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 Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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  • rate this
    -4

    Comment number 38.

    Amazing how the Left question the data when it's good news.

    But never when it's bad news though.

  • rate this
    +4

    Comment number 37.

    16. Knut Largerson . Much of the money brought in is unprovable. However what is NOT are the ticket sales. Those tickets were damned expensive & virtually all of them were sold. Thats a major source of income before you start.

    Equally however you spin the numbers it seems likely the event more or less broke even & thats rare for anything any govt touches.

  • rate this
    0

    Comment number 36.

    20 "As ever a well balanced analysis - and the comment at the end is spot on! Undermining 'The ministry of truth' is never a bad thing" - Deafening silence on latest fall in unemployment, after months of claiming the private sector couldn't make up the slack. Thank God Steph got it together to undermine this good news, I was getting worried the Labour party wouldn't get its money's worth.

  • Comment number 35.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    -1

    Comment number 34.

    Andrew (29) - I couldn't agree more. I live in Hackney on the edge of the Olympic park. We had 4 years of interruptions and we also paid extra in our council tax to cover costs - only Londoners had to pay this extra tax and so its fair that London gets a bigger slice of the investment. Regardless of the inconvenience and cost, my area has benefited massively from the Olympics and so it should.

  • rate this
    0

    Comment number 33.

    Look, the Olympics cheered everyone up and continue to do so every time it's mentioned. It's typical of this government that they feel they have to quantify any benefits in terms of cash, which is impossible really. Clearly people will have taken up a bit of sport last year, but since there's no money to follow up that impetus, I assume they'll be couch potatoes until the next big British thing.

  • rate this
    +4

    Comment number 32.

    @29.
    Andrew

    If that's the case all of the money to pay for it should of came from the budgets given to local authorities down in London. but yet I'm sure the services in the rest of the UK suffered to pay for it. especially when we are all being hit by austerity why should London get all the rewards

  • rate this
    +12

    Comment number 31.

    The benefits are largely unquantifiable so I suppose we must trust those who produce the statistics.

    Unfortunately my trust levels are running quite low, not helped by the accountancy trick which claims to show our deficit shrunk year-on-year for June when it actually getting bigger.

    http://www.bbc.co.uk/news/business-23372309

  • rate this
    +4

    Comment number 30.

    Just seems like "spin" to me.
    But then it seems politicians always like to talk about past glories, rather than the uncomfortable realities of now.

  • rate this
    -1

    Comment number 29.

    23swinte10 - We in London suffered the inconvenience: we should get the benefits.

  • rate this
    +7

    Comment number 28.

    A proper analysis of regeneration would contain an assessment of how unemployment or incomes have changed in East London over the last 10 years, either absolutely or relative to other areas. But there's nothing like that. The document as whole just seems an exercise in cherry-picking, and, given the absence of the "counterfactual", a fairly pointless one

  • rate this
    -8

    Comment number 27.

    the London Olympics were a huge success. Recently talking to a competitor/coach/official from Australia who had been to the last 6 games, simply stated London was head and shoulders the best games she had been to. Now, as we believed they have created "profit" after just a year and a further £30bn by 2020, maybe the moanings, SF included can stop moaning,

  • rate this
    +10

    Comment number 26.

    Nevermind how rigorous, what about the funding we were promised to get kids into sports and off the streets. *Every* town in the country should have a free municipal running track, a rugby pitch, a football pitch, a hockey pitch, a 50m swimming pool etc etc.

    What have we got, very little and a social atmosphere of unemployment and alcohol abuse leading to the chain of ills that plague society.

  • rate this
    0

    Comment number 25.

    Previous Olympics had their financial challenges.

  • rate this
    +5

    Comment number 24.

    My business is located in the town where the Olympic sailing was held. The Olympics decimated local business because all of the tourists stayed away for Olympic week. The 18 month run up decimated my business because of a new road system that was put in for the Olympics (no-one could drive to get to us). A local sports field was replaced with an Olympic housing village. Olympics=local disaster

  • rate this
    +16

    Comment number 23.

    the billions that funded the games came from everyone in the UK pocket. Improving infrastructure in London and the surrounding area. Now most of the money generated by the games will be used in London. Any money earned in the games should be used for all of the UK not just London

  • rate this
    +2

    Comment number 22.

    Off to a party at the weekend. Just doing my bit to boost the economy.

    Perhaps we should have more fun rather than austerity?

  • rate this
    0

    Comment number 21.

    Excuse to pump more money into London and it's infrastructure. Excellent opportunism and disguise though! Keep the good work up as all the other cities and regions don't seem to be catching on!

  • rate this
    +2

    Comment number 20.

    As ever a well balanced analysis - and the comment at the end is spot on!

    Undermining 'The ministry of truth' is never a bad thing

  • rate this
    +5

    Comment number 19.

    I enjoyed Steph's piece on "Today", and also hearing Evan's spot-on interview with VC, who displayed considerable sang froid in the face of being made to look really quite silly.

    The economy's so complex that even a single event's effects are impossible to analyse properly. What we're to make of those who say leaving the EU would benefit us, when we can't even do this, I don't know.

 

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