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How the Games will boost the UK economy by £16.5bn
|Posted: Mon Jul 09, 2012 7:26 am
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Imagine a new development in one of the world's largest global cities, minutes from its major business districts. It is complete with acres of open space, state-of-the-art sustainability credentials, a huge shopping centre on its doorstep, a dozen separate rail links and world-class amenities.
That in a nutshell, is the Queen Elizabeth Olympic Park.
It is one of the largest regeneration projects ever seen in the UK, for one of the largest sporting events ever staged. But there are few issues in recent memory that have divided opinion in quite the same way as London 2012 and its likely impacts.
There have been a catalogue of economic reports on the Games so far, some of which proclaim fantastical benefits; others which have condemned the whole affair as a waste of taxpayer money. But many have been politically-charged, or have told only one part of the story.
What's been missing so far is any attempt to take a broad look at the likely impact of the Games, and to examine not only what the Olympic Park development might do for London, but also how the staging of the Games might deliver benefits
across the UK and, critically, to small and medium-sized businesses.
The Olympics of today are far-removed from the state-sponsored vanity projects of the 1970s and 1980s. They are now as much about redefining their host cities and providing a catalyst for regeneration.
The Games will doubtless help build London's image as a truly modern city. But the bigger impact will be the regeneration of a neglected area of East London, with ripple effects that will benefit everything from living standards in the local area, to the prospects of businesses across the country. That's not to say we would not have achieved such redevelopment without London 2012, but it would have taken 20 years at least.
So, to the numbers. Our new study shows that the GDP impact of London 2012 could reach £16.5bn. That's an impact driven largely by construction, as contracts for the building of the Olympic venues have filtered through to businesses across the UK.
Scotland is a case in point. Companies such as Glasgow's Barr, which built the basketball arena, are contributing to a likely £1bn GDP impact for the country as a whole. We have seen first-hand many of our customers benefiting from contracts and sub-contracts in a difficult economic period.
But there are also huge benefits from tourism as London's new-found status as an Olympic city draws in new visitors from overseas who then go on to visit other parts of the UK.
Although most Olympic host cities see a dip in tourism in the immediate run-up to opening, there tends to be a major boost during the actual event. And London will be no exception. But the real impact from tourism is in the years after the Games. Not just from curious visitors, but from business conferences and sporting events keen to see a city and country at its best.
Jobs and training have also contributed to this GDP growth. Our estimate is that the Games could create and support a total of 354,000 years of employment across the UK both through direct employment for the Games, and though developing skills of the working population that help raise their prospects of jobs in the future.
With more than 8,000 NVQ awards and apprenticeships on the Olympic Park, our estimate is that this will lead to a £500m benefit over the life of this study.
And what about the impact on businesses? Our study shows that small and medium-sized firms could be helping to deliver more than half of the total GDP contribution of the Games and there are countless examples of businesses that have gained from London 2012, either directly or through the supply chain. One such firm, Golden Bear, a Shropshire-based company supplying the official mascots, has gone on to win a world-wide contract to produce toy Minis for BMW. And another small business that won a licensing contract for the Games has since doubled turnover and broken into export markets.
The experience of other big sporting events also leads us to believe that the Games will have a "happiness effect" which, in turn, is likely to encourage consumer spending.
A number of economists have tried to answer the question of whether consumer confidence is affected by major sporting spectacles and the broad view is that it improves when a nation hosts a championships. In the case of the Euro 96 football tournament, the feel-good factor was equivalent to a £165 gift for each of the UK population, so we can expect at least that for London 2012.
A question on many people's minds is whether the London 2012 budget could have been spent on something else, perhaps with bigger benefits?
There are some who might argue events such as the Olympics simply divert resources away from other projects displacing, rather than creating GDP.
The economics are complex, but the bottom line is that in today's economic climate this is unlikely to be an issue. What we are about to witness is an event that will change the face of London, and deliver benefits to the wider UK and thousands of businesses and our economy for many years to come.
Scuba Divers support the Games in 2012, do you? Anonymous