Almost half expect Olympics to harm UK economy
Many believe the Games will be a much needed shot in the arm for the economy, but a high proportion thinks they will be left disappointed.
By Mark Smith, Senior Reporter
Tuesday July 31, 2012
Almost half of FE Trustnet users believe that the London Olympics will be more of a hindrance than a help to the UK economy, our latest poll shows.
With economists now talking of a triple-dip recession, the UK economy is in desperate need of a boost.
The Games were sold to the public – albeit against a much rosier economic backdrop – as a means by which the UK could show-off everything that was good about London and cement its position as the world’s greatest capital city.
Five years of economic crisis and the deepest recession for 100 years have turned much of that optimism into cynicism.
Our latest poll shows that 45 per cent of investors believe that the Olympics are likely to be a hindrance, rather than a help to the economy.
Despite the pessimism, Goldman Sachs economist Kevin Daly estimates that the games will add an extra 0.3-0.4 per cent to UK GDP in the third quarter and will also help the economy in more permanent ways.
“The long-term benefits of hosting the Olympics include the promotion of London and the UK as tourist venues and as a potential location for foreign investment, as well as the lasting impact on the local community from regenerating a previously run-down part of London,” he said.
Goldman Sachs’ Francesco Garzarelli and George Cole point to other Games in recent years as a blueprint for the economic windfalls that the UK can expect.
“Interestingly, all recent Olympic hosts have outperformed the MSCI World index in the 12 months following the Olympics,” they said in the investment bank’s Olympics and Economics 2012 report.
“This is true of recent hosts regardless of the size of the economy or state of development, suggesting either the local market is boosted by the international profile of the Games, or is perhaps relieved to have the Games behind them.”
They added: “Given the below-average performance in the UK since the Olympic announcement, UK investors may hope for a continuation of this trend, looking forward to a positive year in equities following the London 2012 Games.”
The Coalition passed legislation to allow businesses to open outside of normal Sunday trading hours to help them profit from the thousands of extra visitors to the capital.
However, Londoners are reporting quieter streets than usual for this time of year, raising concerns that TfL’s Get Ahead of the Games campaign has put people off coming to the city.
The European Tour Operators Association says that while there are an extra 100,000 visitors – more than any other Games has attracted – this is still some way behind the normal summer peak of 300,000.
However, Julian Chillingworth, chief investment officer at Rathbones, says that the feel-good factor of the Games should not be under-estimated.
"The Olympics will act a stimulus in terms of buoying consumer confidence," he said. "Overseas visitors will be spending money. I expect to see a small positive number for third quarter GDP."