A tangible Olympic economic boost?

Few experts or UK businesses expect one, according to the Economist Intelligence Unit

The 2012 Olympics proved a compelling spectacle and appear to have been an organisational and morale-building success for the host city, London. The organisers also hope that the games will prove to have been an economic success, providing tangible benefits in terms of additional output, new jobs, improved infrastructure and regeneration of deprived neighbourhoods. Most of their hopes are likely to be dashed, to judge by the views of experts and business executives brought together by the Economist Intelligence Unit in a new report, Legacy 2012: Understanding the impact of the Olympic games, sponsored by Cisco.

In a survey of 815 business leaders in the UK, China and Brazil undertaken for the report, less than half of UK executives expected the benefits of hosting the games to outweigh the costs. By contrast, overwhelming majorities of their peers in China (in relation to Beijing 2008 games) and Brazil (looking ahead to Rio 2016) said the opposite. No more than 19% of UK respondents believe that the Olympics generate a long-term boost to economic growth, again in stark contrast to their Chinese and Brazilian counterparts. (See chart attached)

Several of our essayists are likewise sceptical about the existence of clear economic and business benefits to Olympic host cities and countries. Max Nathan, research fellow with the Spatial Economics Research Centre, London School of Economics, writes that hoped-for impacts from job creation, transport improvement and inducements to healthier living usually turn out to be small. He also warns that it will take years for any lasting benefits to become clear.

"Assessing these impacts is tough. The effects of mega-projects are inherently hard to predict, and prone to what psychologists call ‘optimism bias’…. Worse, some games effects may show up straight away, while others take years to emerge.

Mr Nathan holds outs more hope for London's regeneration efforts, citing Barcelona's ability to use its 1992 games as a "gigantic development accelerator". Chris Gratton and Larissa Davies, with the Sport Industry Research Centre at Sheffield Hallam University, likewise believe that regeneration expectations are realistic but warn that "planners should not expect this to take place automatically":

"Evidence … suggests that the success of event-led regeneration depends on several critical factors, including the strategic master planning of interventions.... [However], even when plans are well thought-out they can be vulnerable to economic and political issues beyond the control of event and legacy organisations."

Economics isn't everything, however. Xu Guoqui, professor of history at Hong Kong University, argues persuasively that for Beijing, the most sought-after benefit of the 2008 games was the successful projection of "soft power":

"Cost was a minor concern for the authorities…. The government intended to use the games as a demonstration of soft power, a coming-out party that underlined China's growing economic strength, openness and international prestige. In this respect, the games were clearly a success…."

Other essayists agree that a boost to prestige and civic, even national, pride can prove just as valuable a benefit for an Olympic host as the more tangible ones of jobs and output. In an interview for the report with the Economist Intelligence Unit, Eduardo Paes, mayor of Rio de Janeiro, states his city's intention to generate a "prestige premium" from the 2016 games:

"Non-tangible legacy is equally as important for us. It's a big opportunity to demonstrate that we're not only a city with good samba, but that we're a good place to do business, a cultural capital, a place where you can get things done."

Other key findings from the survey conducted for the report include the following:

 

  • Only 25% of UK executives thought their own business would benefit substantially from the London games. This may explain why no more than 23% had developed strategies to take advantage, compared with 67% of China respondents who say they did in 2008, and 48% of those in Brazil who say they are planning to do so for 2016.

 

  • Fully 93% of Chinese respondents think that the authorities were effective in working with firms to maximise the gains from hosting the Olympics. Just under 70% of Brazilian respondents think this will be the case, but only 57% of UK respondents feel the same in regard to 2012

 

  • Chinese and Brazilian respondents think the main benefits for their host cities lie in transport improvements, while UK respondents look to urban regeneration as the main plus for London.


Legacy 2012: Understanding the impact of the Olympic games can be viewed free of charge at:  www.legacy2012research.com

 

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