Britain hopes for Games gold rush
THE London Olympics – which opens a week today – will rank alongside Beijing 2008 as the most expensive in history, having cost an eye-watering £8.5bn to stage.
The home crowd will be hoping that it is Britain’s most successful Games with Team GB able to add to its medal haul of 47 four years ago, including 19 gold.
All eyes will be on Jessica Ennis, Ben Ainslie, Chris Hoy and co as the country hosts ‘the greatest show on earth’ for the first time since 1948.
But with the economy trapped in a punishing double-dip recession, youth unemployment worryingly high, and the eurozone in crisis, families and businesses will also be hoping it will help jump-start the recovery.
Only yesterday David Cameron warned that Britain faces years more austerity and admitted there was no end in sight to the Government’s spending cuts. And the International Monetary Fund warned that George Osborne’s plans to cut the deficit may need rewriting.
It is against this backdrop that Olympic sceptics will view this multi- billion pound sporting extravaganza.
Throw in the security scandal at G4S, the threat of strikes by border staff, and potential travel chaos across the capital, and there is plenty for the doomsters to moan about.
But there is also plenty of enthusiasm for the Games, and there are signs that it is already helping the economy.
Official figures this week showed the Olympics helped drive the biggest jobs boost for two years in the three months to May.
Employment rose by 181,000 and unemployment fell by 65,000 with three quarters of the declines in London as local businesses took on staff before the Games.
Analysts reckon ticket sales alone could add 0.1pc to GDP in the third quarter while spending on merchandise and souvenirs could also see a spike in demand, adding another point or two to growth.
Businesses that benefit from tourism in London will also be hoping for a fillip, such as brewers, pubs, restaurants and hotels.
Mark Martin, fund manager of the Neptune UK Mid Cap Fund, said companies such as Fuller, Smith & Turner and Greene King should do well.
Much of the infrastructure spending has already been completed, such as on Olympic venues and improved transport links. However, housebuilders could still benefit with as many as 5,000 homes expected to be built in the area after the Games have finished.
But the flip side includes a hit to productivity, transport chaos at Heathrow, on the roads and the Tube, and Londoners leaving the country to avoid the disruption.
Some tourists may avoid London because of the Games, offsetting some of the gain the event brings, while cinema and theatre bookings look set to take a hit.
A report by IHS Global Insight forecast the Olympics to lift overall GDP by around 0.3 percentage points in the third quarter of the year. As a result, it predicts growth of 0.6pc between July and September – but warned the improvement will be temporary.
‘This will be much needed growth for the UK economy as it is highly likely it contracted for a third successive quarter in the second quarter of 2012,’ said Howard Archer, chief European economist at IHS. ‘And it is also highly probable that the rate of growth will fall back appreciably in the fourth quarter with the result that GDP is likely to be only flat at best overall in 2012. Once the Games are over, the problems facing the UK economy will still be there.’ Goldman Sachs expects an Olympics boost of up to 0.4pc in the third quarter but added that the long-term benefits, such as the promotion of the UK as a tourist venue and location for investment, are ‘less tangible’. Downing Street has drawn up plans to use the Olympics to boost the economy in the long-term – through trade and investment opportunities.
The Prime Minister has enlisted the heads of Britain’s biggest companies and exporters as it rolls out the red carpet for business delegations from around the world.
The heads of Marks & Spencer, Jaguar Land Rover, JCB, McLaren Racing, Unilever and Diageo and executives from a host of FTSE 100 companies will be on hand to exploit commercial opportunities.
It is hoped it will help Britain create thousands of jobs and forge new trade links to all corners of the world. But Goldman suggested there was another important factor to consider: medals.
‘Sporting enthusiasts will fairly argue that a narrow focus on the economic costs and benefits of hosting an Olympics misses the point,’ said Goldman economist Kevin Daly.
‘For competitive sporting enthusiasts, perhaps the most important bottom line of hosting the Games is this: over the past 10 Olympics, the host nation has won 54pc more medals on average than it has won in Games it did not host. If medals are your preferred currency, this represents a high return on investment.’
If the Goldman analysis is right – which is a big if – Team GB would scoop 65 medals including 30 golds. Now that would be something to celebrate.