Olympics give Britain's economy a boost
Fin24 - Apr 16th 2012, 09:29
London - The London Olympics will give a short-term boost to Britain's weak economy but economists predict the greatest sporting spectacle on Earth will fail to prevent a sharp slowdown this year.
The government has invested a total of £9.3bn to stage the Games, more than four times the original estimate when London was named host city in 2005.
"The Olympics is unlikely to prevent the UK's economic recovery from slowing again later this year as a result of further fiscal austerity, a weakening labour market and renewed recession in the eurozone," said Samuel Tombs, an analyst at Capital Economics research group.
"Most of the Olympics' boost to the economy has already been felt in the form of higher investment over the last five years," he told AFP.
"Meanwhile, spending on tickets, travel and merchandise is likely to be offset by consumers cutting back on spending on other goods and services."
Britain has spent billions of pounds of taxpayers' money on building facilities such as the Olympic Stadium, an aquatics centre, velodrome and athletes' village in east London.
The vast outlay comes as the country stands on the verge of recession as a result of ongoing state austerity measures and fallout from the stubborn sovereign debt crisis in the eurozone.
British gross domestic product shrank 0.3% in the final three months of 2011 and another contraction in the first quarter of 2012 would place Britain back in recession, defined as two successive negative quarters.
Hilary Walsh, an analyst at the Euromonitor International consultancy in London said the Games would have "a stimulating effect on London and the UK economy".
"However, while the boost in tourism and consumer spending will be noticeable, it won't be sufficient to lift us out of the current economic slowdown," she said, warning: "It's important to keep the Games in perspective."
While she forecast output would increase by 0.6% quarter-on-quarter between July and September 2012, the economic impact of playing host to one million visitors during the Games would not be sustained.
"The tourists will leave once the Games end and so too will the profits. The shot in the arm to infrastructure will be the main legacy of the Olympics and it will provide lasting returns for years to come for London, in particular the east of the capital," she explained.
Around one million tickets for the July 27-August 12 Olympics were made available for overseas applicants, from a total of nine million.
Britain's Office for National Statistics has indicated that Olympic tickets sold last year would be incorporated into figures for the third quarter of 2012, or three months to September.
IHS Global Insight economist Howard Archer agreed that the Games "will provide a limited overall boost to growth in the third quarter".
He added: "Sales of the tickets for the events are likely to add around 0.1 percentage point to growth.
"Secondly, there will be a boost to retail sales through sales of souvenirs, flat screen TVs, etc. Thirdly, there will be tourists coming in, although people will also be going away to avoid it."
Archer also said there would "likely be a limited temporary small boost to consumer confidence from the feel-good factor if Great Britain does reasonably well". National tourism agency VisitBritain forecasts that 30.7 million overseas tourists will flock to Britain this year, spending an estimated £17.6bn as the country's image is boosted by the Olympics.
The numbers would be similar to 2011, when Britain hosted the wedding of Prince William and Kate Middleton.
"We hope the Olympics will inspire people to visit the UK for many years to come," VisitBritain spokesman Mark Di Toro told AFP.
"We are looking at more of a long-term benefit from the Games. London won't have the Games again in our lifetime, that's for sure."
But Capital Economics analyst Tombs expressed caution regarding the economic legacy as he cited the experience of Beijing following its hosting of the 2008 Summer Olympics.
"The evidence that the Olympics will (lift) tourist numbers from overseas this year is mixed - while foreign arrivals to Beijing rose during the 2008 Olympics, for the country as a whole they fell," Tombs added.
"Meanwhile, the example of past Olympics suggests that the legacy benefits of the Games are usually smaller than expected.
"All in all then, while the Games will undoubtedly be a great sporting event, we doubt that they will win any gold medals for the economy."
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