As a host of this year’s Olympic Games London was the world’s hottest spot over the last month. Being in charge of such an important and massive event that brings together athletes, visitors, politicians and media from all parts of the world is definitely a prestigious role a city should be proud of. Does the prestige always go along with economic benefits? It does in most cases but there are significant risks and downfalls that should not be neglected.
For a neat overview at the Olympics’ expected economic impact you can have a look at Confused.com’s infographic presented below.
The main negative effect of the Games comes from the expenditures on facilities, transport infrastructure, safety measures, housing and maintenance that Olympic hosts need to make in order to meet the requirements of the International Olympic Committee and to impress the public. In London’s case, the total budget comes up to £9.325 billion. Estimating the Olympics costs seems to have been a hard task. The final budget exceeded by £5.906 billion the projected budget from the bid made in November 2004. The security expenditures had to double, at the same time there was a twelve-fold rise in the management costs (UK Parliament).
It is claimed that the higher than anticipated spending is outweighed by the positive effects on the British economy.
The immediate economic benefits during the Games period refer to increases in consumer spending (estimated at £750 million), economic output (£1.14 billion), as well as UK residents’ incomes due to increased wages, profits from home rentals, and increased demand for output and services (£229 million). The figures stem from a report by Visa prepared shortly prior the Olympics and are yet to be confirmed.
There are already some contradictions regarding the immediate effect on the Olympics on London’s Hospitality sector. The large pub and restaurant chains from Coffer Peach Business Tracker’s sample have recorded 3.6% increase in sales already in July (Nicholls, 2012). On the other hand many others seem to have struggled during the Olympics, mainly because they lost their regular clientele during the games (Rosen, 2012). The argument is supported by a survey of 100 London restaurants, conducted by the British Hospitality Association, which indicated a 40% average decline in year-on-year revenue. Many are blaming the government which has warned the public to avoid travelling around London and advised office workers to work from home or take a holiday, one restaurant owner even claiming the revenue loss from the local authority (NBC News).
However, the long-term positive effects of the Games seem less disputable. As presented in the inforgrafic, the expectations for the period 2012-2015 are for £5.1 billion stimulus to the overall economy, £1.37 billion increase in economic output per year, £296 million additional annual income for UK residents and 17,900 new jobs per year.
Naturally, of greatest benefit is the Tourism industry. London attracted around 300,000 foreigners and 5.5 million day-trippers for the games (Guardian). UK Culture Secretary Jeremy Hunt expects extra 4.5 million visitors to the UK in the next years, resulting in £2 billion in extra spending and 60,000 additional jobs which, which in his words will “turbocharge” the industry (BBC).
Sources:
Confused.com (2012). The Economic Impact of the 2012 London Olympics. Available at: http://www.visualinformation.info/the-economic-impact-of-the-2012-london-olympics-infographic/
UK Parliament Website (2012). Committee comments on preparations for the London 2012 Olympic and Paralympic games. Published on 20th July 2012. Available at: http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/news/olympics-report1/
Visa Europe (2012). A Golden Opportunity: London 2012 Olympic and Paralympic Games Expenditure and Economic Impact. Available at: http://www.visaeurope.com/en/newsroom/olympics_impact_report.aspx
Nicholls, Luke (2012). Damp July and Olympics Opening Ceremony Hit Restaurant and Pub Sales. Published on 15th August 2012. Available at: http://www.bighospitality.co.uk/In-the-Spotlight/Olympics/Damp-July-and-Olympics-Opening-Ceremony-hit-restaurant-and-pub-sales
Rosen, Maggie (2012). London Olympics ‘Absolutely Disastrous’ for Restaurants. Published on 16th August 2012. Available at: http://www.decanter.com/news/wine-news/530362/london-olympics-absolutely-disastrous-for-restaurants
Seida, Jim (2012). Restaurateur Claims London Games Cost Her Business, Seeks $140,000 from Mayor. Published on 14th August 2012. Available at: http://worldnews.nbcnews.com/_news/2012/08/14/13277647-restaurateur-claims-london-games-cost-her-business-seeks-140000-from-mayor
BBC (2012): Olympics will turbocharge UK tourism says Hunt. Published on 14th August 2012. Available at: http://www.bbc.co.uk/news/uk-politics-19253975
Dodds, Paisley (2012). Doom and Gloom: Olympic Wins Trump Critics. Published on 13th August 2012. Available at: http://www.guardian.co.uk/world/feedarticle/10390341
Top image courtesy: Stibou5, 2012, Flickr CC.
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