The exaggerated economic legacy of London 2012
According to politicians, the London Olympics will provide a great financial boost to the British economy. However, neither short-term nor long-term economic benefits seem evident to critics.
A boost in the number of visitors who come to London because of the Olympics was meant to give London’s hotels, shops, theatres and tourist attractions an added income, but according to the Financial Times, they instead report a decrease in earnings as the regular tourists seem to stay away.
“The Olympics is creating a “ghost town” effect in central London,” reports the Financial Times. According to the paper, the Olympics have drawn more than 100.000 foreign visitors to London, but even though that number is higher than previous Olympics, it is still nowhere near the 300.000 foreigners who usually visit London this time of year.
Other than the effect of the ticket sales, the Office for Budget Responsibility, the UK’s official fiscal watchdog, does not expect that the Olympics will provide any added boost to the economy in the third quarter of 2012. Many economists even believe that other short-term economic impacts might be negative, writes the Financial Times.
UK politicians are therefore playing down the short-term gains and focus on the prediction that London 2012 will contribute £13 billion over four years.
The British economist Stefan Szymanski calls the political promises of great financial gains and a long-lasting legacy from the Olympics “deceitful propaganda”.
One of the untruths told by officials is that the Games will add considerably to the British BNP, argues Szymanski. The London Olympics involves spending around $20 billion over 7-8 years, which is very little compared to the British BNP of $2.5 trillion a year. ”This amounts to about one tenth of 1% of GDP- essentially a rounding error in terms of the national accounts. And this takes no account of the alternatives- there are many infrastructure projects in the UK that would have generated a bigger return than building the Olympic Park,” writes Szymanski in his sports economy blog.
The claim that the Olympics will transform East London is also refuted by Szymanski, who argue that this would require investments on a much larger scale. “East London is a vast area of urban blight requiring redevelopment – maybe 100 square miles. The Olympic Park is only one square mile in area, and is not even especially well connected to the rest of East London.”
The promised boost to sports participation in Britain because of the Olympics also seems to have failed. Numbers from Sport England show that participation rates are flat and even declining in some sports, and a recent report from the Sports Think Tank showed that 80 % disagreed that the Olympics was inspiring them to be more active.
“The point is that the government is driven to make these extravagant economic claims because of the huge public subsidy”, concludes Szymanski.
“Politicians do it for the prestige, and the public enjoys the spectacle. But economic benefits? Put a sock in it”.
Read Stefan Szymanski's article "The costs and benefits of the London Olympics"
Sources: Financial Times, Stefan Szymanski, The Sports Think Tank