The Olympic Games in London: Current Cost and Benefit Analysis
In July 6 2005 at 12:46pm UK time, the president of the International Olympic Committee announced that ‘the Games of the XXXth Olympiad in 2012 are awarded to the city of…London.' Thus, London won the bid on organizing the Olympic Games in 2012 after Beijing in 2008.
The Olympic Games are taking place from: 27 July-12 Aug 2012
26 sports/39 disciplines
(Paralympic Games 29 Aug-9 Sept 2012, featuring 20 sports)
With 26 Olympic Sports and 20 Paralympic Sports, it is the equivalent of staging 46 World Championships simultaneously. There are 37 competition venues, with 14,700 athletes, 21,000 media and broadcasters, and 10.8 million ticket-holders.
Even though there was a £2.4bn estimate when London's bid succeeded the budget is now estimated to exceed 9,3 billion
Different cost factors:
- 600 million are spent on security: 20.000 security men, 12.000 police men due to the fear of terror attacks and of another wave of riots
- There is a workforce of around 200,000 people required by the time the London 2012 Games begin. These are made up of 6,000 paid staff, up to 70,000 volunteers and around 100,000 contractor roles.
- Opportunity cost. It is estimated the cost of the Olympic village could cost up to £1billion, there are also ceremonies to be held: the opening ceremony as celebration showcasing the host country, 805 victory ceremonies for the winners of the games and a closing ceremony which includes the Handover from the host city to the next (Rio)
- Construction, i.e. the financial cost of building facilities, may only be used to their full potential for a short time during games so that the investment of 5.3 bn is short term.
- Because of the credit crunch & recession private sector investment has dried up, this increases the cost onto the tax payers. It’s not sure whether the Olympics lose part of its 2.2 bn contingency fund because tax payers had to step in.
Largest part of the money for new buildings and areas:
The Olympic Park'
The London 2012 Games are the catalyst for transforming 2.5sq km of land in east London.
The southern part of the Park will focus on retaining the festival atmosphere of the Games, with riverside gardens, markets, events, cafes and bars. The northern area will use the latest green techniques to manage flood and rain water, while providing quieter public space and habitats for hundreds of existing and rare species.
The Olympic Stadium will host 208 Athletics and Paralympic Athletics events at the London 2012 Games, as well as the Opening and Closing Ceremonies. Construction began in May 2008 and was completed in April 2011.
The Olympic Stadium is located in the south of the Olympic Park on an ‘island’ site, surrounded by waterways on three sides. Spectators will reach the venue via five bridges that link the site to the surrounding area. The Stadium will have a capacity of 80,000 during the Games, but 55,000 places can be removed after the Games.
After the Games
The Stadium is designed to be flexible enough to accommodate a number of different requirements and capacities in legacy. It will continue to be a venue for sport and athletics, as well as cultural and community events – leaving a lasting legacy.
During the London 2012 Games, the Aquatics Centre will be the venue for Swimming, Paralympic Swimming, Diving, Synchronised Swimming and the swimming element of the Modern Pentathlon. 192 events in total, located in the south-east corner of the park.
It is part of the ‘gateway’ to the Olympic Park, with more than two-thirds of spectators expected to enter the Olympic Park over a vast bridge that runs over the top of part of the venue.
During the Games. the majority of spectators will be seated in two temporary wings that will be taken down after the Games. After the Games the Aquatics Centre will be transformed into a facility for the local community, clubs and schools, as well as elite swimmers.
Funding the Games
The London 2012 project is delivered by two key organisations - one private, one public.
A privately funded Organising Committee
The London Organising Committee of the Olympic Games and Paralympic Games (LOCOG) is the private sector company responsible for preparing and staging the 2012 Games.
It has a £2bn budget coming from several sources: IOC as well as generating its own income from sales of tickets, merchandise and sponsorship programme.
Sponsors are for example Coca-Cola, McDonald’s, Samsung, BMW, British Airways, Heineken or UPS
A public sector delivery organisation
The Olympic Delivery Authority (ODA) is the public sector body responsible for the delivery of the new venues and infrastructure required for the London 2012 Games.
Funding of the ODA
The ODA is funded by the Department for Culture, Media and Sport, the Greater London Authority, the London Development Agency and the Olympic Lottery Distributor.
(The Department for Culture, Media and Sport
The DCMS is responsible for managing central Government funding for the Games and wider regeneration costs. In addition, the DCMS is also responsible for bringing together the legacy benefits brought by all the wider sporting, cultural, environmental, educational and business enterprise initiatives that will take place all over the country as a result of the Games before, during and after 2012.
The Greater London Authority
The Greater London Authority (GLA) is working to deliver the Mayor’s objectives for the London 2012 Games, and ensuring that hosting the Games brings the best possible benefits for Londoners.
The GLA is contributing £925 million to the Olympic Delivery Authority. This money will be spent on the regeneration, infrastructure and facilities that will continue to benefit Londoners for generations to come.
The London Development Agency
The London Development Agency (LDA) is the Mayor's agency responsible for driving London's sustainable economic growth and is involved in the 2012 Games to ensure that London and Londoners maximise the long-term benefits that hosting the Games will bring. )
Thus, the revenue for the games was projected:
- £1.5 billion from a special Olympic National Lottery game.
- £625 million from a council tax surcharge of £20 per year for London households.
- £560 million from IOC television and marketing deals.
- £450 million from sponsorship and official suppliers.
- £300 million from ticket sales.
- £60 million from licensing.
- £250 million from the London Development Agency
Benefits of London Olympics in a wider aspect:
- Provides Jobs and Economic Activity. Important in times of a recession, when the private construction sector is in a steep decline.
- Hosting Olympics boosts the prestige of a country, it will provide a boost to tourism and travel to London.
- Building Olympic park has helped to regenerate the East end of London. In addition to that, the Olympic park will partly give way to a legacy of more available homes, to help ease London housing shortage.
- There is a lasting legacy of the Olympics. East London has new rail lines (Dockland light railway extension) and improved public transport, including improved international rail station at Stratford.
- Outside of London the success has not been universally welcomed, fearing that the event will divert funding from the rest of the country and that the rest of the United Kingdom will be forced to help fund it, for no benefit.
- high costs of the Olympics and the £20 per year council tax rise
Yes, it might end up costing the taxpayer a lot. But, £1bn is less than 0.1% of total GDP. The Olympics may well make an economic loss in the short term but it’s a once in a lifetime opportunity. The Games encourage people to do sports and also support sports on a professional basis.