The Economist Intelligence Unit has published Legacy 2012, a collection of essays on the economic effects of the London Olympics. You can download it here. I’ve got the lead piece, written pre-Games, which (post-Games) now seems a bit grumpy. Here are the headlines, and some reflections with the benefit of hindsight:
First, the direct economic benefits of 2012 to London are pretty small. This is the overwhelming message from the economic evidence, and the experience of past Games. Predictions of a hit to local retail and tourism also turned out to be correct.
Second, the major hard gain is the physical regeneration of the Olympic site. We can argue about whether winning the Games ‘created’ this, or just accelerated it. But some Londoners (homeowners, certainly) got more out of it than others. It’s telling that the Centre for Cities suggests a ‘separate’ employment and skills strategy is needed for East London – so what positive effect did the Games have on local people’s employment chances?
Third, the indirect economic effects on the UK may be pretty big – as they have been for Korea, China and Spain. Hosting the Olympics is a massively powerful policy signal, and the Games are a platform from which to tell a story about the UK’s place in the world. Work by Rose and Spiegel, published in the Economic Journal, suggests that on average, Olympic host countries get a whopping 20% trade boost. (Amazingly, even losing bidders pick up some positive trade effect.) The host city stands in for the nation at Games time, so that London effectively was the UK for foreign viewers. Boris clearly understood this before David Cameron.
More prescient than he knew, Tony Blair is fumbling for the political economy argument in this Vanity Fair interview (thanks to Will Davies for the spot):
For a country like Britain, it’s a great thing for us to have the Olympics here. We can afford to do the Olympics. We’re Britain. We’re not some Third World country.
For countries like Korea and China the message is ‘we’re arrived’. For Britain, perhaps – ‘we’ve still got it’?
So perhaps we’ve been looking for legacy in the wrong place. If it's all about messaging, the biggest economic impacts of 2012 may be the long term boost to British soft power.
The other takeaway is that economists vastly under-estimated the intangible benefits from the Games. Pre-Games analysis suggested the ‘willingness to pay’ was dwarfed by the £9.3bn budget, but our medal hauls in both Games have clearly changed the calculus. Perhaps we should have spotted this coming – Goldman Sachs suggest that host countries typically win 54% more medals than usual. That sporting success doesn’t come for free, as Will points out here. But Team GB’s glorious performances are likely worth several billions in – fleeting? – goodwill.
This post originally appeared on the squareglasses blog.