Strategy & Leadership

Legacy 2012

September 12, 2012

Global, Europe

September 12, 2012

Global, Europe
Our Editors

The Economist Intelligence Unit


Understanding the impact of the Olympic games

Report Summary

The excitement of the London Olympic Games is now behind us. With the spectators and athletes gone, and life in London returned to normal, the attention of business people, economists and policymakers rightly turns to the question: What will be the event's business and economic impact? In some respects, the short-term impact appears from a preliminary reckoning to have been disappointing, as overall tourist numbers were down on previous summers and many retailers reported lighter than expected activity. But what of the longer term effects? Just as importantly, what lessons can be learned from these and previous games for future host cities and countries, and the businesses that operate in them? We have sought to address these questions with a series of initiatives begun in May 2012 and culminating with the publication of this report.

The first was a survey of 815 senior business people—conducted by the Economist Intelligence Unit in May and June 2012—in China, the UK and Brazil to gauge their views on the impact of, respectively, the Beijing 2008, London 2012 and Rio 2016 games. Secondly, a global webinar was hosted by Economist Conferences on 12th July which brought together key stakeholders in these three cities and their Olympic events. Lastly, the Economist Intelligence Unit asked other experts to contribute their views on the games' business and economic impact. The latter are presented in this report in the form of essays, and are complemented by selected highlights from the survey and the webinar.

No meeting of minds

Based on these discussions, it is fair to say that opinion on the Olympic legacy is starkly divided. In our discussions the divide manifests itself on two levels—between business executives in each of the three cities, and between policymakers, officials and economists. In
the survey, for example, overwhelming majorities of China and Brazil executives expressed belief that the benefits of the games in their countries outweighed (or would outweigh, in the case of Brazil) the costs of hosting them; less than half of UK executives agreed. Likewise, far fewer UK respondents than those in the other two countries believed their own business would benefit from the games.

This may explain why less than one-quarter of UK businesses in the survey had developed strategies to take advantage of the games. Indeed, judging by the survey, Chinese and Brazilian businesses expected much more of a boost from the Beijing and Rio events.

Several of the webinar participants, including Eduardo Paes, mayor of Rio de Janeiro, and Sir John Armitt, chairman of London's Olympic Delivery Authority, waxed enthusiastic about the positive impact they expected from the games in areas such as job growth, urban regeneration and the resulting contracts that local firms would win. Their optimism was not shared, however, by economist Stefan Szymanski, who termed the economic effect of the games as "trivial" and that on consumer demand as "very short-term". Several of the essays contributed to this report, such as those of Max Nathan, David Kern and Alexandra Jones, are likewise sceptical about the existence of clear economic and business benefits to Olympic hosts, especially in the longer term, although none are as unequivocal on the subject as Mr Szymanski.

If the benefits are as hard to prove in financial terms as most of our economists say, then why host the games at all? Sir John Armitt argued the case for the games as a catalyst of regeneration in east London. Other webinar participants pointed to a positive public-health impact as the games inspire citizens to adopt more active lifestyles. Mr Szymanski poured water on this notion too, however, saying there is no historical evidence of Olympics-related public-health gains.

For some host cities (and countries), softer benefits such as international prestige and boosts to civic morale are likely to be decisive. One of our essayists, Xu Guoqui of the University of Hong Kong, as well as our Beijing-based webinar panellists have all made clear that this applies to China, which celebrated the event as, in Mr Xu's words, "the country's arrival as a major power on the world stage". For Rio, too, the boost to its international image and civic pride may be well worth the economic cost of putting on the 2016 games. The business and economic benefits may (or may not) be fleeting, but the value of pride and prestige is not to be sniffed at.

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