls on a Saturday this year). For our back-of-the-envelope calculation, let’s assume the average full-time worker works (52 x 5 - 33) days a year, which include a deduction for annual leave and bank holidays. This means that, on average, 1.8% of working days are Fridays worked after bank holiday Mondays.
Based on the soft data above, if we assume Mondays are 20% more productive than Fridays then switching those 4 bank holidays from Mondays to Fridays would make 1.8% of working days 20% more productive. This would raise GDP by 0.4%, equivalent to an additional £8bn in economic activity, meaning more wages, more profits and more tax funding for schools and hospitals.
Next we come onto the question of how much would behavioural effects eat away at the “static” estimate for extra economic activity. If on bank holiday weeks, people would work Tuesday to Friday with the exact same 4-day pattern of productivity as they would work Monday to Thursday then there’s no gain to moving bank holidays around. That said, if this was the world we lived in, textbook economics would always work and Fridays would already be as productive as Mondays.
Let’s assume behavioural effects eat away half of the gain in GDP so there’s some re-patterning of activity but it’s far from complete. If we redo the calculation just for Quarter 2 of 2020, which is the quarter with the most Monday bank holidays (two), we could raise the productivity of 3.5% of working days in Quarter 2 by 10%, equivalent to an extra 0.4% of GDP growth just in that quarter, which would be huge.
Then if UK policymakers wanted to go even bigger, they could think about ditching Sunday trading laws too, but that might be a can of worms worth leaving closed, at least for now.