'Some of the elements in the cost benefit balance sheet are coming together. The net direct costs are roughly what the (revised) budget came up with – around £10bn. There are some offsets from ticket sales but these seem to have been more than cancelled out by lost tourism revenue. There has probably been a further loss of productivity from people not coming in to work and some timing effects from people taking holidays during the Olympics. Our rough estimate is that there is also a net long term GDP loss of £1bn. So taking the two together, the costs will probably pan out at around £11bn.
What about the benefits ?
There appears to have been a huge reputational benefit around the world from Games that have been relatively well organised, policed and have provided some stunning images on TV. This could in time help the UK economy, although to take best benefit from it, the government will need to work harder on bringing down taxes and limiting regulation to where it is necessary for consumer and commercial reasons rather than to protect the backs of politicians.
More interesting is the so-called legacy – the potential regeneration of East London. Cebr has published more than 20 reports over the last 15 years on the regeneration of East London and we have been following the issues carefully.
The past history of regeneration effects from Olympic Games has been mixed. The Montreal Olympics in 1976 led to the city’s bankruptcy; the Athens Olympics coincided with the beginnings of the Greek spending boom that eventually led to the Greek economic crisis.
However, there are two reasons for optimism. The first is that East London is regenerating strongly already. Canary Wharf has transformed the area and had huge knock on effects. The cluster of media and IT businesses around ‘Silicon Roundabout’ has boosted the local economy and the London housing shortage has led to ‘gentrification’ in the East, which is now much closer to where many jobs are being created. The second is that the industries that have moved into the area are very much the industries of the future, with good growth potential. They are likely to depend on highly skilled and mobile individuals wanting to move to the area and who might well have been attracted by the images that have been broadcast on world TV.
We have done some simple econometrics which indicates that countries that have had Olympic games or equivalent events have had slightly more growth than might have been expected in the 3-5 years afterwards. Provided that both national and local politicians are single minded about focussing on growth, there is a very good chance that the Olympic games could turn out to be the icing on the cake for East London, making a critical difference to the area’s regeneration. For London as a whole, our econometrics implies that London’s annual output growth (in Gross Value Added terms) could be boosted by 0.6 percentage points per year. We expect this effect to take a few years to kick in. Ultimately, we estimate that between 2015-16, London’s annual output growth could be increased by £1.8bn in today’s money – a real Olympic legacy'.