The bank holiday for the Queen’s funeral could tip the fragile UK economy into recession, according to analysts.

Widespread closures are expected after the King gave his approval to a public holiday on 19 September when the Queen will be laid to rest at Windsor Castle.

The UK economy grew by just 0.2% in July, according to figures published this morning by the Office for National Statistics.

It follows a fall of 0.6% in June and means that monthly GDP is now estimated to be 1.1% above its pre-coronavirus levels.

Looking at the broader picture, GDP was flat in the three months to July compared with the previous three months.

Economists said that the ten days of national mourning are likely to influence data this month at a time when companies are being squeezed by the rising cost of living.

Danni Hewson, AJ Bell financial analyst, said:” “It’s estimated such events cost the country over £2bn – a cost often offset by additional spend on hospitality or retail. 

“This bank holiday will be different, however, offering a chance for the country to pay its respects to a monarch who gave so much to UK PLC.  The Queen captured hearts and minds around the world and her passing is global news, showcasing the country, its people and its opportunities.”

A number of retailers and other businesses also closed on Friday as a mark of respect, while the postponement and cancellation of a range of corporate and sporting events also hit those in the hospitality and leisure sector.

After an estimated 60,000 were in Edinburgh yesterday to greet the Queen’s coffin, more will be on the streets today today as senior figures in the Royal Family, including King Charles III, accompany the coffin from the Palace of Holyroodhouse to St Giles’ Cathedral for a service.

The crown of Scotland will be placed on the coffin and for 24 hours people will be able to pay their respects.

Initial official estimates last month showed that gross domestic product (GDP) shrank by 0.1% in the second quarter of the year.

A third-quarter contraction would mean a recession starting earlier than the fourth quarter that economists had anticipated.

Hope rests in an easing of energy cost pressures on business following a package of measures announced last week by new prime minister Liz Truss.

However, the additional bank holiday in June to celebrate the Queen’s Platinum Jubilee — which resulted in an extra working day in May and two fewer the following month — had a smaller impact on the economy than expected.

The latest data for July shows services grew by 0.4%, after a fall of 0.5% in June, and was the main driver to the rise in GDP; information and communication grew by 1.5% and was the largest contributor to the services growth in July.

Production fell by 0.3% after a fall of 0.9% in June; this was mainly because of a fall of 3.4% in electricity, gas, steam, and air conditioning supply.

Construction also fell in July by 0.8%, after a fall of 1.4% in June 2022; the decrease in monthly construction output in July came solely from repair and maintenance, which fell 2.6%.

David Bharier, head of research at the British Chambers of Commerce, said:  “The UK economy faces serious immediate and longer-term structural issues which could lead to quarterly recession by the end of 2022, and anaemic yearly growth after that. 

“BCC’s research shows that business confidence is trending downwards, with inflation wiping out turnover and profitability for many firms and a record proportion facing recruitment difficulties. 

“Last week’s announcement on support for firms’ energy bills will have provided some reassurance to business and should dampen one of the key sources of inflation, but further details of the scheme are needed to restore long-term confidence.”

Andrew Sentance, an economist and a former member of the Bank of England’s monetary policy committee, told The Times that the process of national mourning combined with the bank holiday could result in “some quite significant impact on short-term economic activity. We saw a similar effect with the death of Princess Diana.”

Official figures showed that retail sales fell in the month following her death in 1997. Many shops closed for at least part of the day of her funeral, while leisure operators, including cinemas, experienced drops in business. There was a rebound in sales the following month, however.

Scotland’s private-sector economy contracted in August for the first time in 18 months, a key survey shows.

Royal Bank of Scotland’s business activity index for Scotland, which measures manufacturing and services output, fell from 50.2 in July to 47.8 in August on a seasonally adjusted basis, dropping below the 50 no-change mark for the first time since February last year.