The economic impact of Christmas is a factor that has grown steadily over the past few centuries in many regions of the world, especially here in the UK. Retailers generate significant proportions of their profits in the run up to Christmas. It will come as no surprise that the media is filled with articles and ads all hyping up the Christmas season. The media are not alone, many people use Christmas as an excuse to spend. The Christmas season must be good for the economy, right?
The benefits of Christmas spending go far beyond the jobs which are created. People who work in manufacturing, transport, food and drink services, and retail will all usually spend much of their hard earned money over the Christmas period. In turn this extra cash is recycled back into the economy. Taxes generated by workers and businesses will also help to fund government jobs and services. This is all great for the health of our economy.
There are some people who believe the economy is indeed inefficient during the Christmas months. Many items people will be buying for Christmas this year are in fact manufactured overseas, think iPads, laptops, clothing and televisions, all of which are mainly produced abroad by companies based outside of the UK.
Christmas holidays are all too often taken to other countries so again, much of this type of holiday spending is taken abroad and away from the UK. Many economists claim that the Christmas season encourages people to buy items they ordinarily would not, so shopping is generally a great thing during tough economic times.
The overall effects of the Christmas season are for the most part wonderful for the wealth of the country. If there was a way to keep the money flowing after the Christmas period then I am sure it would work wonders for our economy. The circular flow model in economics refers to a simple economic model which describes the reciprocal circulation of income between producers and consumers; this flow of money effectively increases during Christmas in the UK and could be a great indicator for the true health and confidence people have in the UK’s economy.
Let’s hope the big Christmas spending spree creates a much needed boost to the economy.