Type of paper: Report

Topic: Workplace, Olympics, England, Economics, Sports, Internet, Infrastructure, Tourism

Pages: 7

Words: 1925

Published: 2020/12/31

<Course Instructor>

An assessment of the economic impact of the 2012 Olympics on London

The UK Olympic and Paralympic games held in London resulted in enormous economic, social and environmental benefits for Britain. These benefits came in the wake of an economic recession that had hit the UK and other global regions at the time. Much of these commercial revenues resulted from trade activities and inward investment on the part of the government in a bid to make London an attractive tourist destination and host of global sporting events. Examples of these investments include transport infrastructure, housing construction, recreational facilities, business development and retail services. Britain spent approximately “£9.9 billion in capital investment” necessary to prepare London and its environments for the games (Damesick, Holberton & Black n.d., p. 4). The bulk of the investment costs was taken up by transport infrastructure that was still lagging behind. The effects of the games on Britain were primarily felt in the labor market, the transport sector and the tourism industry. Nearly a million visitors attended the games resulting in a net revenue of “£600 million” from external tourists and more than “£360 million” from domestic tourists (Thornton 2013, p. 7). Furthermore, the games also provided avenues for both temporary and permanent job creation, offering employment to close to 76, 000 workers. Other indirect impacts of the Olympics included increase in international exposure, trade, local volunteerism, the enhancement of natural environments and empowerment of the disabled in the country (Matthewman, Kamel, & Bearne 2009, p. 4).

Impact on Tourism

The 2012 Olympic and Paralympic games promoted the growth of the tourism industry in the UK. Thornton (2013) estimates the net effect to be £890 million while visitors to the country spent approximately £2.4 billion in attending the games and engaging in other related activities such as cultural events, sporting and scenic viewing. Majority of these visitors came from North America and Europe. A limited number of tourists also came from other continents such as Central and South America, Australia, and the Middle East. National statistical data indicates that the number of international visitors in the third quarter of 2012 was lower than that in 2011. Thornton (2013) attributes this decline to the unprecedented influx of first-time tourists that deterred the regular visitors who feared the probability for overcrowding, competition for accommodation facilities and price upsurges. In macroeconomics, the theory of demand states that prices increase with a surge in demand for ordinary goods and services (Ahlersten 2008, p. 13). In this case, the games attracted millions of individuals globally who wanted to attend the games and support the participants from their respective countries. This population surge, coupled by domestic tourists, put pressure on social amenities such as hotel accommodation, short-term lease housing and recreational facilities. As a result, demand for these facilities exceeded their supply, leading to price increases that made the stay in London more expensive than in the previous years.
The Games also promoted domestic tourism. Recent statistics indicate that residents “purchased 80-85% of the 11 million tickets” sold for the events (Thornton 2013, p. 18). Their monetary contribution to the tourism revenues is estimated to be “£179 million” for domestic day visitors and “£184 million from domestic overnight visitors” (Thornton 2013, p. 18). The Olympics served to highlight the country’s major tourist sites of which the residents were unaware. As the natives arrived from the vast different parts of the country to attend the games, they got exposed to these natural sceneries, recreational centers, and cultural events. Furthermore, evidence suggests an increase in the people’s participation in sports and elite competitions and a more favorable attitude towards the disabled community and their contribution to societal development. This approach is likely to increase internal tourism after the games as more individuals attend local sporting events. The majority of external visitors included “16,500 athletes, 4,000 technical officials, 4,000 Olympic movement officials and 21,000 accredited members of the media” (Oxford Economics 2012, p. 3).
The games also provided a platform for the country to engage in promotional and marketing activities that would make London and other parts of the country an attractive global tourist destination after the games. Promotional activities were geared towards enlightening the visitors about the various tourist destinations located in London and other parts of the UK. Much of the economic impacts of such promotional activities would be felt in the aftermath of the games, estimated to be “79% of the £1.24 billion gain projected to accrue between 2007 to 2017” (Thornton 2013, p. 18). The costs, on the other hand, involved in upgrading tourism destination sites in London mainly stemmed from the creation of the Olympic Park venues, an Aquatics Center, and an Athletes Village. The Village was estimated to cost about “£600 million” in order to house athletes participating in the games (Thornton 2013, p.9).

Impact on the Labor market

Prior to the games, the Lower Lea Valley was a poorly developed region, harboring the poorest segment of the British populace. However, this dire condition changed with the onset of construction activities made by the Government prior to the Olympics. The development of multiple social structures such as the Olympic Park, stadiums and sports facilities in the region provided the local people with employment opportunities. Furthermore, the government factored in training costs needed to impart education and skills necessary for increasing labor productivity. An impact assessment of the games established that the “experience gained by workers before and after the events” improved people’s “employment prospects” in other sectors of the economy (Pricewaterhouse Coopers 2005, p. 10). As such, the games were projected to result in a “net present value of £504 million” over the working years of the over 3, 000 local residents located in the region who were previously unemployed (Oxford Economics 2012, p. 4). Each individual in the area is expected to earn about £40,000 throughout their lifetime. In general, the games generated more than 76, 000 temporary and permanent jobs in the country.
The training interventions also created a positive legacy impression on the labor market through the development of a highly-skilled workforce. The higher the level of individual competence, the greater the likelihood of them being employed and earning higher wages. Furthermore, highly-skilled workers generate more profits for employers through increased work efforts and quality of production that fetch high market prices. Moreover, co-worker can benefit from skill transference in the job environment. Oxford Economics (2012) argues that unemployment leaves a scar on people due to the loss of firm-specific skills they had previously acquired and the lack of opportunities to advance such skills. This situation is highly disadvantageous because most employers view past employment records to “signal individuals’ productivity” thus determine their wages (Acemoglu & Autor n.d., p. 35). The high unemployment rate in the region mainly resulted from the unproductive state of the land and acute recession that had struck the global market.
The present labor market segmentation theory tries to explain the differences existing in the labor market in terms of wages and job responsibilities. It proposes that the labor market is divided into segments, each exhibiting distinct characteristics in their work conditions, wages and promotion opportunities (Reich, Gordon & Edwards 1973, p. 359). When employers use people’s past employment history to determine their wage rates, they are more likely to offer jobs, promotions or higher wages to those with previous work experiences regardless of their competence in relation to those with no job history. This situation can explain the endemic unemployment situation that existed in the Lea Valley before the Olympics. Due to the limited sources of employment in the region, only a few people could secure jobs while the rest remained unemployed or engaged in menial jobs that carry subtle weight within formal employment circles. Thus, the wage disparity between workers in urban areas and those in under-developed towns of Britain resulted in segmented labor markets offering distinct job attributes. The Olympic Games, therefore, assisted in bridging this disparity by streamlining the wage rates and attracting more qualified professionals to this region who imparted their knowledge through skill transference.

Impact on Transport

The transport sector and the infrastructural networks play a crucial role in the economic development. An efficient transport system increases market accessibility by both consumers and businesses, thereby reducing costs production costs while saving on time. Consequently, a reduction in the overall production costs and increase in economies of scale results in a fall in market prices through the multiplier effect. The need for an efficient transportation system in London and its environs was necessary for enabling Britain win the bidding process for hosting the Olympic Games. A variety of transport infrastructure was embarked on prior to the onset of the Olympic and Paralympic games games. Examples include the East London Line, Channel Tunnel Rail Link, Jubilee Line upgrade, a temporary Olympic Javelin and Thames Gateway Bridge among others (Damesick, Holberton & Black n.d., p. 11). For instance, the Channel Tunnel Rail Link (CTRL) was constructed to connect Channel Tunnel with St Pancras station via the Stanford International station – the largest station serving the Olympic Park.
The estimated cost of constructing or upgrading roads and railway lines stood at “£6.5 billion” (HM Government 2013, p. 37). However, the bulk of these transport costs had already been planned for and were underway long before the games. The games only served to accelerate these programs in order to win the bid for hosting the event. Usually, the cost of installing and upgrading the transport network is very high. Such undertakings consume the bulk of government expenditure because of their huge resource requirement. Such resources include a large pool of both professional and unskilled personnel, technological input, geographical assessment and rehabilitation, and large-scale machinery. Despite the costs, the upgrades eased transportation of supplies to and from the hosting arenas and facilitated mobility of people from different parts of the country. Moreover, it reduced the delays and inconveniences caused by traffic congestion since people could access the arenas through several routes simultaneously.
The location of the Olympic Games in the lower Lea Valley was s strategic move to open up the area for economic development. The businesses and constructions that occurred in the region needed a constant stream of supplies that could only occur in an efficient transport framework. Hence, the costs were justified in constructing and upgrading road, railways and underground movement systems to accommodate travels to and from the events. Thus, an efficient transport network promotes economies of scale, mobility of people and factors of production, enhancement of the supply chain, “utilization of geographical comparative advantages” and the redistribution of labor from developed to under-developed regions (MSC n.d.). The Lea Valley, being under-developed and impoverished, the workers in this area were mainly semi-skilled and unskilled people working in menial jobs and the informal sector. Furthermore, the region was largely unproductive due to the pollutant deposits dumped in the area from urban areas. Prior to the games, the British government rehabilitated the land and built a transport network that attracted internal investors to set up businesses in this region. As a result, skilled workers from urban areas could easily move to the Lea Valley to secure jobs.


In conclusion, the 2012 Olympic, and Paralympic games undoubtedly boosted the country’s economy through its multiple effects on several sectors. These positive impacts were distinct in the labor market, transport network and the tourism industry. The games served to open up the remote area of the country to economic development by focusing internal capital investments in the Lea Valley region. This bold move promoted business innovation and development, accelerated construction and housing development, and created massive employment and skill development opportunities for the population. This effect demonstrates that any region or locality, no matter how impoverished it may be, has the capability of developing into an economic hub for the welfare both the people and the state. The games, therefore, helped open up the country to international investors by shaping their perception of the UK as a viable investment destination. Furthermore, the long-term ripple effect of the impacts of the games on investments still shapes the economic future of the UK as the region continues to receive multiple contracts related to global games, and harbor the increasing number of tourists.


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