As UK politicians wine and dine a gold-plated guest list from the world of business at a pre-Olympic trade summit, Channel 4 News asks how likely it is to boost the British economy by £1bn.
The final bill for staging international sport’s most prestigious event is already set to hit £11bn, and following recent news of the worse than expected GDP figures there there is no doubt that the UK economy would benefit from an increase in inward investment.
The government is promoting a pre-Olympic trade summit as the springboard to £1bn of investment. It says: “We expect the direct financial outcome to be derived for the UK economy as a result of these Games time activities is at least £1bn.”
Launching the British Business Embassy event at Lancaster House in London, the trade minister and former HSBC chief executive Lord Green promised: “Lancaster House is a unique venue that will showcase the very best of British capability to international companies – and demonstrate that the UK should be their first stop when looking to boost business.
“We will champion key sectors where British companies shine. These will include energy, the creative industries, technology, life sciences, infrastructure, global sports and advanced engineering.”
But Geoff Walters, director of Birkbeck’s Sports Business Centre, told Channel 4 News he is sceptical whether it can: “Not to be too cynical, but this £1bn figure has been released the day after the doom and gloom we saw over the GDP figures. I think it is a dangerous strategy to pin hopes on the Olympics delivering a kick start to the economy – at this stage I feel we have to be cautious about the economic impact of the games.
At this stage I feel we have to be cautious about the economic impact of the games Dr Geoff Walters
“It would be wonderful if the Games do deliver increased opportunities and investment into the UK and it is clear the government is doing all it can to instigate this which I support, but at this stage it is difficult to say whether it will.”
Channel 4 News asked the Department for Business Innovation and Skills (BIS) where the £1bn figure came from and they sent us this lengthy response: “The financial benefits of ‘service deliveries’ UKTI provides to UK businesses are calculated using the PIMS (Performance Impact Monitoring System) methodology.
“On the basis of past average estimated benefit delivered to UK companies engaged through UKTI [UK trade and industry] events…the latest PIMS report estimates show average additional sales per company attending are around £500k over 18 months.
“It is expected that at least 2,000 UK companies attending either London, regional or international UKTI events during the Games (or who are exposed to the British Business Embassy programme through other channels) are expected to be helped by UKTI.
“We are therefore projecting that at least an additional £1bn of benefit to the UK economy through additional international sales is expected out of the Games time activity.
“Further investment in the UK economy is also expected to be generated from inward investment and HVO opportunities that are sparked during the programme and as a consequence of the Games time activity.”
Read more: Will the Olympics boost the UK’s damp retail sector?
More widely, Dr Walters says academic research available on the broader economic benefits from similar sports events is too varied to accurately compare, but that it broadly shows such events have only minor economic benefits: “There are so many ways to measure the economic impact and often there will be inconsistency in the approach used by different studies.
“It’s also worth considering who is funding the research, it may be someone connected with the event or who has an interest in promoting its benefits.
“On the one hand, you can see what the government is saying – the international attention and showcasing of Britain globally means the potential benefits to the UK are significant. However academic literature which has looked at economic benefits tend to suggest the impact is negligible”.
That said, there are hopes that some Olympic economic spark could ignite a flame of recovery. Financial advisers Deloitte said the Olympics and Paralympics will provide a “short-term boost to trading” for the retail industry but it is unlikely that the UK will, in David Cameron’s words, “turn the Games into gold”.
According to The Economist, since 1960 Olympic Games average an overspend of 179 per cent with 100 per cent of them running over budget. Whether or not London 2012 can buck this trend may only become clear in several years’ time.