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19 June 2014
The financial legacy

The financial legacy

The economic benefits of large sporting events are notoriously difficult to accurately assess and are often exaggerated, notes Gareth Rice-Jones, a communications specialist who has studied recent major events. Governments attempt to gain support from taxpayers for what could otherwise be considered an expensive exercise in national pride, he argues.

The Sochi Olympics cost an estimated £30bn, making it the most expensive winter Games in history and far above the initial predicted cost of $12bn. “It seems that the prestige of hosting the Games was more important than their cost-effectiveness,” said Rice-Jones.

Estimates vary for the cost and impact of the London 2012 Olympics. A Lloyds TSB study suggested that they would support a £16.5bn contribution to UK GDP spread over 12 years.
Of this, 82 per cent was expected to result from the pre-Games and legacy construction activity, 12 per cent from tourism and 6 per cent from the expenditure required to stage the event. A post-Games study estimated that the UK economy has seen a £9.9bn boost in trade and investment from hosting the 2012 Games.

“There is no doubt that 2012 helped to kick-start growth in the construction sector and position UK design on a global stage, and if consumer confidence is the bedrock of economic growth, then 2012 may well have delivered a boost at a vital moment in our recovery,” said Rice Jones.

A key component of the economic legacy of the Olympics came from trade and inward investment secured. The UK Government aimed to see £11bn of inward investment, high value opportunities and additional sales for supported businesses by 2016, using events such as the British Business Embassy and overseas campaigns such as GREAT.

“The Games and related promotional activities have clearly influenced perceptions of the UK as an investment destination, instilled confidence in companies about the future of their UK operations and helped UK businesses to access new export markets because of Games-related contracts,” according to a study by Grant Thornton.

In addition, with over 800,000 overseas visitors attending an Olympics event, the Games brought economic benefits to the tourism sector. Although total visitor numbers during Games time actually fell, the high level of spend by Olympics visitors meant that overall there was a net boost of almost £600m to the visitor economy, excluding ticket sales.

Domestic visitors provided a further net boost of over £360m, although it is less clear how far this was additional at the level of the wider economy.

There were signs the Games had a positive effect on perceptions of the UK as a tourism destination. Associated marketing campaigns, such as GREAT, influenced potential visitors’ intentions to come to the UK, which should generate further benefits.

The Grant Thornton report also said the Games represented a “one-off” opportunity to provide workless people with a pathway to sustainable employment. An estimated 62,000 to 76,000 workless Londoners secured temporary or permanent employment as a result of the Games, and there will be potentially significant longer-term impacts, still to emerge, from effectively re-engaging previously workless people within the labour force, it said.

Other less easily quantifiable aspects of the Games longer-term economic legacy included: the potential competitiveness and resource efficiency benefits from the diffusion of the sustainability good practice around the Games; and the innovation, skills and reputational benefits UK businesses gained from delivering Games contracts.

“History shows that sporting events can be beneficial to the economy when delivered within a reasonable budget,” said Rice-Jones. “Sporting events should not necessarily be held during tough times, as the Brazil protests for the World Cup demonstrate. But that aside, these events can have a positive economic impact and a positive social impact.”

That’s what the organisers of the Glasgow 2014 Commonwealth Games, and their partners, will be hoping for; last week First Minister Alex Salmond published a programme of events encouraging Scottish businesses to seize opportunities arising from the Games.

‘Connecting the Commonwealth’, ‘Global Sports Opportunities’, ‘Life & Chemical Sciences Showcase’ and ‘International Market Awareness’ are some of the workshops and events that will take place at Scotland House in Glasgow.

Scotland House partners, including the Scottish Government, Scottish Enterprise, VisitScotland, EventScotland, Glasgow City Council, Glasgow Chamber of Commerce and Glasgow City Marketing Bureau, will host a range of business to business events during Games time. The events aim to promote collaboration and partnerships between sectors, and to assist companies to break into new markets.

Of the £313m Commonwealth Games contracts awarded to date, £257m – 82 per cent – have been secured by Scottish companies. “While this demonstrates the immediate financial gain to Scottish companies of the Games,” said a government spokesperson, “the Scotland House programme aims to galvanise long-term and ongoing partnership and investment by putting Scottish business on a global stage.”

As well as the Scotland House programme, Salmond had invited international buyers to a Showcasing Scotland event; the largest meet-the-buyer event ever coordinated for the food and drink industry. So far, 75 Scottish companies have registered to meet buyers from across the Commonwealth and beyond to showcase their produce and discuss trade and export opportunities.

“With the return of the Queen’s Baton to Scotland last weekend, there is a tangible and mounting excitement around the Games. We want that excitement to extend beyond sporting competition and get Scotland’s business community considering what opportunities the Games can offer them.

“The Showcasing Scotland event will exhibit our first-class produce, underpinning Scotland’s position as a land of food and drink. Scottish food exports are one of our great success stories and this is a fantastic opportunity for international buyers to see the very best of Scotland’s natural larder.

“Our Scotland House business programme has been created to encourage long-term trade and investment and to show the existing support available to companies looking to break into new markets, and to help join the dots between sectors. From education and creative industries to energy and science, Scotland has a wealth of expertise and skill.

“Between the Scotland House programme and the Commonwealth Games Business Conference, Scotland has an exceptional platform to show the Commonwealth there is no better export than our people and our ingenuity. Our Glasgow 2014 Commonwealth Games legacy goes beyond sport and I want to see Scotland grasp those opportunities with both hands.”

Dr Lena Wilson, Chief Executive, Scottish Enterprise, added: “We’ve created a programme of business events around the Games that complements our day-to-day support and includes delivering the Commonwealth Games Business Conference, our Scotland House events and our Showcasing Scotland event. All of these will showcase our country’s most exciting sectors and companies to an international audience.

“We want Scottish businesses to connect with new and emerging international markets to open up new avenues of growth. Throughout this year we have an unparalleled opportunity to build a long-term international trade and investment legacy for our economy using a range of exciting business activity that we, and our partners, will deliver.” 

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