AN ASSESSMENT OF THE ECONOMIC IMPACT OF THE 2012 OLYMPICS IN LONDON Essay - Essay Prowess

AN ASSESSMENT OF THE ECONOMIC IMPACT OF THE 2012 OLYMPICS IN LONDON Essay

AN ASSESSMENT OF THE ECONOMIC IMPACT OF THE 2012 OLYMPICS IN LONDON Essay

AN ASSESSMENT OF THE ECONOMIC IMPACT OF THE 2012 OLYMPICS IN LONDON

Introduction

A country has to overcome numerous challenges posed by the IOC or the International Olympic Committee to win the much envied right to host the world’s most lucrative sporting event, the Olympics (Kavetsos and Szymanski, 2010, p. 162). The process is in essence a critical process incorporating several rounds and stages of voting (Prayag, Hosany, Nunko. and Alders, 2013, p. 632). As such, the city of London started bidding for the opportunity to host the international event in 2003 and was granted the privilege seven years before the event actually began (Oxford Economics, 2012). The city of London had to prove over and beyond that it had the social and political goodwill to successfully host the event. Its overall infrastructure, proposed Olympic village, sporting venues, accommodation facilities, natural environment, security parameter, finances, transport system and legacy all had to appease to the IOC (Oxford Economics, 2012).  The Olympic Games is in essence a sporting event with an unrivalled magnitude and as such, presents a vastly significant economic impact not only on the host city but to the host country as well (Prayag, Hosany, Nunko. and Alders, 2013, p. 632). This paper seeks to present an assessment on the economic impact realized by the UK for successfully hosting the 2012 London Olympics.

Construction

The UK economy as well as those of its constituent nations as well as regions indeed experienced a considerable boost from successfully hosting the 2012 London Olympics as well as the Paralympics Games (Prayag, Hosany, Nunko. and Alders, 2013, p. 634). The construction activities associated with the London 2012 games not only contributed to the UK’s GDP but also increased employment considerably. An estimate of the overall building costs can serve to present the contributions this had on the overall UK economy (Kavetsos, 2012, p. 1460). Data from the Olympic Delivery Authority will be critical towards offering accurate information concerning Olympic Park construction project expenditures (Oxford Economics, 2012). These Olympic Parks include the international Broadcast Center, the Athlete’s Village as well as the different competition venues. There were also a number of different Olympic Games associated construction projects like the Arcelor Mittal Orbit observation tower and the Westfield Shopping complex (Kavetsos, 2012, p. 1460).

It is estimated that the total expenditures on the London Olympics related construction projects from 2005 to 2017 stand at about 12 billion pounds relative to 2012 price indexes (Oxford Economics, 2012). These expenditures have benefited companies from all UK nations as well as regions. It is known that the ODA went on to award more than 800 companies construction contracts such that 7 of the 12 UK nations witnessed their firms receiving about 5% and above of construction project contracts (Oxford Economics, 2012). More so, the construction projects prior to and after the games are estimated to contribute more than 4.5 billion pounds to the UK’s overall GDP. It is important to point out that 70% of this GDP contribution occurred prior to the Games while the remainder also contributed to GDP relative to legacy builds (Oxford Economics, 2012; Weed, 2014, p. 105).

It is critical to analyze the multiplier effects associated with the construction projects. It is estimated that the multiplier effects indeed added about 5.8 billion pounds to the UK’s GDP from such activities as inputs procurement for goods and services relative to the supply chains exhibited by various construction oriented firms (Oxford Economics, 2012; Kavetsos, 2012, p. 1460). On the same note, the number of UK residents employed in the numerous construction projects as well as the associated supply chains contributed about 3.3 billion pounds to the UK economy by reason of their individual spending habits (Oxford Economics, 2012). While relying on the 2012 price indexes, the construction activity related to the London 2012 Olympic Games will in totality contribute more than 13.5 billion pounds to the overall UK GDP (Oxford Economics, 2012).

It is also important to point out that the total growth in GDP as a result of the 2012 London Olympic Games involves indirect, direct as well as induced effects. These are supported by the different phases of construction work before and after the Games and its subsequent legacy build (Weed, 2014, p. 107). For instance, site preparations as well as related infrastructure added more than 2.3 billion pounds to the overall GDP of the UK regions and nations (Oxford Economics, 2012; Kavetsos, 2012, p. 1460). On the same note, about 1.3 billion dollars added to the UK’s GDP resulted from the construction projects associated with competition avenues (Oxford Economics, 2012). After the 2012 London Olympic Games, constructions like the Athletes Village had to be converted for other purposes such as residential spaces, building of office, and retail spaces and more so, transformations to the Stratford station to incorporate the Crossrail (Oxford Economics, 2012). It is estimated that about 4 billion pounds will be added to the UK’s overall GDP from the construction of legacy projects.

It is a well accepted fact that the construction activity relative to the London 2012 Games both before and after the event contributed and will continue to contribute to the overall UK job sector (Pratt, 2010, p. 16). The UK experienced and continues to experience growth in employment levels from the construction industry, the industry’s supply chain which spill over to the greater UK economy (Kavetsos, 2012, p. 1462).

According to the ODA, the direct impact on employment from the London 2012 Olympic Games will present about 78,000 employment years in the construction industry alone (Oxford Economics, 2012). From this figure, more than 54,000 will be made in the period spanning 2005 to 2012. The ODA provides that the peak levels of the employment boom was attained in 2011 as over 12,000 UK residents received employment contracts during the construction of the Olympic Village as well as the Olympic Park. More so, about 115,000 employment years are expected to be realized from the construction industry’s supply chain (Oxford Economics, 2012). Spending of wages by the employees associated with the construction industry and its vast supply chain further adds about 74,000 employment years apportioned across all other economic sectors in the UK (Oxford Economics, 2012). Similarly, over 260,000 employment years relative to the London 2012 Games and the subsequent legacy associated construction works (Weed, 2014, p. 108).

Tourism

The London 2012 Olympics are estimated to have generated and will continue to generate an overall 10.8 million visitors from 2005 to 2017 (Oxford Economics, 2012; Liu and Wilson, 2014, p. 15). It is estimated that the additional visitors will spend more than 1.7 billion pounds out of which about a billion pounds will result from the legacy associated with the London 2012 Olympic Games. These additional spending is bound to have a reciprocal effect on the UK’s overall economic activity as well as those of its constituent regions and nations (Liu and Wilson, 2014, p. 17; Blake, 2005)). The additional tourism associated with the Games it approximated to add 2 billion pounds to the overall UK GDP. Of this amount, 17% was estimated to accrue prior to the official launch of the event, 35% after the Games were launched and 48% after the Games ended (Oxford Economics, 2012).

It is expected that the surplus expenditure will present a distinct impact on the output levels of various industries (Davis, 2016, p. 63). The greatest beneficiaries are the restaurants and hotels sectors expected to continue t contribute about 25% of tourism associated GDP (Oxford Economics, 2012). Since the Games will be hosted by the city of London, the economic impact stemming from the tourism industry was and will continue to be witnessed in the city (Liu and Wilson, 2014, p. 20). As such, the Games act as some form of economic stimulus for the over 22,000 SME’s associated with the city’s restaurant and hotels sector (Oxford Economics, 2012). There are a number of other pivotal industries which benefited directly from increased visitors and subsequent spending trends (Davies, 2012, p. 323). These include the transport, retail and entertainment industries thus making significant contribution to the GDP of the overall UK economy (Liu and Wilson, 2014, p. 20). On the same note, it is expected that the UK’s business services sector will also significantly realize increased outputs largely stemming from supply chain effects.

The overall value addition created within the UK’s economy is approximated to sustain more than 61,000 employment years from 2005 up until 2017 (Oxford Economics, 2012; Davies, 2012, p. 325). The numbers of employment years to benefit the city of London are estimated to be about 20,000. North West, South East, South West and Scotland gained more than 5,000 employment years (Oxford Economics, 2012; Watt, 2013, p. 105).

LOCOG Contributions

The London Organizing Committee of the Olympic and Paralympics Games (LOCOG) was tasked with successfully staging the 2012 London Olympic Games. In an effort to fulfill its mandate, it was required to procure over a billion pounds worth of services as well as goods across 8 sectors (Oxford Economics, 2012). These included events and performance, artists, security, soft facilities and catering management, services, technology, logistics and transport as well as hard facilities and venues management. Of the UK resident contracts awarded by LOCOG, only 28% consisted of large businesses (Oxford Economics, 2012). About 72% of the contracts accorded to UK residents were associated with small and medium sized enterprises. As such, it is a well appreciated fact that SME’s in the UK were responsible for a huge percentage of turnovers in associated industries as well as in the generation of viable employment opportunities.

The billion pounds expenditure earmarked by LOCOG was approximated to contribute up to 500 million pounds to the overall UK GDP (Oxford Economic, 2012). This high figure is attributed to employee compensation as well as profitability levels of corporations resulting in huge turnover percentages in various industrial sectors in comparison with the rest of UK’s economy. As such indirect impacts associated with LOCOG contributed an estimated 300 million pounds to the UK economy relative to the supply chains of these sectors (Oxford Economics, 2012). Induced impacts resulted in an additional 243 million dollars such that LOCOG in totality contributed approximately 1.044 billion ponds to the overall UK economy (Oxford Economics, 2012).

Similarly, the GDP contributions relative to LOCOG are expected to sustain about 26,000 employment years though a huge percentage will be associated with temporary employment. As such, one can point out that the overall number of UK residents realizing employment will be significantly greater. The employment will result in direct impacts on the overall UK economy standing at 52%, 26% attributable to the resultant supply chain while 23% of contributions to the UK’s GDP will stem from induced impacts (Oxford Economics, 2012).

Happiness and Other Economic Benefits

It is imperative to point out that the acquiring the rights to host a main sporting event such as the Olympics translates to happiness benefits for the residents of the host nation (Oxford Economics, 2012; Giulianotti, Armstrong, Hales and Hobbs, 2015, p.104; Kavetsos and Szymanski, 2010, p. 162). On the same note, happiness has been found to project a significant influence on the individual’s economic outcomes such as is the case with individual incomes. Therefore, hosting the 2012 London Olympic Games led to the people from the 12 UK nations as well as associated regions to contribute to favorable economic outcomes due to the happiness associated with the event (Giulianotti, Armstrong, Hales and Hobbs, 2015, p.106). Two relationships generally associated with happiness include household consumption and consumer confidence. It is, however, important to point out that utmost care should be appreciated during the interpretation of relationships considered as enhancing consumption and consumer confidence (Kavetsos and Szymanski, 2010, p. 163). This is because such may be commonly associated with more concrete economic impacts like increased investment or tourism associated to the opportunity to host an event like the Olympic Games.

The London 2012 Olympic Games and its Legacy on the UK Labor Market

The degree of training offered to UK residents in line with the huge construction projects associated with the 2012 London Olympic Games as well as its subsequent legacy build resulted in considerable contributions to the overall UK economy (Coaffee, 2013, p. 299; Mackintosh, Darko, Rutherford and Wilkins, 2015, p. 1068). For instance, it is approximated that the country earned a NPV or net present value of more than half a billion pounds spanning the recipients’ working lives (Oxford Economics, 2012). More importantly, such training has resulted in more than 3,000 people considered as formally unemployed to shed of the name tag. These trainings are expected to enable such individuals gain an extra 121 million pounds in wages and other forms of compensation spanning their entire working lives (Oxford Economics, 2012; Giulianotti, Armstrong, Hales and Hobbs, 2015, p.104). It is therefore approximated that each individual will have the opportunity to earn roughly 40,000 pounds over their working lives from working in the construction industry alone.

The London 2012 Olympic Games will therefore result in a positive and sustainable legacy in the overall UK labor market for its contribution to reducing unemployment (Coaffee, 2013, p. 297). As the available academic literature provides, sustained unemployment periods tend to present affected individuals with permanent scars by impacting on outcomes in the labor market they are able to achieve in the foreseeable future (Mackintosh, Darko, Rutherford and Wilkins, 2015, p. 1070). More specifically, it is assumed that long periods of joblessness tend to imply that such individuals will remain unemployed in the long term thus, continuously weakening consequent employment tenures (Ritchie, Shipway and Cleeve, 2009, p. 149).

As such, the mitigation of associated wage scars on the 3000 previously jobless contractors who then attained employment as a result of construction projects with the even resulted in 121 million pounds in wage compensations (Oxford Economics, 2012). This is approximately equal to wage earnings of 40,000 for each previously jobless contractor. It is, however, important to point out that the outcomes associated with training and joblessness reduction may fall within localized labor markets especially if the temporary workers come from non UK nations (Ritchie, Shipway and Cleeve, 2009, p. 149).

Conclusion

From 2005 t 2017, the London 2012 Olympic Games will inject a significant additional contribution to the UK’s overall GDP to a tune of about 16.5 billion pounds. As this paper has provided, much of the positive contribution to the host nation’s GDP result from the numerous construction projects projected to continue even after the culmination of the event. For instance, 57% of GDP contributions by the construction industry were realized prior to the event while the rest will continue to be felt even after the event closes. Similarly, the tourism industry presented significant GDP contributions in the run up to the event and even during the event and is expected to continue due to the legacy of the games. Happiness and the eradication of the unemployment scar will also have a significant impact on the country’s overall economic outlook and as such, result in a stronger performance of the economy in future.

 

 

References

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