Olympics won’t come to rescue of UK economy
THE OLYMPIC Games will provide only a “temporary fillip” to corporate earnings and fail to lift the UK from its economic stagnation, according to a study released yesterday by Moody’s.
The impact of Olympics-related infrastructure developments has “probably already been felt”, Moody’s said.
In 2005 the government calculated the economic net benefit of the event to be around £1.9bn – yet the budget has spiralled well above the original estimate of £2.4bn in costs. A Westminster committee said last month that the bill could hit £11bn.
Ministers continue to insist that the Olympics will provide a lasting legacy for east London, claiming that three quarters of the spending is “long term investment”.
Economists remain sceptical, although Moody’s has identified some financial beneficiaries from the project. “The 2012 Olympics are expected to provide a huge marketing opportunity for businesses, particularly the sponsors,” the report said.
“The hotel sector will be a clear beneficiary,” Moody’s added, explaining that benefits in the retail and consumer products sectors will be more from brand promotion than actual sales.
The benefits to London from tourism may be overstated, the study warns. “The benefits to earnings for the transport and infrastructure sectors may not be clearcut, as lower-margin tourist travellers may displace business travellers during the Games.”
Douglas McWilliams, chief executive of the Centre for Economics and Business Research (CEBR), has previously said that the Games “will almost certainly reduce London’s GDP since the Olympic tourists will largely crowd out those who would have come otherwise”.
Moody’s, however, identifies several companies expected to report a boost from the Olympics, yet these one off peaks “will then become a tough comparable and used to potentially explain weaker growth data the following year,” it says.