The economic impact of the London 2012 Olympics and Paralympics games on the UK economy

Introduction (200 words)

The assessment of the economic impact of the London 2012 Olympics and Paralympics games to the host economy, region or city is an important aspect of the entire assessment of the worth of hosting the Olympics games to countries in future. The evaluations resort in reports that are essential in the fundamental stages of the Olympics bidding process. It is of critical importance that the host city and economy is fully aware of the scale of the economic impacts both positive and negative that are attributed to hosting the games. This enables the host economies to make critical decisions pertaining to promotion of the games in the local perspective as well as a c cord the organising committee a wide range of benefits so that they can have informed comprehension of the extent of the costs and benefits of hosting the games (Davis  2012).

This study seeks to conduct a measure of the economic impact of the London 2012 Olympics and Paralympics games on the UK economy as well as the surrounding nations and regions. It narrows down on the period from the day the International Olympic Committee’s (IOC) awarded the 2012 Olympics and Paralympics Games to London in the year 2005 to five years after the games i.e. in the year 2017 in order to spot the long-lasting effects of the games (Downward, Dawson  & Dejonghe  2009).

The financial performance of the organisers of the event is quite a narrow definition of the economic benefits of hosting the Olympic games. The broader perspective of the games will entail the effects of the visitors on the domestic economies as a result of the expenditures, developmental benefits of the infrastructural investments as well as the long-term legacy benefits as a result of exposure to international media years before, during and after the games. The impact of the aforementioned factors on the UK economy and London city are the subject of the assessment of the economic impacts (Great Britain Parliament  2010).


Literature review (500 words)

Brown and Massey (2005) indicate that hosting the Olympics does not at all time bring financial rewards to the host economies. For instance the 1972 Munich Olympics and the Montreal Olympics in the year 1976 recorded losses of £178 million and £692 million respectively. On the other hand the 1984 Olympics held in 1984 and 1992 Barcelona Olympics recorded surpluses of £215 million and

£2 million respectively (Davis 2012).

The high economic performance of the event organizers and the greater economic impact of the games is attributed to the larger mass market for the goods produced locally mainly due to the television rights and the higher costs of games characterized by significant number of competitors. This results in increased expectations for the venues of the games hence justify the high costs which in turn increases the revenues (Davis, 2012).


For an effective economic impact assessment, the effect of the games on spending ought to be established. The spending is by parties such as the organizing committees and the individuals; teams and spectators. Organizing committees spend on infrastructural spending in the period before the games and the spending during the games. Individual expenditures arise from transport, accommodation, food and entertainment, expenditures by spectators, athletes, officials and media personalities representing the mainstream media outlets. There has to be a distinction between expenditures by residents and the non-residents (Great Britain Parliament  2009).

The expenditures need to be ranked by product and how the expenditures translate into income and employment. Berman et al (2005) examine the impact on the prices in the stock market following the IOC decision in the year 1993 to award Sydney the 2000 Olympics. The results of the study indicate that there was no aggregate impact on the stock decision; but the share prices in particular sectors such as the building materials, developers and contracts, engineering and other logistical services increased from the announcement. The increases in the prices were limited to the particular states where the Games were to take place (Page & Connell  2011).

There have been several published studies indicating the economic impact of the Olympics in the candidates for 2012. Airola and Craig (2007) adopted a version of the RIMS II input-output model in the estimation of the economic impact of a possible Washington- Baltimore bid on Columbia District. The study found an economic impact of US$ 5.3 billion and an aggregate employment effect of 69758 jobs (Girginov 2012).

The pre-games impact includes the impacts of the logistical phase of the project, pre-games costs and the increase in visitor arrivals as a result of the increased profile in the period prior to the games. The ‘during-games’ impact pertains to the revenues arising from hosting the games and impact of the visitors during the games. This entails the events that occur before or after the games for instance the Paralympics games that are as a result of holding the Olympics.  The ‘post-games impact’ is commonly referred to as the legacy effect. This entails the higher profile of the city. Moreover stadia and transport infrastructures provides value to the host country many years after the games (Girginov  2013).


Statement of research questions and/or the Research objectives (up to 200 words)

The research seeks to establish the pre-Games impacts on the UK economy. This is with reference to the impacts of the construction to build the stadia in the Olympic Park and Athletes’ village prior to the 2012 Olympic and Paralympics games in order to estimate the effects of the legacy construction efforts. The research also seeks to investigate the impact of the Games on the expenditures of the visitors which is mainly reflected in the tourism indicators. The study seeks to assess the magnitude of economic activities and employment particularly in the tourism sector, in the tourism supply chain as well as the impacts resulting from spending of wages that the marginal tourist expenditures create. The research also seeks to find out the impact of the London Organising Committee of the Olympic Games and Paralympics Games Ltd (LOCOG) procurements from the UK suppliers in order to hold the 2012 Games.  The research aims at finding the possible impacts of hosting the London 2012 Olympic and Paralympics Games on the national well being or prestige of the UK citizens. This will involve an assessment of whether there are potential increases in the happiness as a result of holding the major sporting events which is indicated by a measure of the consumer confidence and expenditure.



Research Method (300 words)

The method used in this study is founded on the basis of dynamic computable general equilibrium model of both the London and UK economies. Before the adoption of the model, the spending effects are estimated under various categories and the extent of uncertainties in the estimations is defined.

The research will be a quantitative one whereby quantitative data is gathered with exact values of the selected indicators of the economic changes prior to the games, during the games and after the games. Since the events have already taken place [pertaining to the Games, the research will rely on secondary forms of data gathered from various surveys.

The first step before collection of the data is the identification of the various categories of indicators of the economic impacts which are required. Once the categories have been established, it will be easier to collect quantitative data and conduct an appropriate assessment of the impacts. The secondary sources of data ought to be reliable and up to date especially in the assessment of the legacy impact of the games.

The modelling of the study is conducted at three levels namely: the UK, London and sub-regions within London. At the UK and London levels, an economy-wide perspective of the relevant economies will be constructed and used to formulate a dynamic model in the estimation of the economic effects of the London Olympic and Paralympics Games 2012. In the five-sub regions within London, case results emanating from the London model are used along with the sub regional data in order to generate the manner in which London 2012 would impact on the earnings in the London sub-regions (Girginov 2012).

The economic and financial data that will be needed includes the games organisation expenditures (LOCOG) which has information on the construction of the sport facilities prior to the 2012 Games. There would be several revenues from television rights and sponsorship deals. Infrastructural development breakdown will also be necessary to provide the actual costs and the variability that is associated with them. The visitor spending estimates data is also necessary pertaining to ticketing, number of visitors, days spent in the UK and the expenditures per day. Other measures in the study are the legacy effects, diversion and displacement effects (Davis 2012).

Timetable (100 words; If you wish to include a Gantt Chart, please present it in the space below)

The research is expected to cover a total of 10 months with an equivalent of 300 hours. The major tasks of the research include the literature review compilation, write-up of the literature review, construction of the research instruments, selection of the samples and variables, preparation of the ethics application, selection of the research instruments, pre[parathion of the final version of the research instruments, write-up of the research methods, collection of the data, analysis of the data, write-up of the data analysis, review of the new literatures in the research, completion of the research and verification and eventually the presentation of the research .

The  Gantt Chart is given below:











Practical issues relating to the research (up to 300 words)

The calculation of the economic effects of the 2012 Olympic and Paralympics Games portrays some difficulties in  that  most of the information pertaining to the levels of visitor spending, infrastructural expenditures, running costs as well as the effects on the tourism industry cannot be precisely stated with utmost certainty.

For this study, the short-term properties of the models applicable can end up with misleading short-term results due to the models’ reliance on historical data in prevalence to the economic theory. For instance the ECM models bring to light error terms or residual values which contrast the economic theory in order for the error terms to be dropped as it is the case with the CGE model or violation of the economic model as stipulated by the ECM models.

The research is also time bound yet some phases of the research may require allocation of more time in order to develop a comprehensive analysis. The research depends on secondary data found in the various data bases which may consume plenty of time to retrieve. Moreover, some data bases require authorisation in order to access the data which could act as an impediment to the success of the research.

The data collection and data analysis write-up is very involving and requires one to have the fundamentals of the economic theory as well as proficiency in statistical skills in order to observe accuracy to the letter. Inaccurate computations could compromise or bias the results and the impact of the Games may not be explicitly brought out.




Airola, J & Steven C, 2007, The Projected Economic Impact on Houston of Hosting the 2012 Summer Olympic Games, Department of Economics, University of Houston.

Berman, G, Brooks R & Davidson, S, 2005, The Sydney Olympic Games announcement and Australian stock market reaction. Applied Economics Letters Vol7 No12, pp781-785.

Brown, A, & Massey, J, 2005, The Sports Development Impact of the Manchester 2002 Commonwealth Games: initial baseline research. Manchester Institute for Popular Culture, Manchester Metropolitan University and UK Sport.

Davis, J A, 2012, The Olympic Games Effect: How Sports Marketing Builds Strong Brands, John Wiley & Sons, Hoboken.

Downward, P, Dawson, A & Dejonghe, T, 2009, Sports Economics: Theory, Evidence and Policy, Routledge, London.

Girginov, V, 2012, Handbook of the London 2012 Olympic and Paralympics Games: Volume One: Making the Games, Routledge, London.

Girginov, V, 2013, The London 2012 Olympics: Volume Two: Celebrating the Games, Routledge, London.

Great Britain Parliament, 2010, Olympic Games and Paralympics Games 2012: legacy: oral and written evidence, Stationery Office, London.

Great Britain Parliament, 2009, Potential benefits of the 2012 Olympics and Paralympics for Wales: Eighth report of session 2008-09: report, together with formal minutes, oral and written evidence, TSO, London.

Page, S & Connell, J, 2011, The Routledge Handbook of Events, Routledge, London.



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