Page last updated at 13:45 GMT, Friday, 15 January 2010

Is snow actually good for the economy?

Snowy scene in Wales

Workers stranded at home, transport chaos, empty High Streets - it's claimed the cold snap has cost the UK economy hundreds of millions of pounds. But is this true, asks BBC business reporter Anthony Reuben.

Many organisations claim that the cold spell has cost the UK economy dear, in lost working days, delayed transport and late deliveries.

Departures board at Heathrow showing snow-related delays and cancellations
Bad for passengers, good for airport hotels

Taking anecdotal evidence that 10% of staff don't make into work as a result of snow, the Federation of Small Businesses estimates the wintery weather could be costing the economy at least £600m a day. The Centre for Economic and Business Research puts it at £900m a day.

True?

A common way of telling whether something is good or bad for the economy is the effect it has on gross domestic product (GDP), which may be thought of as either the total value of all of the goods and services produced by the country, or everything bought by households, companies and the government.

There is no doubt there are some snow-related factors that will reduce that figure.

Those who run cafes that cater for workers on their lunch-break will suffer a loss of earnings for several days. So may those who work on a freelance or casual basis if they are unable to get to work.

But in many other cases, much of the business lost will be regained in later days.

Passengers crowd a train platform
Many made it to work despite dire predictions to the contrary

Take, for example, a hairdresser. The cold snap means some appointments will be cancelled, because either the cutter or the client is unable to make it to the salon, because of transport difficulties or having to look after children home from school. But those clients will still need a hair cut when the weather improves.

So while takings may drop for several days, the salon will be busier than usual and staff will work harder in the following week to fit everybody in. So it is not necessarily a bad thing for the economy.

Sellers of cars or clothes or books will also have high hopes that the customers who stayed away because of the weather will be in to make their purchases once the roads are passable and public transport is back to normal.

Manufacturers may fulfil some orders late, either because staff could not get to work or because parts couldn't be delivered. But few customers will cancel an order because of that - every other supplier will be in the same boat.

Many schools have been closed, but this will barely register for the economy, except in terms of school lunches not made.

So there will be some losses, but could they really add up to £600m a day?

Ups and downs

Look on the other side of the calculation, at the aspects of snow that are good for the economy.

Rock salt being loaded onto a truck
Salt mines and salt hauliers are doing well in the cold snap

Councils have been desperate to secure extra rock salt to grit roads and pavements. Most of that salt comes from mines in Cheshire, Teesside and County Antrim, and so those mines - and any extra hauliers roped in to deliver their products - are having a boom time.

Sales of warm clothing, sledges, soup, duvets and snow tyres are all up and people are stocking up on extra food to see them through the cold spell.

Even cars skidding on ice help the economy, as these vehicles often need to be repaired or replaced, generating extra work and additional sales.

Also, people are using extra gas and electricity to heat their homes, which is bad news for household budgets but good news for the economy.

Some of that gas still comes from the North Sea, which is very good economically, but even the gas bought from overseas shows up as a positive for the GDP figures.

This is also helped by the government's payments to people on certain benefits if the temperature drops too far. Giving money to people on low incomes who are likely to spend it is a good way of boosting the economy.

So, lots of extra goods and services are being bought, some of them from UK companies.

Snow factor

There is a strong argument that given the current state of debt for both households and the government, making people spend extra money is not a good thing, but that is one of the key economic paradoxes.

Snowy school in Hampshire

On an individual basis, saving money or paying off debt is a good thing, but for the economy as a whole, if there is a big fall in spending then the economic consequences in terms of closed companies and lost jobs will be disastrous.

The GDP figures are produced every three months by the Office for National Statistics (ONS), which also provides commentary on the data, pointing out key factors that have stimulated or depressed economic growth.

The ONS has never mentioned snow in its GDP report.

It is tempting to conclude that the snow's good and bad economic effects pretty much cancel each other out.



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