July 26th, 2012
04:28 PM GMT
London (CNN) – The British economy is shrinking far faster than expected. The latest figures - showing a 0.7% contraction - are a huge shock.
The rotten weather, extra days off for the Diamond Jubilee and contagion from the eurozone crisis have contributed: Now even UK Chancellor George Osborne is conceding the country has “deep-rooted economic problems.”
Jeremy Cook, chief economist at foreign exchange company World First, points to the eurozone’s hoovering up of government cash as one issue. Government spending is meant to be dropping but is instead increasing, he says. “We’ve said the situation would get worse before it gets better, anything worse than this and we are risking depression,” he warns.
Oh dear, what a gloomy picture. But at least London is hosting the Olympics, right? British Prime Minister David Cameron has declared the games in London will bring great spoils: Around $20 billion, we’re told. Banks, restaurants and retail outlets have staffed up, helping nudge unemployment to a nine-month low.
Yet, despite these claims of impending financial joy, there is no set way to analyze the costs and rewards of staging the biggest international sporting event in the world.
One way to calculate likely impact is by through looking at other cities which have hosted the games.
Barcelona might claim the gold medal, while Athens would probably take the booby prize. Sydney - regarded as bearing the closest resemblance to London in terms of the bid process and focus on regeneration and job creation – was boosted in the run up but there was little benefit after the event.
Some number-crunchers are looking to measure the economic impact on the basis of quarterly growth comparisons. According to Blerina Uruci, analyst at Barclays Capital, the impact of the Olympics will be limited. Uruci says a likely small boost - she estimates 0.1% bump - from ticket sales could be offset by cuts in other spending.
So, despite splashing the cash to stage London 2012 (the British government’s budget has swelled to $14.5 billion from $3.7 billion), beyond the feel-good factor of being linked to a celebration of athletic prowess, the Olympics are often mis-sold.
This reminds me of a conversation I had with International Olympic Committee President Jacques Rogge in July 2005, in Singapore, when London was bidding for these very games. He told me the committee only cared that the hosts delivered on time. Delivering on-budget was a distant consideration, let alone a deal-breaker.
I don’t want to be a merchant of doom. There has been enough moaning and whining about everything from tickets to transport to security.
There is a ray of hope for the UK economy while the world is zoned in on London: Shopping.
The government has lifted the Sunday trading laws for some shops in England and Wales until the end of the paralympics. The onus is back on us - the consumers - to spend our way out of recession. Perhaps the government should consider making these “summer opening hours” a permanent thing to show that Britain is open for business all year round.
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