Economic Impact of 2012 Olympic on London Economy - Example

London Economy Executive Summary The essay will concentrate on the impact of Olympic on theLondon economy. The economy of London is one of the rich and diversified economies in the world and is comparable to many of the country economies. However, the decision of hosting 2012 Olympics had changed the dimension of the economy to a great extent. The Mayor of London, with assistance from government of the United Kingdom planned to renovate the transportation system and accordingly raised the communication network as per the international standards. Such effort from public as well as private sector truly simplified the city communication for the visitors as well as for Londoners. As numerous spectators from all the continents visited the city during the Olympic season, the economy also got an opportunity to promote its tourism sector, so that all the spectators who visited London for the games purpose revisit the city for tourism purpose and boost the revenue of the economy. Housing market also flourished because during the preparation of Olympic, the economy experienced inward shift of Foreign Direct Investment (FDI) which became a huge source of employment generation for the local people. Increase in income level improved the standard of living of Londoners; thus demand of housing market increased. The retail sector did not benefit from the immediate effect of Olympic 2012, as the visitors’ interest was shifted towards the games from shopping. Afterwards when the tourism sector flourished, the retail sector of London also experienced a big boom. Contents 1. Introduction 4 2. Discussion 4 2.1. Economic Impact of 2012 Olympic on London Economy 4 2.1.1. Transport System 5 2.1.2. Labour Market 5 2.1.3. Housing Market 7 2.1.4. Retail Sector 8 2.1.5. Tourism Sector 8 3. Conclusion 10 Reference List 12 1. Introduction The economy of London is one of the leading financial centres and hub for international trade and commerce in the global economy (Ackroyd, 2001). According to the statistics from Brookings Institution 2012, London is fifth largest among the city economies in the world. The economy contributes more than 22% annually to the Gross Domestic Product (GDP) of the UK economy. Economy of the city is so vast that it is comparable to the economy of countries such as Sweden or Iran. 18% of the economy constitutes of professionals and technical business and 15% of infrastructural business among the 8, 41,400 private sector business enterprises of London, as on 2013. In 2012, Olympic, the leading sporting event of the world was hosted by London and the city was significantly boosted and gained long term economic benefits (Imrie and Lees, 2014). The paper will analyse the cost and benefits of the economy, especially on the transport system, labour and housing market as well as tourism and retail sector, derived from hosting the 2012 Olympic. Retail and tourism are some of the most important segments of London economy, as these sectors are responsible for more than 50% of the revenue and biggest source of employment of the city economy (Buck, Gordon, Hall, Harloe and Kleinman, 2002). Contribution of the sector to the London economy will be evaluated. 2. Discussion 2.1. Economic Impact of 2012 Olympic on London Economy According to the reports from Olympic officials, 2012 Olympic was a lifetime opportunity for London to gain long term economic benefits, and the economy has successfully captured all such prospects in order to boost up the economic growth. During the recession period as well, projects related to games and sports have helped the economy to boost up their revenue and employment. Such economic benefits had been amplified in 2012 as the economy had generated approximately Great Britain Pound (GBP) 9.9 billion from the Olympic to boost the trade and investment of the UK economy at large. Experts are also expecting that London Olympic has channelized the source of long term revenue of GBP 16.5 billion and 41 billion till 2017 and 2020 respectively (Olympic.org, 2013). In the next segment, the impact of London Olympic on different economic sectors of the economy will be explored. 2.1.1. Transport System Hosting of Olympic in 2012 had energised London to make several infrastructural developments among which, improvement of public transport system is most significant. The transportation system of London had been so upgraded during the period that it became capacitated to carry more people that it had carried ever in the past. Such development was supported by £6.5 billion of public and private investment (Evans, 2014). Importance was given to the improvement of Stanford station as it was the central point for accessing Olympic Park. In the East London, Stanford has now become the best connected hub of Great Britain. The “Games Transport Investment and Legacy” has provided multiple transportation facilities. The capacity of Docklands Light Railway was enhanced by 50% (Olympic.org, 2013). Capacity of Tube networks were also extended, especially of the Central and Jubilee Lines. The over-ground services were renovated and the orbital railway project was completed before the Olympic started. Apart from all these, the concept of New Cycle City had been introduced and 75 km cycle orbit was constructed around Queen Elizabeth Olympic Park, and Barclays Cycle Hire scheme was established, in order to augment frequency and consistency of the transportation system (Olympic.org, 2013). Transport for London (TfL) also concentrated on the freight services of the city and highlighted the efficiency of London Freight Services as a part of travel demand management. Apart from all these major improvements, traffic signal and road network management also reached the standard of efficiency which in turn has elevated the network connectivity and accelerated present business of London economy (Evans, 2014). 2.1.2. Labour Market The labour market of the UK economy boomed during 2012 and the positive effect on the country’s employment rate was mostly enjoyed by the host city of Olympic 2012, London. The local population of the city was facilitated by huge on job training opportunities. The requirements of both skilled and unskilled labours were enhanced as the city engaged itself in the overall development. In East London, more than 10,000 permanent job opportunities were created by Westfield Stratford Development in various departments of games preparations. Among these, 25% of the unemployed people were placed in Stratford City Retail Academy. It was expected that 17,000 additional jobs will be generated in London by 2017 as a result of expansion of the economy due to positive effects of 2012 Olympic. The estimate has exceeded the employment expectation of the previous host of Olympic, Sydney, that had estimated 7000 additional jobs by 2015. During the preparation phase, 80,000 residents of Host Borough were benefitted as the residents were involved into the Department for Culture, Media and Sport survey (Olympic.org, 2013). Figure 1: Increment in Employment Rate in London since 2004 to 2012 (Olympic.org, 2013) Employment rate accelerated as the economy of London experienced additional inflow of Foreign Direct Investment (FDI) since they had announced of hosting Olympic. The Employment and Skills Legacy Programme (ESLP) of department of the Mayor of London directly facilitated 3400 unemployed citizens to take active part in various departments of the games preparation, according to their existing skills and abilities. Influenced by the success of London Olympic, the Mayor launched Creative Employment Programme (CEP) in 2013 to grant £15 million to promote more than 6500 Apprenticeships, especially in the sports and cultural sector. The Government also conducted Disability Employment Conference to improve the employment opportunities for disabled citizens as well (Olympic.org, 2013). 2.1.3. Housing Market In economics, price of residential property is a function of multiple physical attributes such as transportation services, industrial reach, schools and parks, safety of the location, pollution level and many other facilities required in daily life. The better the availability of such facilities are, the higher the price of housing market. Studies have also shown in the past that a premium price is charged if the location of the property is near golf course, due to the standard of the place of property (Imrie and Lees, 2014). In 2012, researchers explored a new relationship between the locations of sports stadium and property prices as consumers’ willingness became prominent to pay high prices if the property resided near Olympic stadium (Kavetsos, 2009). Such motivation of the participants of housing market can be addressed in two ways. Inward shift of FDI has resulted in labour abundances due to enhancement in employment opportunities which in turn increased the purchasing power and standard of living of the Londoners. Else, the Londoners might aspire to relocate to reside at an easy distance from the Olympic stadiums, raising the rent and property prices of those areas (Olympic.org, 2013). Moreover, increase in the property prices in housing market even before completion of Olympic Park near Stanford justifies the positive correlation between Olympic influences and property prices. Such hypothesis was also based on the facts that, Londoners assumed it correctly that the Government of the UK and departments of Mayor of London would definitely take huge initiatives for infrastructural development in the city in terms of transportation network and other facilities, which in turn would amplify the property prices. Hence, the citizens tried to occupy the properties before the price multiplied and huge demand in housing market during London Olympic in 2012, in turn increased the price level of the market. The hypothesis can also be proved by showing that the owners of houses near Olympic stadiums experienced an increase of their property prices nearly by an average of £60,000. In aggregate, the house prices increased from 2005 (average of £208,148) by 28% to 2012 (average of £266,730). 2.1.4. Retail Sector According to the reports of British Retail Consortium, the number of shoppers had drastically decreased during the 2012 Olympic times. According to the estimated Olympic ticket sales, London economy assumed that huge number of expected visitors would give a big boost to the sales of retail sector. However, the industry factsheet revealed that the sales of retail fashion during the Olympic months declined by 0.40% as compared to the sales of same months in 2011, striking out the possibilities of opening up of new stores (Mayor of London., 2013). The decrease in sales in the retail fashion had been complemented by the sound performance of street side food and drink outlets. However, such performances of the food and beverages sector could not compensate the poor performance of noon-food sectors. Considering the retail electronics, the sales of large screen televisions truly amplified during the Olympic season. Where the sales of supermarkets were enhanced by 3.5%, sales for soft drinks increased by 10% and that of the snacks and confectionaries rose by 8% (Mayor of London., 2013). Such patterns in retail sector clearly evidenced the increment in consumption of confectionaries by local people, while watching Olympic in television. Online retail sales also decreased by 4.8% because of the shift in consumer’s pattern of leisure spending. The time Londoners and outsiders used to spend online, they started contributing the time in watching television. In general, July-August is a bust period for retail sector due to absence of any festivals during the period. Though the economy expected a hike in sales and revenue because of hosting Olympic in 2012, the sector could not leave up to the expectations (Mayor of London., 2013). 2.1.5. Tourism Sector The London economy understood the importance and potential of tourism sector, immediate after the Olympic 2012. According to the survey reports, during the months from June to September in 2012, more than 800,000 visitors from overseas visited London who altogether had spent approximately £1.1 billion during the course of their stay. Most of such visitors were from the continents of Europe and North America who had visited London for the first time to take passive part in Olympic 2012 (Costa, Panyik and Buhalis, 2014). The survey also revealed that though the intension of their visit was the games, the visitors expressed their wish to visit London again, may be with families, only for tourism purpose. Observing such demand for London tourism, the government planned to promote the tourism sector of London with an estimate of achieving additional £2.3 billion of revenue from this sector by 2020 (Department of Culture Media & Sports, 2013). The government also calculated that in order to achieve the revenue target of the sector, it is also important to attract at least 40 million visitors per year (Mayor of London, 2013). Figure 2: Estimates and Expenses of Visitor in Olympic 2012 (Mayor of London, 2013) Past statistics have shown that, the last host country, Sydney, had experienced a decline in during the Olympic. Analysing London’s success, it has become prominent that massive advertisement and campaigning of London’s holiday homes (“VisitEngland”) and announcement of tariff cuts and other discounts have been successful in attracting such great number of visitors. Data from National Statistics have shown that a 1% increase in the overseas tourist in London results in an increment of £19 billion revenue. Hence, from April 2011 to March 2013 an additional increment of visitors of 1.54 million enhanced the proximity of 600% revenue generation in aggregate over a four years period of time (London.GV.UK., 2013). Figure 3: Contribution of Visitors from Different Continents (London.GV.UK, 2013) Concentrating on the domestic tourism market, estimates have shown that more than 80% of the 11 million Olympic tickets were sold to the domestic visitors of the United Kingdom. Considering ticket prices and cost of food and stay, a domestic visitor had spent £225 on an average. Assuming that one fifth of the domestic visitors had attended all such ticketed events, it is easy to calculate how much revenue London economy had accumulated by hosting Olympic in 2012. Olympic 2012 had provided London economy an opportunity to establish long term impacts on domestic as well overseas visitors to showcase London as a distinct tourism destination of the United Kingdom. London had also capitalized such opportunities to a great extend (Department of Culture Media & Sports, 2013). 3. Conclusion London is one of the most eventful economies in the world. The retail, transportation, tourism and housing markets of the economy have always contributed positively towards the success of the city economy. However, success of the economy was amplified when the city took the opportunity to host Olympic in 2012. The infrastructure of the city was developed, labour market expanded; tourism industry also boomed as the sporting event attracted visitors from almost every continents. Labour market expansion and infrastructural development in multiple parts of the city also left a positive impact on the housing market of London. Though retail market failed to gain immediate attention, in long run the segment also experienced a positive effect arising out of the event. Therefore, it can be concluded that Olympic 2012 provided London Economy a substantial scope for employment generation, infrastructural development and many more which had directly impacted towards the revenue expansion and progression of the economy, not only in the short run but also for long enduring future. Reference List Ackroyd, P., 2001. London: The Biography. London: Vintage. Buck, N., Gordon, I. R., Hall, P., Harloe, M. and Kleinman, M., 2002. Working Capital: Life and Labour in Contemporary London. London: Routledge. Costa, C., Panyik, E. and Buhalis, D., 2014. European Tourism Planning and Organisation Systems: The EU Member States. Bristol: Channel View Publications. Department of Culture Media & Sports, 2013. Post-Games Evaluation. [PDf] Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/224181/1188-B_Meta_Evaluation.pdf [Accessed 21 February]. Evans, G., 2014. London 2012 and Regional Regeneration: Legacy Games. Regions Magazine, 295(1), pp. 11-13. Imrie, R. and Lees, L., 2014. Sustainable London? The future of a global city. Bristol: Policy Press. Kavetsos, G., 2009. The Impact of the London Olympics Announcement on Property Prices. [pdf] Available at: [Accessed 21 February]. London.GV.UK, 2013. Current Issues Note 37: International tourism in London. [Online] Available at: [Accessed 21 February]. Mayor of London, 2013. Inspired by 2012: The legacy from the London 2012 Olympic and Paralympic Games. [pdf] Available at: [Accessed 21 February 2015]. Olympic.org, 2013. London 2012 to provide long-lasting economic benefits. [Online] Available at: [Accessed 21 February 2015]. Read More