Has British economy won a gold medal?
14 Aug, 2012 08:42
While British athletes celebrate the most successful Olympics in the nation’s history, economists and politicians are divided whether the recession-hit economy has won a major boost from the Games.
The London Mayor Boris Johnson boasted the Olympic Games were “money well spent” as tourists delivered a huge boost to restaurants, nightclubs and theatres over the past two weeks. The number of people eating out increased takings by 20%, according to the data provided by Visa. Johnson also said that eight out of every 10 hotel rooms were full during the Games – far higher than during either the Beijing or Sydney Games.However, the tourism experts say the Olympics have failed to lift the sector as the number of visitors dropped during the event. “In fact, it is expected that numbers may well end up having fallen by well over 30%,” Mary Rance, CEO of the tourism body UKinbound told AFP.In the run-up to the Olympics commuters and tourists were warned to stay away from the city amid fears that London’s transport system could collapse with millions of extra people rushing to the capital. Later British PM David Cameron even urged people to “come back into the capital” following claims the city turned into a “ghost town”.Rance added, many hotels had to cut prices during the games, while shops and entertainment venues saw the number of customers drop. “Although it must be said that shopping centres like Westfield Stratford City, next to the Olympic Park, have benefited significantly,” she admitted.Meanwhile, Sir Mervyn King, Governor of the Bank of England, warned the impact of the Olympics may not be as long-lasting on the economy as expected. “The impact on confidence may give the economy a boost. But ultimately the games cannot alter the underlying economic situation we face,” King said.Last week The Bank of England’s chief economist Spencer Dale also said the Olympics would provide only “a small positive contribution” to the British economy. “There may well be some extra spending from tourism, but as many of us know there has also been travel disruption, more people are going on holiday,” he said. “The contribution from ticket sales and TV rights may lead to a very small boost to GDP in the third quarter,” he added.Analysts expect an increase in consumer and government spending during the Games to boost the UK's GDP between July and September by 0.2%.However, this boost is likely to be temporary and actually result in lower spending later in the year. Ticket sales are also expected to bring an additional 0.1% to the country’s GDP.The British Government expected the Games would not only provide a return on its £9bn-plus investment, but would bring an extra $6.2bln over the next four years. “I am confident that we can derive over $20.15bln benefit to the UK economy over the next four years as a result of hosting the games,” British PM David Cameron said before the Games started.This include $9.3 billion from foreign investment, $6.2 billion in high-value contract opportunities, $3.56 billion from extra tourism and $1.55 billion from additional sales by UK companies, Cameron pointed out.