Woo-hoo, the year of the London Olympics has dawned, and already the hype machine has been cranked up another notch. The Times, in its self-appointed role as cheerleader-in-chief for David Cameron, devotes its front page today (paywa££-protected) to a story headed "An Olympic revival", in which it seems to suggest that Cameron expects the Olympics to give the British economy a kickstart. Actually that's not what Cameron said in his new year's message. Here's how the BBC reported it:
The prime minister looked ahead to the "global drama of the Olympics", which will be held in London from 27 July to 12 August, and the "glory of the Diamond Jubilee", which will mostly be commemorated for three days from 2 June.
"Cameras and TV channels around the planet will be recording these magnificent events. It gives us an extraordinary incentive to look outward, look onwards and to look our best: to feel pride in who we are and what - even in these trying times - we can achieve," said Mr Cameron.
Cameron is right to be circumspect. Most of the direct benefit to the economy from the £9 billion Olympic project has already been felt during the construction phase, which is now almost at an end. The period of the Games themselves may well dampen economic activity slightly. For a start, the organisers are asking Londoners to cut back on travel during the Games in order to avoid overloading the transport system. A 20% reduction in normal commuting is apparently needed just to prevent the system from seizing up entirely. It's hard to see how the city's economy, which is the driving force for the entire country, can fail to be affected by that.
Then there's the impact on tourism. A few weeks ago one of the organising committee said something to the effect that "the Games are not a tourist event", which I'm pretty sure is not what they told Tony Blair when they petitioned him to support the bid for the Games. A lot of people will be coming to London to catch the action, but there's every likelihood that overall tourism in the UK will take a hit as others stay away in order to avoid the crowds. One clue that this may be happening: London theatres are reporting a huge drop in bookings for the Games period. Many theatres may even "go dark" for a few weeks, rather than stage performances at a loss for half-empty auditoria. That in turn will have a knock-on effect on some of the pricey eateries that serve the theatre crowds. And all of this is without even talking about the large number of Brits who will jam the airports to get the hell away just as the Olympic tourists arrive.
By and large, the impact of one-off events tends not to be all that meaningful when GDP data are tallied. I've written more than once here in the past that headlines like "Tube strike costs economy £500 million per day" are usually way off base. The "lost" output is quickly recovered. To some extent that will be true of the Olympics as well. Companies are already planning how to cope with the transport problems, and most of the locals who take holidays in order to avoid the Games will simply be changing their vacation time, rather than taking additional leave. Still, this is not just a one or two day blip like a Tube strike. This is a whole month or more we're talking about, if you include the Paralympics. It's very hard to see how this doesn't dampen GDP in the third quarter of the year, at least marginally.
And, in the words of Captain Beefheart, "whaddabout after that?". The Australian development company that has built the Westfield shopping mall close by the main Games site has claimed all along that their palace of consumerism will do much more for the regeneration of East London than the Games will. They're almost certainly right about that.
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