As the world mourns the loss of Queen Elizabeth II, it is believed that her passing could have implications traversing the economy and politics, especially at a time when the United Kingdom’s economy is battling an energy crunch and is on the brink of a recession. On the political front, this comes only days after Britain’s new prime minister, Elizabeth (Liz) Truss was appointed by the Queen herself – her last act of public service, and amid geo-political tensions in Europe. Although it is widely circulated that the period leading up to her funeral will be marked by a solemn ceremony whereby no official government announcements will be made, some implications of the Monarch’s passing are already glaring.
The Bank of England in a condolence message mentioned that current banknotes featuring the image of the Queen will continue to be legal tender and further announcements will only be made after the mourning period. The media has it that the mourning period till the funeral will span twelve (12) days. Political activities have been suspended. Members of parliament only gathered on Friday and Saturday to pay their respects to the late Monarch and to take the statutory Oath to the new King – King Charles III.
It has been announced that Monday 19 September, the day of the Queen’s state funeral is to be a bank holiday. Consequently, all businesses including the stock market will be closed for the day. Some of the key changes expected are; updates to the image and cypher which appear on nearly all government-issued items. These will have to reflect the presence of the new monarch, King Charles III. Notable changes include changes to currency and stamps, passports, uniforms in the UK including police and military uniforms, and other institutional changes. Although it is difficult to accurately estimate the financial cost of these changes, estimates range widely between two billion Dollars (USD2bn) to seven billion dollars (USD7bn). On a positive note, however, it is expected that the UK tourism sector will receive a boost, which should help partially offset the financial cost to the UK economy.
he Queen’s death marks the end of an era and comes at a time that the UK is faced with an uncertain economic outlook due to high inflation, weak growth prospects, and its exacerbating energy crises. The funeral expenses will add to the cost of a stimulus package estimated at around one hundred billion pounds (GBP100bn) being proposed by the UK’s new prime minister Liz Truss to help citizens ease their soaring energy bills. Although the British pound (GBP) closed down -0.22% to USD1.1500/GBP last week Thursday (9/9/2022), since then it has recovered some lost ground, gaining c.1.7% to USD1.169 as of the time of writing this article. Prior to the GBP’s recent recovery, it had shed almost 15% ytd. It is also quite likely that the GBP will further strengthen against the United States dollar (USD) following the much-anticipated hike in the policy rate by the Bank of England at its next meeting later this month.
FBNQuest Research
12 September 2022