With 80 days to go until the opening ceremony of the London 2012 Olympic Games, the final countdown has officially begun. It has been nearly seven years since Trafalgar Square erupted with the news that London was to hold the Games, and for so many of us we have found it to be seven years of tireless publicity about how great it will be for the country.
Since the bid was accepted, economists all over the country have been debating how it will affect the UK’s economy. A lot of scepticism still surrounds the benefits the Games will have on the UK, with a recent poll revealing that more than half of those surveyed did not believe that London 2012 would be worth the huge public expense.
The current budget for holding the Games is £9.3bn, which has largely been funded by the taxpayer. This amount is nearly four times the £2.4bn estimated cost for staging the games at the time of the bid in 2005, and has seen many disgruntled Londoners paying an extra £20 contribution in their council tax. A poll conducted by BBC Radio 5 Live found that 64 per cent thought taxpayers had paid too much to cover the games’ costs, with the large budget even prompting former Olympic Minister Tessa Jowell to question whether London’s bid to host the Olympics would be a costly mistake back in 2008.
Of the £9.3bn, £3.1bn has been allocated to building the Olympic park and venues, and £1.7bn for regeneration and infrastructure, yet we have been reassured that the costs of staging the event will be met through selling television rights, corporate sponsorship and ticket sales. So the big question is will this huge expenditure eventually benefit the UK economy?
The economic impact that major sporting events can have on their host countries and its businesses has already been demonstrated in the past. During the 2010 football World Cup in South Africa, which attracted 500,000 visitors and created 130,000 jobs, South African food and drink group Famous Brands reported a 24 per cent increase in sales during the tournament. The 2002 Commonwealth Games in Manchester also saw £670m of additional inward investment for the city. Indeed, the rewards of hosting such a huge event already seem to be showing its effects here in the UK despite the Games being three months away. Sheffield has become home to a number of Olympic and Paralympic squads in the lead up to the Games and its city council has reported that it has brought a £19m boost to the city’s economy already.
The majority of benefits, however, will inevitably affect London. According to a study carried out by PwC for the Government in 2005, the Olympics will boost the London economy by £5.9bn, and the rest of the UK by a further £1.9bn. Already a 2.5km/sq corner of East London has been transformed into a hub of sporting venues, with every £1 spent on development here estimated to be worth 75p in long-term investment for the area. 98 per cent of facilities built for the Games have been built by British companies through contracts worth £6bn, and by 2016 the park’s venues are expected to be receiving 9.3 million visitors a year. The aquatics centre itself will become the UK’s top swimming facility and is anticipated to attract up to 800,000 visitors a year alone. Therefore demonstrating that one of the lasting impacts of the Games will be the way in which these new stadiums are utilised to continue to generate revenue.
The building of the Olympic Park has also impacted the housing market. A reported £30.8bn has been added to the value of residential properties located in close proximity to Olympic sites in the UK since 2005, with £6.4bn of this in added value to house prices in East London.
With a major influx of visitors expected in London, many are concerned about the pressure that the Games will place on public transport and the fact that traditional tourism may well decrease due to people avoiding the busy periods (some theatres have already reported reduced bookings). On the upside, 40,000 jobs have been created as a direct result of the Games, which has benefitted the UK’s current unemployment levels.
A recent study by BT also suggested the positive impact that UK businesses are expecting as a result of London 2012. Of 1,200 businesses surveyed nationwide, 68 per cent are expecting a peak in demand and nearly half anticipate a rise in sales. 45 per cent expect to find new international business opportunities and 30 per cent are hoping for a welcome boost to profits.
Furthermore, according to a report released by Visa Europe last year to mark the 25th Anniversary of Visa’s global sponsorship of the Games, the UK GDP is set to benefit from a £750m consumer spending boost during the seven week period of the Olympic and Paralympic games. The report drew on Visa cardholder spending data from the 2006 and 2008 Games, the 2010 Winter Olympics and the 2012 football World Cup. Visa accounts for more than £1 in every £4 spent in the UK, so the information gathered offered a clear projection of how the UK population and visitors could spend during the 2012 Games.
The report found that during the three week period of the Olympics, the economy would receive a £621m spending boost (with a further £129m spent during the Paralympics), this equates to an uplift of 18.5 per cent above what would be expected over the same period had London not won the bid. According to the data, as a result of increased spending, the retail, leisure and travel sectors look set to be the biggest winners of all. Predicted spending injections include £81.5m to the entertainment, food and drink industry, £122.6m to the hotel sector, and a much needed £184.7m spending uplift for the British high street. In terms of long-term economic impact, the report also suggested that by 2015, as a result of hosting the Games, the expected growth for the UK economy would be 3.5 per cent.
If all of the figures are to be believed then the biggest impact to the UK economy will largely be generated by the huge number of visitors flocking to the Games. While the extensive budget has come under constant scrutiny over the last seven years, 55 per cent of people surveyed by BBC Radio 5 Live still agreed that the Games would prove to be good value in terms of benefits to the UK.
However, when the vast crowds leave, the increased spending levels will inevitably leave with them, so businesses will have to make use of the small window of opportunity open to them. With the UK economy only set to grow by 0.7 per cent in 2012, the Games are unlikely to lift us out of recession. Yet with the feel-good factor expected to come with the Queen’s upcoming Diamond Jubilee this summer and the anticipated boost to consumer spending during the Olympics, only time will tell whether the UK economy can win gold.