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

    Comment number 58.

    Yes this report sounds a lot more believable than one might think. How about the destruction of Christchurch by Earthquake. Instead of the New Zealand $ crashing & bankruptcy the country actually got a boost from construction employment in order to rebuild in a place that should have been condemned as unsafe. More sound than the Euro country membership ? Olympics more sound than QE & US economy

  • rate this

    Comment number 57.

    Just a thought did these figures include the anti missile system being installed on roof of flats nearby & have they been dismantled?

  • rate this

    Comment number 56.

    Westfield shopping centre in Croydon, was going to happen as part of the area re-development anyway, irrespective of the Olympics happening.

  • rate this

    Comment number 55.

    54.are we broke yet

    "So we're in profit and we have a legacy. How wonderful - as long as you live south of Watford."

    I think 'cloud cuckoo land' IS well south of Watford!

    This is a SILLY SEASON news story - full of unverifiable 'facts' put out to win the next election for the duffers who are in now.

    Dave, it will not work till you get interest rates up to rescue the pension industry & savers.

  • rate this

    Comment number 54.

    So we're in profit and we have a legacy. How wonderful - as long as you live south of Watford.

  • rate this

    Comment number 53.

    48. MfM.

    I think you may be confusing me with someone else.

    The question here is if the Olympics benefitted the UK economically. The simple answer is no. However that would not fly with the Loonies far up Thames (you do the anagram) so an official BSR is sanctioned with questionable (or unquestionable, if you prefer) data.

    There is no left or right anymore, just centrist nonsense.

  • rate this

    Comment number 52.

    #44 if you think Stephanie Flanders is 'the left' your idea of 'centre' is WAAAAAAY to the right of mine. I'd call Neil Kinnock back in the early 80s 'the left'.

  • rate this

    Comment number 51.

    Now let's get this straight, the Olympics paid for themselves? No, no they did not, the whole nation paid £9bn and a very small part of the nation got just about all the benefits. Why London and the East End in particular should keep getting public money is a scandal. The Millennium dome, the Olympics, Docklands development that now also includes £220M to upgrade the stadium from public funds.

  • rate this

    Comment number 50.

    43. Wrong graph... this is a better one....

    So... "Just how rigorous is the report..." starts Steph, "ridiculous" would be a better word...

    whingy, moan, lefty moan... I should just believe what reports state, especially when political capital is entwined... duh.

  • rate this

    Comment number 49.

    Could I just point out that the money spent on the olympics didn't just 'disappear'? I agree that todays report is misleading at best, but the £9.9bn spent was money injected into the economy. I see lots of complaining about the deficit and govt. spending here, and it all seems rather ill-informed.

  • rate this

    Comment number 48.

    43. Just_the_Fax

    Labour kept telling us what a great thing the Olympics would be for us and how it was worth the ever growing cost.

    Now, after the Olympics the Left moan about the legacy.

    While also wanting us to spend more on capital intensive projects like... er the Olympics.

    And you don't think this is moaning?

    I rest my case M'Lord.

  • rate this

    Comment number 47.

    The only people who made money out of the Olympics were the foreign owned multinationals.

    The majority of money flows out of the UK. The average joe gets paid. Most are not paid enough to save. The majority of pay one way or another goes to people somewhere along the line who siphon off the money out of the UK.

    Might as well be slaves working for nothing.

  • rate this

    Comment number 46.

    To answer my own questions, will the moaners stop moaning now they have been proved wrong?, errrr guess not.

  • rate this

    Comment number 45.

    #43 The entire cost of the Olympics is barely equal to 1 months govt borrowing so is unlikely to make even a small dent in overall economy. However I can easily answer your question:

    Because Osbournes policies are seeing a massive drop in corporation tax revenue. £6bn this October down from £8bn the Oct before. Tax cuts to big business, tax hikes for the rest of us.

  • rate this

    Comment number 44.

    41 "Where at the 'Left' questioning the data?" - in that long column at the top? On Radio 4 apparently judging by comment 40. Odd because when Labour organised the shindig and while it was on the BBC declared it the "best thing to every happen ever", cannonised all the atheletes and exploded with PC joy at getting to ram the paralympics down everyone's throat. Wonder why the shift in tone eh?

  • rate this

    Comment number 43.

    38, 37 et al ad nauseum... blah, blah, whinging lefties, all labour's fault blah, blah.

    Next you'll be telling me that the official rate of inflation is correct and the OBR is an independent body...

    If the Olympics were so successful at generating money, why did the defecit grow (explode) over the period?

  • rate this

    Comment number 42.

    38 "Amazing how the Left question the data when it's good news. But never when it's bad news though" - Seem to remember the BBC spending 13 years refusing to question immigration stats? "This government is usually quite sceptical... you can borrow and spend your way to faster growth" - Bitter much? Surely the economy isn't daring to improve without listening to Steph's ruinous borrowing ideas?

  • rate this

    Comment number 41.

    #38 Where at the 'Left' questioning the data? You forget it was Blair got us the Olympics and all the funding & planning was done under a Labour govt. Typical of Cameron to claim all the credit when it worked out though.

    No shortage of bad news courtesy of the current govt to question though. I'd question why our national debt continues to rise & corporation tax income has dropped like a stone.

  • rate this

    Comment number 40.

    I don;t believe a word of it - lies, damn lies and statistics.

    All soft data, with nothing to substantiate it.

    File on 4 (Radio 4) 6 months before the games, were suggesting the total 'Olympic Cost' was £24bn, though I remember @ Singapore win it was only £2.1bn Lord Coe said.

  • rate this

    Comment number 39.

    "Today's official report ..goes out of its way to show that the Olympics more than paid for itself .."

    Did anybody really think it would say anything else?


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