The request: of the Snow last week cost the UK economy Â£ 1 billion per day.
Reality check verdict: Economists estimate the cost to the economy of the snow also say that a lot of the lost production will be made in the coming weeks, so that it is very unlikely that the snow will eventually cost the economy that much.
The front page of this week, the Observer went with the title: “Freezing conditions cost UK economy Â£ 1 billion per day”.
When the article speaks of events costs money, it is a reference to the gross domestic product (GDP), the total value of everything produced in the country, calculated every three months by the Office for National Statistics (ONS).
There are indeed things about the snow that will reduce GDP. For example, if you run a car factory on the maximum output of your staff and you can’t get work or deliveries may not be made.
Similarly, if you run a cafÃ© and you can’t open because of the snow or of your regular customers may not do this, then you will suffer a permanent loss of income.
But there are many other businesses in which the loss may be limited, or in the future.
If you are a hairdresser and you can’t open for a couple of days, people will always need their hair cut, so you might have to work a little overtime the next week, but your permanent loss will not be huge.
With the services sector representing almost 80% of the economy of the united KINGDOM, there are fewer people working in factories and more people who might be able to work from home or to compensate for the loss of production.
But there are also things about bad times to stimulate the GDP. For example, people who need to use more energy to heat their home, or the panic buying of perishable goods, advice, or have to buy grain to spread on the roads, or people who can’t get to work spending some of their time at home, shopping online.
The 1 billion pounds per day figure came in a tweet from Douglas McWilliams, Centre for Economics and Business Research (CEBR), which suggests that the total production of each day would be reduced by 20%, even after the effects of online shopping and work at home, and a 20% increase in energy production, but he described it as a “very rough estimate”.
But Mr McWilliams told the Reality: “at the end of the first quarter, I suspect many of which have been made up.”
And the same conclusion has been drawn by Howard Archer, from the prediction group of the european year of the Item Club, which predicted that the cold was going to hit 0.1 or 0.2 percentage points of GDP, the figures from January to March, but added that much of the loss of production would ultimately be recovered.
The loss of 0.1 to 0.2 of a percentage point would be a loss of Â£500 million and Â£ 1 billion in total, considerably less than the Â£ 1 billion per day as estimated by the CEBR.
Alan Clarke, of Scotiabank, said that he believed that the estimates of 0.2 percentage points lost due to bad weather conditions were “a huge exaggeration”.The perfect storm
The last time that the ONS mentioned snow in its quarterly GDP report was for the last three months of 2010.
The snow in December 2010 has been particularly damaging to the GDP figures.
The disruption caused in the week before Christmas, which means that many parties have been cancelled, and people could not go to the shops to buy gifts.
Also, because it was right at the end of the quarter, there was no time to compensate for the loss of production.
It must be said that by 2010, the CEBR also said that the snow had cost it Â£ 1 billion per day.
While some parts of the UK are still disturbances due to the snow, most of the country has a month to recover the losses before the end of the quarter.
We will not know how bad shock, the snow was up to the GDP figures are published in April – in fact, we can’t even know for sure, because it is not always clear how much change in growth has been due to one particular factor.