As a keen cyclist, I went down to London last weekend to watch the Olympic road race. It was pretty exciting standing on the Fulham road watching the peleton go past. That part of London seemed pretty busy and nearby cafes were doing very well. However, in the centre of London, many shops and hotels have complained of lower than expected business – with many tourists and shoppers being put off by threats of traffic chaos.
Given forecasts of four hour traffic jams, it is unsurprising that so many stayed away. However, whilst some have sought to avoid London during the Olympics, there have also been a new wave of visitors, who will hopefully want to revisit a revitalised London in the future.
The economic legacy of London 2012 is going to be much more than the three week duration of the Olympics. However, given the last GDP statistics showing a shock 0.7% fall (partly blamed on Jubilee holiday) The government will be hoping that the Olympics gives the economy a boost – there are only so many times you can blame falling GDP statistics on bad weather and public holidays.
Feel Good Factor?
UK consumer confidence is near record low levels. After four years of recession, creating positive economic news has been difficult. It is possible a successful Olympics will help change consumer confidence and encourage economic activity. From a macro perspective, with a double dip recession the Olympics has come at a good time. The question is whether watching sporting success actually translates into consumer spending and investment. Despite the scale of the Olympics, there are still more important factors affecting economic confidence and growth.
However, I think that overall the Olympics will have a positive effect on economic spirits.
Problems with Economic Legacy
1. Firms not able to mention the Olympics. A controversial area has been the marketing of the Olympics. Only the official sponsors are able to mention the Olympics. Other firms who helped in bringing the Olympics are not allowed to mention the Olympics because of the strict copyright laws. (Olympic legacy at Independent)
For example, firms are not allowed to issue press releases or webpages mentioning that they worked on the Olympics. In building the Olympic park, Corus had to cover up their name on the steel after a legal letter form the IOC
2. Cost. The total cost of hosting the Olympics is put at over £11bn. The % of this that will be recouped directly or indirectly is hard to calculate, though some argue with pressures on public spending, it was extravagant. Others would say it is a once in a lifetime opportunity to do something unique. ALso given state of economy, injections of spending have helped promote economic output. Fears that the Olympics will cripple London like Athens after 2004 are unlikely.
3. Are there benefits outside London? The London games did lead to orders for firms outside of London. The London Olympics generated orders worth £360 million for East Midland companies. However, after the Olympics is over, the direct benefits will be mainly appreciated by London.
Economic Legacy of London Olympics
1. New wave of tourists. Cities like Barcelona did well after the 1992 Olympics; it really helped to put them on the global map. Arguably cities like Barcelona and Beijing have benefited from improved global perception as a place to visit. London’s profile is already high before the Olympics. But, the Olympic legacy is another element which will help attract people to London in the long-term. Perhaps future tourists will visit hoping to see a crazy London mayor dangling from zip wires above the city…
Transport Infrastructure. The London Olympics was an incentive to create new transport links, especially in the East of London. For example, the East London Line (London Overground) and DLR Woolwich extension. The east end of London is now growing much faster and has better transport links than before the Olympics was awarded. (Transport infrastructure)
Olympic Village Legacy. After the Olympics is over the athlete’s village will be converted into 11,000 new homes with 12 new schools and a new community for Londoners.
The new cycling velodrome (photo: sum of Marc)
Sport. The other hope is that the Olympics will encourage greater participation and sport and help to improve the nations health. Sport England is hoping the Olympics will encourage over 110,000 to take part in regular exercise. If this occurs, the health benefits could have an economic side effect with lower health costs.