The great Olympic stimulus

 
GB's Sophie Hosking and Katherine Copeland celebrate winning gold. Just how much did the economy benefit from the Olympics?

This government is usually quite sceptical of the idea that you can borrow and spend your way to faster growth. But not, apparently, when it comes to the Olympics.

Today's official report on the economic benefits from the 2012 Games goes out of its way to show that the Olympics more than paid for itself in new business for UK companies - and, presumably, higher tax revenues for the Treasury.

In fact, if you were just looking at the headline findings of this report you might well conclude that the government should be going in for a lot more "grand projects". Like the Olympics, they might add to public borrowing in the short term, but help "catalyse" a long-term boost in UK investment and growth.

It sounds positively Keynesian. Except, I don't think even the most fervent supporter of Keynesian-style stimulus plans would recommend doing anything based on the headline findings of this report - let alone the details.

As I said on the Today programme this morning, it would be rude to call the benefit numbers flakey. But most economists would say they were deeply speculative, at best.

Broad definition

The point is not that the Games didn't bring economic benefits - it would be hard for something that cost roughly £9bn not to have any economic benefits. And of course they brought lots of more intangible benefits, for all of us.

But remember the big £9.9bn figure we got today is supposed to be the extra business for UK firms from 2012, in addition to the jobs and income that were directly generated by building the stadium and other investments to prepare for the games.

To make even a rough guess of the extra business generated, you need to have a sense of what would have happened anyway; what academics would call "the counterfactual".

They never really provide that in today's glossy report. The implicit assumption seems to be that - had it not been for the Olympics - that £9bn would simply not have been spent.

Would that have meant £9bn less in government borrowing over the period leading up to 2012? The report does not say. Nor does it offer the chancellor's view on that alternative future.

We do have some hard numbers, here, on the business that UK companies have won to help with Rio Olympics, which add up to about £120m. In total, the report says that UK contracts for other international sporting events add up to £1.5bn.

More problematic is the £2.5bn of "additional" inward investment into the UK since the Games.

This turns out to include, among other things, any investment announced at Department for Business events that took place in and around the Olympics - or any investment made since then, by any company that attended one of these events.

As Vince Cable conceded on the Today programme this morning, that is a pretty broad definition.

We know that companies with big deals in the offing will have been encouraged to "save them up" for these set piece occasions. They always are.

We also know - or at least have to hope - that many of the very big companies that were all encouraged to come to these conferences would have invested in the UK anyway. That, presumably, is why they came.

'What luck'

But at least those "extra" investments actually took place, (even if they include a Westfield shopping centre in Croydon.) The "additional sales" which account for nearly two-thirds of the £9.9bn in total benefits is not based on any actual sales numbers at all.

It is based, rather, on the assumed effect of all the extra engagement with companies that UKTI and the Department for Business undertook as part of its Olympics business strategy.

It's quite possible that these efforts did generate extra sales for companies. The department has carried out surveys which suggest it has done this in the past.

The point is that all these companies would have been doing something else if they had not been doing all these "Olympic-inspired" things. And so would all those civil servants.

Again, it's not that the Olympics won't have generated a payoff for UK plc - in addition to all that happiness and general raising of our national self-esteem. But if you're going to put numbers on it, I suspect most economists would say they need to be a lot more rigorous than this.

Still, you can't help thinking how happy the authors of this research must have been, that the total benefits happened to come in so close to a chunky number like £10bn - and just above what the games are said to have cost. What luck.

 
Stephanie Flanders, Economics editor Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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  • rate this
    0

    Comment number 18.

    Steph i was getting worried when you failed to undermine the latest positive unemployment data .
    But now its obvious you were getting ready to undermine a different piece of positive economic news .

    where would we be withou u steph

  • rate this
    +1

    Comment number 17.

    Where's your article about the ridiculous false statistics regarding benefit caps that Iain Duncan Smith keeps spouting off?
    It's a massive failure of impartiality by the BBC to repeat these figures and not even mention the fact that the Office of National Statistics have issued statements to say they are at best unreliable.

  • rate this
    +13

    Comment number 16.

    Lets pretend it made absolutely no money at all.

    Maybe 30 Million people enjoyed it, and the cost £10 Billion overall or £300 per person.

    I can live with that.

    What Insults my limited intelligence is fantastic claims about the money the event pulled in.

  • rate this
    +5

    Comment number 15.

    The Olympics were a glorious morale boost to our country. You cannot put a price tag on that.

  • rate this
    -4

    Comment number 14.

    You can always trust Steph to look for the bad in any good news story.

  • rate this
    +2

    Comment number 13.

    Strange how a country run by a bunch of short-termist amateur opportunists can on the face of it get one off circuses so right and one off structural investments so badly wrong.

    By singing their own praises they do indeed make the case for plan B.

    Pratts !

  • rate this
    +4

    Comment number 12.

    Sporting success aside, and with the exception of G4S, which actually proved how good the contingency planning was and the adaptability of UK Armed Forces, the Olympics showed the World just how good the British are at innovating, designing, building, volunteering and delivering on major projects. We are a 'can do' nation of exceptional talent at every level and it was good to be reminded of this.

  • rate this
    +3

    Comment number 11.

    8.smurfs75
    The Olympics proves this.
    ~
    Think you need to re-read Steffie's Blog ;-)

    9.Notinanutshell
    showed that the UK can be 'best class'.
    ~
    Agree absolutely, ticketing & G4S notwithstanding.

    Will all the facilities be in use though, free, for allcomers in three years time?

  • rate this
    0

    Comment number 10.

    Maybe the scriptwriters for Twenty Twelve just got paid really, really large roytalties....

    That's about the only unambiguous "extra" activity I can think of.

    And while we're at it, Stephanie, did they remember to subtract out the "extra" costs of closing much of Westminster to traffic and tourists for a whopping six months?

  • rate this
    +4

    Comment number 9.

    Obviously any politician will look for the best possible results, so you can take the headline figure with a pinch of salt. However, this article failed to go into the other key benefits of intangibles of which there are many and effective. One major point was that it was considered the best ever and showed that the UK can be 'best class'.

  • rate this
    +2

    Comment number 8.

    It amuses me that the single largest GDP hike seen under Osborne's poor chancellorship was thanks to a massive State spending boost.

    When will the Right grow up and admit that government spending is integral to the well being of an economy? The Olympics proves this.

    Very amusing indeed.

  • rate this
    -3

    Comment number 7.

    It sounds about right to me.
    The Olympic Games was a fabulous success and left foreign nationals with the impression that UK is a go-ahead, can-do kind of place.
    Pity that we still have a hangover of doomsayers. You doomsayers, please, please go somewhere else or shut up - please and kindly.
    Pretty-please.
    No offense intended, but you get me down with your moaning.

  • rate this
    +21

    Comment number 6.

    It would be great news if it it is true, but where is the proof,where are the hard figures? It does smack a little of wishful thinking.

    The Soviet Union used to give out optimistic, unfounded 'facts' like this, and in Scotland, Salmond is a modern-day economic soothsayer.

  • rate this
    -16

    Comment number 5.

    Oh here we go!
    The BBC leftist just cannot stand things going well for OUR country and are now throwing in every red herring to try to dismiss any signs of improvement and progress.
    I just wish they were as critical when Brown was wreaking our economy when in 'government'
    But that would not part of the BBC agenda to upset their masters

  • rate this
    0

    Comment number 4.

    What were the Olympics ?

  • rate this
    -6

    Comment number 3.

    Typical beeb, as soon as there is the hint of somer good news, you get the doom sayers out to try & punt it into the long grass.
    The media are one fo the main causes for making this country the misery hole it is turning into. How about getting behind some good news for a change, stop championing the bad all the time!

  • rate this
    +1

    Comment number 2.

    A report of this nature should either be objectively factual, and admit that the Olympics cost us millions, or focus on the subjective benefits - national pride, etc....

    Instead, we have the same weasle words and misinformation from a Government that can no longer be trusted.

  • rate this
    +4

    Comment number 1.

    One of the good points of The Olympics in 2012 is it showed that the UK was open for business and doing well after several years in recession. This has counted for a lot compared to many of the main EU countries whcih are still struggling now.

    "Open for business" message sent worldwide not just EU.

 

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