The primary objective of this dissertation was to find out the socio-economic benefits and impacts of the London 2012 Olympics for London since development and regeneration began in 2007. As such, this dissertation aimed to identify the associated advantages and any negative impact of being the host of an Olympiad, but at this stage of the research made no forecast about the scale of impact. As a result while the dissertation progresses there will be arguments, analysis and evaluations to establish whether there is justifiable cause for the UK government and LOCOG spending billions on a one off event, all in the name of aiding social welfare and economic advancement.
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This dissertation initially provided an overview of both earlier and continuing research to aid the discussion around aspects of legacy and economic growth since 2005 consistent with the argument of Veal and Frawley (2009). Drawing on the lessons from past Games, this dissertation will also focus on the three phase economic benefits of the London 2012 Olympics. Establishing the impact of the Olympics on residents and countrymen alike was another aim in the dissertation. For this dissertation this inquiry was carried out in form of a survey. The results revealed a great deal, firstly it showed that the younger generation found inspiration from the games with 71% of respondents stating they would take part in some form of sport and exercise. Additionally the results also showed most of the respondents were unsure whether the games were value for money this resonates with the thoughts of Dennis (2012). The most astounding revelation was that 66% of the respondents believed the games were inspirational, captivating and moreover worth all the cost. The dissertation brought to light that the London 2012 games are more socially and economically beneficial at the pre-game and games year but these benefits and impacts are not proportionally evident elsewhere in the UK. The post-game phase analysis showed that there was great uncertainty in regard to economic growth and legacy of Olympics, with Greece 2004 an example of when things go wrong. Despite this, there is still room for further research on the social impacts of Olympic Games.
CHAPTER 1: INTRODUCTION
“The Olympic Games generates lots of enthusiasm and great expectations. More than simply a sporting event, hosting ‘the greatest show on earth’ is seen by some as a ‘once in a lifetime opportunity’ to provide new infrastructure and deliver benefits to local residents and communities.” (Vigour et al, 2004)
From the time when Pierre de Coubertin, founded the modern Olympics in the late 19th century, cities and countries have sought to redefine themselves by staging the Olympic Games. To the host country, the games offers global exposure and world’s interest in its cultural wealth, creating job opportunities during and after the games, attracting revenues from tourism, and inspiration for the nation. Included in this search for Olympic glory was the Great Britain. After three consecutive failed bids, the Olympics were finally awarded to London on the 5th of July 2005. The optimism and passion towards the London 2012 project from the bid team became infectious spreading across a nation that was very much inspired and expectant. Despite this, once London’s name was pulled out the proverbial hat, critics like Gross (2012) and Dennis (2012) led the great Olympic inquisition in the years after the bid was won. Gross (2012) describing the bidding process of London 2012 as a gruelling and often farcical campaign, that accompanied itself with a £11.5bn tab. He said “the true extent of funding has been hidden, the process is hardly transparent?”
However earlier in 2005 it became apparent that the funding would be from both the public and private sectors. According to the Olympic Delivery Authority (ODA) (2005) a £2bn fund coming from London Olympic Committee Organising the Games (LOCOG) was accrued from the private sector through a combination of sponsorship, merchandising, ticketing and broadcast rights. The ODA (2005) budget which catered regeneration and infrastructure projects was from the public sector, the funding was the breakdown was as follows;
63.3% from Central Government
23.3% from National Lottery
13.4% from the Mayor of London and the London Development Agency
Additional criticism emanated from the France 2012 bidding team, they indicated that London’s bid was based on “promises not linked to reality” (Moulds, 2009) as they believed the budget was cut too low. Monroe (2007) was in agreement after researching Olympic budgets of the past four Olympics, she too said the budget was ambitious to say the least. An aura of vindication befell the critics as it came to light that the London 2012 Olympics budget was not going to plan. The Olympic budget soared from £2.4bn to £9.3bn in 2008, leaving only £475m in the contingency fund (BBC, 2012). However, LOCOG and ODA stated this was not frivolous spending but rather a means to an end. The Games were targeted as a stimulus for social development and economic growth alongside being a ‘step-change’ in the transformation of the East End of London. Per se bidding for the Olympics is a calculated risk that can either turn to gold or leave the hosts in the starting blocks.
More related to the scope of my study, is the socio-economic contribution of an Olympics and the post games legacy. Ascertaining this will be done by exploring the economical, geographical and social implications for London as the host of the 2012 Olympics. The reason for the focus on London is in line with the Barton (2004) report that highlighted that for large economies such as the United States and United Kingdom, the economic impact of hosting major sporting events appears to be more significant primarily at the local or regional level, fewer impacts seen in cities beyond the Olympic Hubs. What is also noteworthy is that this dissertation not only seeks to establish the socio-economic impacts of hosting the Olympics, but also to determine how sustainable these benefits are in the future through a three phase economic assessment. In other words how the games can maximise the so called “legacy”. The challenge however lies in how to measure and quantify future rewards of an event that has just happened. Magnay (2009) perhaps offers an insightful elucidation of this paradigm. Magnay (2009) states that in their simplest forms, socio-economic impacts are either tangible or intangible. In essence this means that the pre-games and games-year phases show evident tangible benefits such as physical infrastructure, the tourism, employment and consumer spending. On the other side lie the intangible benefits or the ‘legacy’, evident in the life after Olympics. In the post games there is greater uncertainty in particular for London 2012 as a consequence of the current economic downturn.
One of the challenges encountered in this research is the scarcity of studies that look at a link between socio-economic agendas and the legacy. In principle a theoretical gap with which my dissertation aims to tackle, following the works of Blake (2005), Barton (2004), Gratton and Preuss (2008). This dissertation will also contribute in no small way towards complementing literary and traditional ideology on the legacy, socio-economic impacts of Olympic Games. This is in hope that this dissertation could serve as groundwork for further research in the study of hosting global sporting events. Nonetheless, hosting the Olympics is certainly a pricey business; as a result of this it gives a basis to create an opportunity to conduct such research (Blake, 2005). Additionally away from the academic exposure and learning experiences derived from the research, this dissertation will be providing an informed insight into the chosen area of study.
CHAPTER 2: AIMS AND OBJECTIVES
Magnay (2010) stated the LOCOG chief executive has previously indicated, ‘the games are a principal asset to the country’. As a result of this statement there is a need to establish if the games are truly asset or a burden. This can be done by showing whether hosting the Olympics amounts to a greater socio – economic benefit in comparison to the incurred cost from inception through to the eventual clear up. Additionally the dissertations will investigate the factors which justify the increase of the Olympic budget during a significant and sustained economic downturn. Since the International Olympic Committee (IOC) is the lead committee for both summer and winter Olympics, to arrive at a suitable conclusion the aim is to use statistics and other information relating to both these variations of Olympiad as relevant sources of adding to the ensuing argument. This is because the bidding, planning, organisation and funding protocols all follow the same procedures, as a result comparisons can be done in regard to procedure and protocol. However what is pertinent to point out is that any comparisons between London and winter Olympics will be limited to social impacts and cost overruns.
OBJECTIVES
This dissertation is an opportunity to present an unbiased view on the London Olympics and the possible impacts, while making an informed judgement on it according to the evidence presented. This dissertation will raise important economic, political and social issues surrounding the Olympics and possibly give further insight to the following areas.
To identify the nature, characteristics and features of sporting mega-events, with specific reference to the London 2012 Olympic Games.
To critically review the literature on cost, impacts and benefits of hosting the Olympics, eventually leading to an appropriate conclusion that summarises the extensiveness and complexity of the concepts surrounding socio-economic impact of the London 2012 Olympics.
To evaluate the net benefit of “the Olympic Spectacle” to London from the perspective of tourism, employment and redevelopment view point.
To identify the risk alongside the challenges and implications of hosting the Olympics by looking at previous host cities such as Greece 2004, Sydney 2000 to name a few.
To ascertain the thoughts of Londoners and the wider UK population on issues regarding the economic, social, health and environmental benefits of the Games particularly through regeneration and sustainable development in London.
CHAPTER 3: LITERATURE REVIEW
Expenditure on facility and infrastructure preparation, as well as revenues from visitor spending, event receipts and media exposure, forms the baseline of much mega event analysis.” (Hiller, H 2000).
Thе socio-economic evaluation of the Оlympicѕ is of importance to the hоѕt city, itѕ rеgiоn аnd to a lesser extent cоuntry. This by is far is the primary driver for assertiing thе vаluе оr wоrth оf hоѕting thе Оlympic Gаmеѕ (Carlin, 2007). The depth of the possible factors affecting London as a result of the Olympics are well beyond the scope of this dissertation, and therefore briefly looking at these vast factors will not evoke the thoughts and arguments desired to deliver a good literal critique. As a result my dissertation will be looking to expand on the academic and research issues in relation to the benefits of hosting the Olympics. It is fair to say that there are complexities surrounding this subject matter, nonetheless the investigations and research conducted during the dissertation aided by published material and resources will help to develop the argument about socio-economic benefits of Olympics.
Over the years there has been a flurry of academic literature including the likes of Bellamy (1995) and Collins (1997), their research assessed the economic impact of global sporting events to the host city and in some instances the wider economic impact on the nation. However much of the literature on major events is concerned with the economic impacts, McLeod (1999) also explored broader issues including sports participation, social impact, and urban regeneration. On the face of it these studies championed the hosting games as a very strong catalyst of economic growth and society improvement. In other words this research was very ‘pro Olympics’. Other proponents further augmented the short-term and long-term benefits by stating the Olympics will birth benefits such as construction of venues, facilities and improvement of infrastructure the trickledown effect of these is increased tourism, as well as improved public welfare and job creation (French and Disher, 1997; Rose and Spiegel 2009). Moreover Spiegel (2009) states that the ‘Olympics Economic Effect’ results in an injection to economic growth thanks to the foreign investment and Olympic tourists. This results in higher tax revenues for the government.
In contrast Hiller (1998) argues against this by stating there is a lack of comprehensive analysis; the focus of these previous studies was on positive benefits, while negative impacts are largely hidden. Other scholars (Noll and Zimblist 1997, Rosentraub 1999, Baade 1996), unearthed some disparities with this previous research and they found that the tangible economic impacts of Olympics were being overstated and often the measurable economic impact of Olympics is very small in relation to the wider economy but was however more evident in the host city or region (Barton, 2004). As stated before the vast majority of publications that focused on the merits of mega events were derived from a variety of empirically and statistical models that looked at both pre-event and post-event benefits. This dissertation does not intend to employ such techniques regarding the subject of Olympics; rather, focusing on a qualitative approach to these stated benefits.
More often than not the Olympic Authorities make their bid consideration based on the economic and social advantages of these said events. However before delving into the depth of the research, it is important to establish what is meant by socio-economic impact. Cullum (2007) described socio-economic impact as a way to determine how development projects, i.e. Olympics, might affect the social and economic conditions of people and communities. In essence the trajectory of such impacts will be inclined towards regional economic boost, social regeneration, and lastly bringing communities together. Even so, Carlin (2007) reiterates that taking on events such as Olympics and World Cups is a predetermined hazard. In a way it is possible to argue that the British Olympic Association (BOA) was caught up in the promise of bountiful riches, global exposure and getting one over the French when they pursued this venture.
This over exuberant was reflected in the continued revision of the Olympic budget. London expected its 2012 Games to cost under £2bn at the bid stage but the budget rose to £9.4bn in 2007 and in 2012 it was expected to exceed £11bn (Carlin, 2007; Simon, 2006; Dennis, 2012). So is London 2012 likely to suffer as a consequence of underestimated costs and overestimated benefits? In order to tell whether the London 2012 Olympic budget and investment are justifiable, it is necessary to examine some key benefits. These key issues will encompass areas including economic, social and health benefits that the Olympics bring to a host city and country.
3.1. SCOPE OF STUDY
Before 1976, there were not many studies of the economic benefits of hosting the Olympic Games (Field, 2007). Since then, PriceWaterhouse Coopers (PWC) alongside other researchers offered a glimpse into these Olympic economics. In the summer Olympic Games held from 1984 to 2008, the findings showed varying degrees of measurable economic success. Some of this was as a result of estimates regarding the economic and demographic impacts of hosting the Olympics (Malfas et al, 2004). The challenge however was the difficulty in quantifying any economic benefits; even so studies (Blake, 2005; Malfas et al 2004; Szymanski, 2010) show that in terms of the economic impact of hosting an Olympics, the definition of Olympic Economy has been flippantly used as a result distorted its true meaning. Through using a three-dimensional and three phase impact study, Matos (2006) alongside Wei (2006), found that these purported benefits were combination of the pre-game phase, the games-year and subsequently the post-games phase. There are short-term benefits occurring at the pre-games and games year phases. The post-game phase is characterised by the anticipation of long-term benefits that are less tangible, those come about owing to the promotion of the London as a tourist destination and a potential location for investment. Gornostaeva (2011) added to this by stating Olympics are not merely a glorified sports day; a means of image building or competition between cities but a very useful instrument to aid socio-economic advancement.
Nevertheless, Dennis (2012) once again argued against this by affirming that the research on the economic benefits at times focuses only on the financial performance of games. As a matter of fact they present narrow focus on the economic performance of the Games (Malfas et al, 2004); it eventually forgoes examination of vital links between Olympics economics and wider factors affecting communities, business and stakeholders within the host cites. Economics of London 2012 by Szymanski (2010) is one study that offers a broader examination of the varying economic impacts. Szymanski (2010) stated employment, tourism, consumer spending and GDP movement are the main barometers of success in regard Olympic Games economics this will be explored in the dissertation accordingly.
3.2. ECONOMICS OF LONDON 2012 OLYMPICS
Employment
“The London 2012 Olympics will be the biggest civil engineering project in Europe, create more than 30,000 new jobs a year, and pump an extra £20bn in the UK economy, to cement London reputation as one of the world’s main financial centres”
Ahmar (2008) indicated that employment is probably the best definition of what is considered one of the main centrepieces of economic indicators. He expand further by stating the employment impact depends on the characteristics of the host economy, the size of the labour force, and the state of the labour market which later determines the sourcing of labour. This is because it mirrors trends in both the economic and social dimension. On one hand a higher employment rate implies a higher disposable income rate, optimised utilisation of labour force and boost in consumer spending. On the other hand the social aspects of employment are reflected through health and life expectancy for instance. But Wagner (2007) questioned what this meant for London as a whole. ODA (2009) estimated that it is likely to spend around £2bn in temporary employment of staff, security, and they also stated that 45% of the labour force will be recruited from the Inner, Outer and Greater parts of London. The economic impact of previous Olympic Games and the employment opportunities on the host cities are shown in table 1.1.
Table 1.1: Economic impact of Olympic Games and Employment opportunities on the host cities.
£ (million) Economic Impac
Cumulative Jobs Created**
Barcelona (1992)
190
196,640
Atlanta (1996)
30
77,026
Sydney (2000)
2,884
90,000
Athens (2004)
3,589
100,400
Beijing (2008)
3,500
180,000
London (2012
2,000
132,000
TABLE 1.1 SOURCE: ODA (2008) *CUMULATIVE JOB FORECAST
Barber (2008) and Brunet (2008) observed the employment trend from 2006 till 2012; they found unemployment in East London had dropped by a margin of 41% (Barber, 2008). The ODA had previously forecasted at least 55% of the useable labour resource will be from London by the time the games arrived in 2012. But there were contradictory sentiments emanating from the local councils. According to the Hackney Citizen (2012), ODA promised jobs were to be created for the many local people in London but this would seem not to be the case. It was found there was a disproportionate distribution of opportunities among the unskilled, semi-skilled and specialist jobs. This is because the majority of jobs available suited specialised workers, because building stadia and arenas requires workmen who specialise in building and engineering services as opposed to the local carpenters and builders.
Gornostaeva (2008) also shed light on the possibility of the discrepancies of these figure; he stated that ODA employment estimates included volunteers because these opportunities were identified as volunteering work targeted to get the unemployed people to do low skilled jobs at the Olympics. With this sentiment he argued that volunteers should not be included in the employment figures because volunteers were trained for specific low skilled jobs. Moreover, there was little or no evidence showing that these volunteer skills were transferable to the post-Games economy. Despite these reservations, 2012 continues to reflect a significant drop in the rate of unemployment across the capital, with more evident employment rises occurring in the host boroughs (Barber, 2012). Table 1.2 shows a summary of expected impacts on employment. The employment estimates use similar assumptions as those used in the macroeconomic impact assessment by Blake, (2005) and PWC, (2005)
Table 1.2: Summary of expected impacts on employment from years 2005 to 2016
Spatial Level
*Pre-Event
(2005-2011)
During Event
(2012)
Post Events
(2013-2016)
Overall
(2005-2016)
UK
2,955
3,261
1,948
8,164
London
25,824
3,724
9,327
38,875
North East London
7,344
311
311
7,966
TABLE 1.2 SOURCES: BLAKE, 2005; PWC, 2005. EMPLOYMENT FIGURES
Of course it can be argued the games are achieving one of their primary objectives but research pertaining to Olympic induced employment advises caution (Baade and Matheson, 2002; Ahmar 2008). Baade and Matheson (2002) revealed that prior to the event and leading into the Games year employment also shows a boom. Madelano (2012) expanded on this by stating that there is a disproportionate rise in employment coming from London, leading some to believe that we are floating inside a rose-tinted Olympic bubble. With this in mind, does London have the resources and strategy to sustain post Olympics employment?
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Beth (2012) paints an ominous picture with the headline ‘Olympic Jobs Legacy Misses Target’, the government had two key schemes set up in 2010 intended to get unemployed people into jobs during and after the Games. However these initiatives have been dogged by delays and cuts in funding. This contradicts Boris Johnson’s pre-election promise to provide jobs. Irrespective of this, some of the researchers (Gornostaeva, 2008 and Beth 2012) have shown that the benefits employment as a by-product of Olympics are over-estimated but this does not mean that there are none. It would therefore be of interest to gauge whether the locals believe that the post-Olympic job promise has been fulfilled.
Tourism
The economic benefits of the Olympic Games as direct result tourism are widely researched. They are routinely listed among the principal “legacy effects” of hosting the games, along with new age sporting facilities, cultural and social investment and improved infrastructure (ETOA, 2008). The burst of tourist interest in relation to the 2012 Games was the USP for the ODA and LOCOG because the London economy and society are said to be the key beneficiaries. Early estimates in 2008 predicted that the “visitor economy” would be at least £2bn. PWC (2008) claimed the Olympics would attract induced visitor numbers thanks to “enhanced media exposure”. They outlined three stages of the tourism effect.
Preâ€Olympic tourism – This is typically described as taster tourism effect. This is because the visitors at this point in time are related directly with the planning and preparation for the games.
Eventâ€time tourism – Also as the games year tourism. This stage is characterised by two types of tourist. The first are leisure tourist- they travel to see the Olympic villages and park. Whereas the sport tourists travel to actually see the events and make the biggest proportion of foreign ticket purchasers.
Postâ€Olympic tourism – PWC (2008) state this type of tourism is characterised by two important sources: Gamesâ€prompted private leisure tourism and soâ€called MICE (meetings, incentives, conventions, events) tourism.
Even if we did assume that tourism could be enhanced by the Olympics, what sort of evaluation timescale is appropriate and what sort of empirical information is meaningful? (Dimeo, 2009)
The London 2012 Olympics will no doubt attract foreign visitors in their thousands; the longstanding argument is that their increased spending brings a boost to the local economy. Shaun Woodward, the then tourism minister, in 2006 said “the tourism potential is enormous”. Grohmann (2010) of Oxford Economics forecasted the arrival of 379,156 foreigners in the period pertaining to the Olympic Games. Others have felt that up to 800,000 extra visitors (Visit London and Visit Britain 2010) would be drawn to the capital because of the Games. It is important to note that visitors create the single most important economic benefit to Olympic host cities. The only issue surrounding tourism data is that unlike investments for infrastructure, tourism expenditure is not recorded or controlled centrally. Nonetheless Wallace (2010) produced the table 1.3 that showed the three phase impacts of Olympic tourism.
Table 1.3: Impact of London 2012 Olympic Games on Tourism
Pre-Games
Games Year
Post Games
Year
Year
2008
2009
2010
2011
*2012
**2013
**2014
Visitor Number (million)
14.5
14.9
15.2
15.6
16.2
15.4
15.6
Total Spent (£ billion)
1.3
1.4
1.5
1.6
2.0
1.7
1.4
Avg Spent
1.5
2.0
1.6
Growth %
–
2.9
1.8
2.7
3.7
-4.9
1.3
Avg Growth Rate per Annum %
2.5
3.7
2.6
TABLE 1.3 SOURCE: WALLACE (2010) *FORECASTED IN 2010 **FORECASTED 2011
The table 1.3 revealed a trend similar to that of Athens 2004 and Beijing 2008 Olympics. The trend was characterised by an increase in visitor numbers 4 years prior to the Olympics because of the pre-games events held most notable in 2010 and 2011 with an eventual decline after 2012. Wallace (2010) suggested that because London is a central tourist hub, it would generate just over £10bn in tourism revenue in those three aforementioned games phases. Steward (2008) adds to this by saying that Olympic tourism is a cash cow because not only does tourism bring in revenue but it puts great emphasis on the social and cultural benefits that arise from hosting games. Steward (2008) also adds London is unlikely to cause tourist displacement, because without the Olympics, it is still an attraction in its own merit.
ETOA (2008) bring another viewpoint in regard to argument on the benefits of Olympic tourism. ETOA (2008) found that hosting the Games might actually have a negative impact on tourism to the host city. They state that there has been difficulty predicting the number of foreign visitors in some earlier studies such as Papanikos, 1999 and Dwyer et al 2003. The scarcity of empirical research limited the extent to which Olympic tourism impacts were examined, as a result most of the analysis was conducted through case study discussions. Weed (2007) found it difficult to provide information even on the basic question of whether the host city experienced a longer term boost to its tourist economy. The trickledown effect of this gap in literature is that the more challenging issues, like the negative impact on other tourist destination in the same country, are not addressed (Dimeo , 2009). In spite of these concerns, supporters for sport-related tourism uphold the conviction that holding the Olympics can bring widespread tourism associated upshots. However, this debate is not just about the host city, it is about the Olympics as the linchpin in a global tourism marketplace (Dimeo, 2009).
ETOA (2008) supports this by adding Olympic tourists are unlike regular tourists, they are not interested in tourism, and they are interested in sport. These said tourists spend less on non-Olympic recreation activities; the trickledown impact of this will significantly affect government revenues as these negated activities include specific taxes on alcohol and gambling (Blake, 2005). So their spending habits are very unpredictable and difficult to forecast. As such this unpredictability has been quite evident with London 2012 tourism market. As recently as July 2012, the government revealed that visitor numbers were not meeting the expected targets. This therefore means the likes of Wallace (2010) and Steward (2008) were off the mark. In comparison to the last two Olympics, the London Olympics brought less tourist revenue to recession-hit Britain which was a sharp contrast to the expectation set out by ODA. The reason behind London’s apparent tourist short fall is a result of London effectively closing for normal business. For that reason both tourists and the residents are scared off immediately before and during the events because of overcrowding, transport disruption amongst other things. This absence in the market then creates its own negative effect across the region. In line with sentiments Dimeo (2009) and Wnorowski (2011) , although Olympic tourism has it benefits, post 2003 studies found that growth in Olympic tourism dropped in games year and most significant drop was immediately after hosting the Olympics. The disparity between government expectation and reality leaves a quandary for future Olympic tourism studies.
Conceivably a benchmarking criterion is needed to ascertain how to weigh up tourism input benefits. These benchmarks could be offset against the cost of construction facilities, how these facilities can be transformed for community use after the event and the general disruption to the host city. When it comes down to it many of the claims about Olympic tourism impacts are based primarily on the increased tourism experienced in Sydney 2000. Blowe (2005) adds to this by saying what the proponents of these Olympics fail to consider is that London is among some of the major Central Business District (CBD) in the world, however it also houses a rather inadequate transport system. Therefore rather than spending vast sums on this one event, improving the Tube and rail network would provide a bigger boost for the city and the country directly influencing tourism.
Olympics and the host city economy
As far as the definition of Olympic Economy is concerned, there have been several opinions by scholars. Most notably Carlsen (2003) explained Olympic Economy is the direct and indirect revenues that come about as a result of hosting the Olympic Games. Alternatively Chalip (2005) said it was a focused Economy, which promptly boosted the economy of host ci
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