Economic Impact Of The London 2012 Olympics On The UK Economy Professional Essay Help

Table of Contents
Introduction Impact on the infrastructure Increase in foreign direct investment Increase the number of tourists Impact on commerce Enhanced business assistance, diversity, and innovation Conclusion Bibliography


After a lengthy bidding procedure, the International Olympic Committee granted London the right to host the 2012 Olympic and Paralympic Games on July 6, 2005. Multiple parties participated in the competitive bidding for London to host the games, including the British Olympic Association (BOA), the government through the Department of Culture, Media, and Sport (DCMS), and the Government office for London (GOL) (Olympic games impact analysis', 2005, p. In recent years, the host city has placed a greater emphasis on analyzing the economic impact of hosting the Olympic Games. This is because of the economic value or worth that the games will bring to the region or nation. The study permits successful promotion of the Games within the local context of the country. The analysis also offers the organizing committee with thorough information on the extent of benefits, which is used to determine the cost of bidding and hosting the games. In addition to financial benefits, hosting the Olympic Games has many other advantages. In considering the bid to host the games, the organizing committee must take into account the broader economic benefits, such as the tourists' spending influence on the local economy. According to Massey and Brown, the 1972 Olympic Games in Munich and 1976 Olympic Games in Montreal caused a loss of 178 million pounds and 692 million pounds, respectively (2001, P.26). In contrast, the 1992 Barcelona Olympics and 1984 Los Angeles Olympics produced surpluses of 215 million and 2 million pounds, respectively (Massey & Brown, 2001, p. 26). Examining and analyzing the economic effects of the London 2012 Olympics on the UK economy is the focus of this article. It also examines the steps that must be taken to ensure that economic benefits are sustained throughout time.

Macroeconomic impact

The 2012 Olympic Games will significantly enhance economic activity in the United Kingdom, leading to an increase in Gross Domestic Product (GDP). According to a study undertaken by Dr. Adam Blake of Nottingham University on the influence of the Olympic Games on the British economy, it is projected that the games would result in a £ 1.9 billion increase in the nation's GDP. 2005 to 2016 is anticipated to be the timeframe during which the effect will be felt. In addition, it is anticipated that London's GDP will rise to $5.9 billion. Nonetheless, a part of these advantages will trickle down to non-residents.

The rise in GDP will occur over the course of three periods. This includes the pre-event period (2005-2011), the event year (2012), and the post-event or legacy period (2013-present) (2013-2016). The following table illustrates the change in GDP.

Spatial level Pre-event


Amount in millions of pounds during the Olympics.

2012. Amount in millions of pounds (Post event).

2013-2016. Amount in millions of pounds Overall impact

2005-2016 Sum in millions of pounds.

London 3,362 925 1,613 5,900

UK 248 1,067 622 1,936

464 331 425

According to the data, London will see the largest economic impact on the GDP, amounting to £3,362 million. This is anticipated to occur during the pre-event phase, which includes the construction of Olympic stadiums and other preparations. During the Olympic Games, the UK's gross domestic product will increase by a magnitude of £1.067 billion. It is assumed that the difference in the change in GDP between regions is due to the fact that there would be resource displacement. According to the Olympic Games impact assessment (Anon., 2005), during the Olympics there will be a greater transfer of resources from the United Kingdom to London than during the pre-event and post-event periods. London will see the highest economic impact on GDP, with an average change of £5,900 million.

When assessing the economic effects of the London 2012 Olympic Games on GDP, a sensitivity analysis was undertaken by considering the impact on the United Kingdom and the city of London separately. The following table illustrates the study's findings.

UK London

£ Million 10% probability (Less than) £ million Probability (Positive) 10% chance (Less than) £1,000,000 Probability (Positive)

2005-2011 248 -204 75.9 3,362 -2,377 77.3

2012 1,067 513 99.3 925 665 100

2013-2016 622 -875 70.3 1,613 -1,169 77.1

Overall 2005-2016 1,936 -517 84.4 5,900 1,386 95.3

According to the data presented in the table above, there is an 84.4% chance that the Olympic Games will result in an increase in the UK's GDP between 2005 and 2016. Overall, there is a 10% chance that the UK's GDP will decline by an average of £517 million.

Impact on infrastructure

According to economic consequences of the Olympic Games (Anon., 2009), infrastructure development is largely responsible for the 11% and 12% changes in the GDP of the United Kingdom and London. Primarily, this will be experienced prior to the event. Olympic Parks, Venues, and Transport Infrastructure are among the infrastructural upgrades that will contribute to a rise in the UK's GDP. The preparations for the Olympic Games will result in infrastructural improvements in London. This has been observed in other nations that have hosted the Olympic Games in the past. By hosting the 2004 Olympic Games, Athens city infrastructure including as the airports, railway, metropolitan tram system, and metro system saw enhanced development ('Economic benefits of Olympic Games,' 2009, p.4). According to a study by Adams, the construction industry will be the largest contributor to the nation's gross domestic product. It is anticipated that the construction industry will contribute £ 506 million to the gross domestic product. The change in GDP resulting from infrastructure development will be caused by an increase in the real wage. This implies that the purchasing power of consumers will improve, leading to an increase in individual consumption. Personal consumption contributes significantly to the UK's GDP. In addition to the contribution of stadium infrastructure to the nation's gross domestic product, the venues developed in various regions will result in an enhancement of the legacy of those places.

augmentation of inward investment

Previous research on the influence of the Olympic Games on investment revealed that there has been an increase in foreign investment. Inward investment refers to the injection of foreign funds into a certain region. The investment appeal of a particular location to foreign investors is contingent on a variety of factors. Among these characteristics is the degree of infrastructure development. Increasing foreign direct investment creates employment prospects within a region. This results in an increase in the country's employment rate and, consequently, its economic growth (Olympic Games impact study, 2005, p6). For example, the increase in building investment will result in the employment of 3,000 individuals between 2006 and 2011. Additionally, investments will be made in industries such as restaurants, pubs, hotels, and air travel. This will subsequently result in an increase in the country's employment rate. According to Adams (p.44), it is predicted that 2,554 new hotel employment, 1,811 new restaurant jobs, and 2,094 new bar jobs will be produced. In addition, these studies have demonstrated that planning and hosting of the Olympic Games has contributed to a rise in the profile of the host city.

Currently, London is an established city, which makes it a prominent destination for foreign direct investment in the United Kingdom and Europe in general. Nonetheless, the metropolis confronts severe competition from other developing cities worldwide. London will be pushed internationally as an investment and business destination through the 2012 Olympic Games. This will result in an increase in the country's Foreign Direct Investment (FDI) as a result of additional infrastructure construction-related investments. According to the Olympic Games impact analysis (Anon., 2005), it is projected that East London will gain considerably from increased foreign direct investment.

Increase the number of tourists

There is a great likelihood that the 2012 Olympic Games will increase the number of tourists exploring London and the rest of the United Kingdom. Furthermore, London will be heavily pushed as a tourist destination. London will experience a rise in both foreign and domestic tourism as a result. This will significantly stimulate the country's gross domestic product due to a continuous increase in the number of tourists and an increase in their expenditure. According to London 2012 Olympic Games and Paralympics games; funding and legacy (Anon., 2007), international tourism during the 2012 Olympic Games will contribute around £ 2 billion to the country's gross domestic product. The table below depicts the anticipated impact of the Olympic Games on the nation's tourism industry.

Spatial Height

2005-2011 (Pre-event) (Pre-event) 2012 (During event) Amount in millions of pounds Post-event sum in millions of pounds Overall impact (2005-2011). sum in millions of pounds

London Domestic: 1,162,448

Foreign – 81

UK Domestic Market – -2 454 518

Foreign – 66

During the 2012 Olympic Games, domestic tourism in the United Kingdom will decrease by a margin of £ 2 million, while international tourism will increase by £ 66 million. However, both domestic and international tourists will expand their visits to London. According to London 2012 Olympic Games and Paralympics games; funding and legacy (Anon., 2007), this is mostly due to the fact that a significant portion of tourism will be involved with the Olympic Games. This indicates that commercial and leisure tourism will diminish in the country. To combat the downturn in tourism relative to other sectors, the UK government should reassure tourists that the country would continue to provide value for their money during this period. For instance, the reduction in tourism to other sectors will result from the perception that tourism package prices will increase and that there will be a shortage of available accommodations during this time. To market London as a tourist destination, the British government must ensure that the city has sufficient capacity, reasonable pricing, and high-quality lodging. This will result in more tourists visiting London during the Games (London 2012 Olympic Games and Paralympic Games; funding and legacy, 2007, p.41).

After the games, it is anticipated that the number of tourists visiting the United Kingdom will increase. This is because the Olympic Games will serve as a "shop window" for the United Kingdom. After the Olympic Games, the British Department for Culture, Media, and Sport (DCMS) anticipates a significant rise in the country's tourism. This is because the Olympic Games give a classic opportunity for marketing the United Kingdom as a tourism investment destination and boosting its profile. This means that, according to London 2012 Olympic Games and Paralympics games; funding and legacy (Anon., 2007), the Olympic Games will result in long-term rather than short-term economic gains ( In addition, the Tourism Alliance claims that increasing media exposure of the United Kingdom as a tourist destination will contribute to the country's tourism boom. To continue tourism growth, the government of the United Kingdom must develop a comprehensive investment strategy focused at increasing exposure.

influence on trade

According to economic benefits on Olympic Games (2009, p.11), big events such as the World Cup or the Olympic Games have a beneficial effect on a country's trade volume. For instance, such occurrences result in a rise in the nation's export volume. The growth in trade volume for the country hosting the Olympic Games is not only related to the construction of infrastructure, but also to the liberalization of trade in the country seeking to host such mega-events (Rose & Spiegel, 2009, p. 5). The effect of liberalization is the opening of a country to commerce with other nations, such as the development of trading blocs. By bidding to host mega-events such as the World Cup and the Olympics, a country is able to attract additional investments that improve its trade. According to Rose and Spiegel (2009, p. 6), this is because the offer sends indications of the country's commitment to liberalize its commerce. This is evident in countries that have hosted such mega-events in the past. For example, in 2001 Beijing was won the right to host the Olympic Games, and within a few months China joined the World Trade Organization (WTO). According to a study conducted by Rose and Spiegel, countries that have previously hosted the Olympic Games had a 30% boost in export trade. This is because liberalization leads to a rise in a country's degree of openness, which boosts its pace of macroeconomic growth.

augmentation of business assistance, diversification, and innovation

The Olympic Games will also enhance corporate activity in London and the United Kingdom. According to the Olympic Games impact assessment (Anon., 2005), about 119 additional enterprises will be developed throughout the United Kingdom and 439 new firms will be established in and around London between 2005 and 2016. During the event, there will be the greatest increase in the number of businesses founded. This is represented in the following table.

Spatial level Pre-event Before the event After the event Overall

UK 56 526 127 119

London 317 902 535 439

Land passenger transport and construction are anticipated to enjoy the greatest increase in business ('Olympic Games impact report', 2005, p.7). In contrast, London will witness increasing growth in three major industries. According to the Olympic Games impact analysis (Anonymous, 2005), these include enterprises associated with athletic facilities, commercial services, and passenger land transportation. The expansion of these industries will bolster the formation of new businesses and strengthen the supply chain. The Olympic Games will considerably benefit Small and Medium Enterprises (SME) in the United Kingdom. This is because Olympic Delivery Authority (ODA) has engaged a variety of companies to provide Olympic Games facilities.

According to UK firms earning economic gold at London 2012 (Anon., 2009), 801 companies have been contracted successfully. Sixty-eight percent of these businesses are small and medium-sized enterprises (SMEs), and ninety-eight percent of these businesses are UK-based. This implies that the effects of the current economic recession will stimulate the nation's economic activity. In addition, the Olympic Games will tremendously assist British businesses because they will gain expertise in product and service distribution. This indicates that the company will innovate its supply chain procedures in order to achieve a competitive advantage.

In light of the fact