Impact of 2012 Olympics on the UK Economy
Until 16th July 2012, there are only 11 days left for the Olympics games held in London, on 27th July 2012. Beside the games, people also focus on how this momentous event will affect the UK’s economy as UK’s economy is currently suffering from the recession. Will the games attract world attention as well as huge economical benefits to UK? The objective of this essay is to investigate the economic impact of the London 2012 Olympics on the UK economy in short-term and long-term. Due to the limitation of information, the essay will concentrate on aspects of the economic impact where most data are available such as the GDP growth and consumer spending. The impact across some key sectors such as construction, labour market and tourism will also be analysed. To be evaluated in detail, the impacts on companies in different sectors will be addressed through an analysis of stock market announcements in 2012.
The budget for the London 2012 Olympics is continuously increasing since Britain won the bid in July 2005. The original predicted cost was £2.37 billion; by the time in 2008 it was raised to £9.35 billion, and with £6 billion is coming directly from the government. As UK is under an increasing pressure of the downturn in the economy, this level of public funding has been criticised by the press. However on the other side, as Ms Jowell, the minister for the Olympics and Paymaster General claimed, the Government's spending could be seen to stimulate the economy and generate jobs for local people. (The telegraph, 12 November 2008)
The total economic impact of the Games on the UK
The Gross Domestic Product (GDP) is the most important measure of economic activity in a country. Several forecasts on the UK GDP growth due to the 2012 Olympic Games have been made by various organisations. The official forecast from the Office of Budget Responsibility is that the UK economy will grow by 0.7% in 2012.Within that, the economy is guaranteed to grow by 0.1% through the £300 million tickets sales. (The telegraph, 05 Jan 2012) Although for the first two quarters’ GDP of 2012 which have already published, showed the growth remains negative. Many economists such as Shona Dobbie, head of the economic research centre at Alliance Trust, still hold a positive attitude to the impact. She believes that there should be a big increase in GDP in the third quarter which will decisively pull the UK out of recession. This prediction is also agreed by James Carrick, economist at Legal & General Investment Management. (Moneywise, 03 May 2012) More specifically, The Wall Street bank forecasts that GDP in the third quarter of 2012 will be boosted by between 0.3% and 0.4% by Olympic spending which will potentially help Britain to emerge from the recession. (The telegraph, 12 Jul 2012) In long-term, the UK GDP will be contributed directly from the 2012 Games by £16.5 billion (2012 prices) spread over 12 years according to the study from the Lloyds Banking Group, taking in the period from London’s successful bid in 2005, through until 2017 – a five year legacy period. Of this, 70% of the contribution is estimated to be generated prior to and during the Games and the remaining 30% is expected to occur as its legacy. London as the host city of the Games will be contributed most above all other areas in UK, with a 41% share of the total GDP supported. For other areas such as South East, North West and East Midlands, each will only has a share of no more than 10%. Over all, the total economic impact of the Games on UK is significant and there is likely to have a short-term boost in economy during the games are taking place. The impact will also last for many years as legacy effect.
Construction is a key sector that is expected to contribute largely to the GDP growth as a result of the 2012 Olympic Games. With all the GDP that the Games contributed to, 82% is...
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