The Impact of the London Olympics on the UK Economy - Essay Example

?Question 4 The Impact of the London Olympics on the UK Economy The London Olympics is to be held in the between 27th July, and 12th August2012. It is to feature over 200 countries and this will involve over 10,000 athletes of world-class repute and 14,000 sport officials in 21 venues around London (Department of Culture Media & Sports). In the bid to host the event was led by the UK's International Olympics Committee and it was strongly supported by the UK government and the leadership of the country which funded the bid. From the observation of facts, this bid is an economic gain to the UK government and people. This is because it is going to support the macroeconomic structures of the country and this will ultimately improve lives in the United Kingdom. Macroeconomics is the performance, structure and behaviour of the entire economy of a nation and how it links to the wider global as well as internal economic units (Imrie et al, 2009). In order to assess whether the London 2012 Olympic Games is beneficial to the UK or not, it would be better to approach the whole situation through the study of trends in the macro economy. Expenditure It is noted that there is a budget of ?9.35 billion that was set aside for the London 2012 Olympics (Department of Culture Media & Sport, 2011). This amount is to be funded mainly by the International Olympics committee, thereby inferring that the funds for the games would be generated from the global community and not the British Government. This implies that there will be an injection of funds and capital that would help to develop the UK economy and add up to the current infrastructural base of the country. Also there will be enormous injection into the economy that will boost the various economic units of the economy to enable the economy to make important gains that would help it into the future. According to PriceWaterhouseCoopers, the UK economy would benefit from the London 2012 Games from three main angles: 1. Global Economic Support 2. Business Support, Innovations & Diversification & 3. People Skills & Employment Global Economic Support The UK will benefit from the concentration of foreign investment in the country. This is because the International Olympics Committee will be involved in funding the budget of ?9.35 Billion which would be used to develop the various components of the economy to enable the nation to meet all the necessary requirements of the Games. This money will provide various levels of financial and economic support to important elements of the economy. This will enable the country to report gains and this is likely to improve the standards of living in the UK on an aggregate level. The Gross Domestic Product is a measure of the worth of output in a given economy in monetary terms at a given point in time. It is a concept that seeks to evaluate the net worth of economic activities of the various sectors in a given economy at a given point in time. PriceWaterhouseCoopers reports that the Gross Domestic Product of the UK will enjoy about ?2 billion increase between 2005 and 2016, which can be linked directly to the London 2012 Games and the corresponding investments made by the international community in the country. Out of this figure, London alone will get an increase of ?0.5 billion which can be directly attributed to the event. Secondly, the London 2012 Games is to inject much needed infrastructure into the nation's economy. This is through the building and renovation of stadiums, sporting facilities, accommodation, airports and other important facilities throughout the country. Out of this, it is expected that the infrastructural base of London will increase by a total of ?0.6 billion whilst infrastructure in the rest of the UK will increase by ?0.2 billion. The increase in infrastructural units attributed to the London Olympics is a major addition and economic injection into the country's economy. This is because these infrastructure will add up to the asset base of the country and long after the games are over, the infrastructure will continue to generate income and revenue from local and international sources that will boost the British economy. Also, the successful bid to host the Olympic Games makes the UK in general and London in particular, attractive destinations for foreign investment. This is because most businesses from outside the UK are likely to spend more money developing their trading positions in the country to enable them to benefit from the numerous economic benefits that would be associated with London when it becomes a melting point for athletes, the global media and the numerous visitors. Thus, many international businesses like food chains, international brands and other global economic entities are investing heavily into the nation's economy and this is likely to help improve the macroeconomic conditions of the country. Tourism is another important area that the London 2012 Games seeks to bring immense gains to the overall national economy. Between 2012 and 2016, PriceWaterhouseCoopers estimates that a total of ?0.518 billion would be accrued in revenue that would be specifically attributed to the London Olympic Games. This revenue is expected to be raised from international tourists who would take the opportunity to visit the country and also sports fans and other professionals linked directly and indirectly with the Olympics. These tourists will come in with money and they are likely to pay for their food, shelter and shop for items from UK businesses. This will leave a vast amount of foreign exchange (estimated ?0.5billion) which would be injected into the economy by these businesses through taxes and spending which will take the economy to the next level. Units of the UK Economy and the Olympics Numerous UK businesses have won contracts and bids that are directly linked to the Summer 2012 Olympic Games. These bids and contracts are expected to bring in premium revenue to these UK businesses and it is likely to help them to expand their businesses. Also, new businesses are being created to help the country to discharge its responsibilities in the form of providing the needed services to ensure that the games proceed as it is supposed to. These new businesses are likely to thrive over the period, build expertise and internationalise to bring foreign exchange long after the games are over. Also, related businesses that are involved in the supply chain of the primary UK businesses that are involved in the games are likely to benefit from the various capital injections made into the economy. This will further empower them and enable them to add up to their financial portfolio and expand their scope as businesses operating in the economy. The games is also likely to lead cluster development which means that there would be some specialized economic units that would be created because of the games. These specialized units can take up international jobs after the games, which will bring revenue to the nation and benefits to the economy. People, Skills & Employment The London 2012 Games is expected to have an impact on the individuals of London and the UK and the collective effect of this is expected to boost the economy. About 10,000 permanent job placements are to be created in relation to the Olympic Games. A total of about 40,000 jobs are also to be maintained casually at every point in time between 2005 and 2016 (PriceWaterhouse Coopers, 2005) that is directly attributable to the Olympic Games. These jobs are likely to provide revenue to the employees. This will improve the quality of their lives and help them to make additions to the UK economy. Also, the jobs will help these individuals to build skills and potentials that will support them in their bid to provide better services during and after the Games. This will help develop the country's economy. Other areas like sporting and cultural legacy as well as the improvement of public health will enable the nation to improve its economy. In conclusion, the UK government's support of the bid to host the 2012 Olympics in London is not a negative investment. Rather, it is an investment that is paying off and will continue to pay off by injecting more and more money and economic resources into the nation. London 2012 is expected to cause the injection of funds and capital from the global economy into the country's economy. This is in the form of GDP enhancement, infrastructure development, inward investments and tourism. Also, the Games is supposed to add up to the creation of new businesses in the UK through the provision of contracts and other premium projects for these companies. Also, the London Olympics is causing an increase in employment and the enhancement of skills in the country's economy. References Department of Culture Media & Sports (2011) 2010 Olympic Games Available online at: http://www.culture.gov.uk/what_we_do/2012_olympic_games_and_paralympic_games/default.aspx Accessed 24/08/2011 Imrie Robert, Lees Loretta & Raco Mike (2009) Regenerating London: Governance, Sustainability & Community in a Global City London: Taylor Francis Group London Olympics Annual Report (2009) Available Online at: http://webarchive.nationalarchives.gov.uk/+/http://www.culture.gov.uk/reference_library/publications/5800.aspx Accessed: 24/08/2011 London 2012 Website (2008) UK Businesses Winning London 2012 Economic Gold Available online at: http://www.london2012.com/press/media-releases/2008/11/uk-business-winning-london-2012-economic-gold-.php Accessed 24th August, 2011 PriceWaterhouseCoopers & Department for Culture, Media & Sports (2005) Olympic Games Impact Report Government & Public Sector. Available online at: www.culture.gov.uk/images/publications/OlympicGamesImpactStudy.pdf Accessed: 24th August, 2011 Read More