Will manufacturing suffer once the Olympic games are over...
Much has been made of the legacy the London 2012 Olympics will leave. Be it the urban regeneration, improved transport links or increased sporting participation, the expected after-effects of the Games have been promoted nearly as much as the Games themselves. So what of the economic legacy? In particular how will manufacturing fare once the athletes have left town?
The Olympics will begin on 27 July, with the flame burning through to the closing of the Paralympics on 9 August. During this period output is expected to rise due to increased consumer demand, particularly in the tourism and food and drink sectors. Some of this expenditure will also no doubt benefit manufacturers supplying supermarkets and other retailers. The Bank of England puts the estimated additional GDP growth at 0.2%, based on a similar uplift seen during the 2000 Sydney Olympics.
But whilst economic growth during the Games will be widely welcomed, the question will remain whether this has been caused by ‘new’ consumer demand. The alternative view, asserted by some experts, is that events such as the Olympics merely focus consumer demand that would otherwise be spread over a longer period of time. If this latter view holds then any peak in demand caused by the Games would be followed by a corresponding trough over the remainder of 2012.
For example it is expected the influx of overseas visitors will bolster the London and UK-wide economies over the Olympic period. But many of these tourists may have planned to visit the UK anyway, with the Olympics only dictating when, not whether, they would come.
Similarly a domestic consumer may stock-up on food and drink from their local supermarket so they can watch the sporting events unfold in the comfort of their living room. But if the games weren’t on they may equally have gone for a meal or to the pub, spending the same money elsewhere.
Economists who take this less optimistic view point to Olympics past. The general pattern over the past five decades has been that Olympic-related growth occurs mainly during the six months leading up to the festivities, principally through investment in infrastructure and other major construction work. Such growth is usually mirrored by a contraction following the conclusion of the Games.
Maybe the London Olympics will buck this trend. The politicians certainly hope it will, not least because of the £6bn of taxpayer money committed to delivering the Games. When Minister for the Olympics, Tessa Jowell MP stated that in the longer term London 2012 will deliver economic benefits to East London and bring wider benefits across the UK. She estimated 50,000 new permanent jobs would be creased in the Olympic Park region.
The arguments over the effect of the Olympics on output will no doubt continue long after the Games themselves have ended. As with many macro-economic trends, it is difficult to disentangle the myriad of causes and effects connected with such an event.
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