Opinions divided over Olympic effect on economy

| May 3, 2012
Opinions divided over Olympic effect on economy

While research by the Alliance Trust suggests that an economic boost generated by the Olympics will help Britain out of recession, rating agency Moodya��s is warning that any benefit will only be short term.

Alliance Trust suggests that ticket sales for the event and other consumer spending on Olympic related retail products will cause a surge in economic growth.

Tickets to the value of around A?300 million have been sold and this is expected to boost GDP figures for the third quarter of 2012.

This figure equates to 0.1 per cent of GDP, enough to have a significant effect on growth figures for the summer according to Alliance Trust.

A fall in GDP of just 0.2 per cent last month was enough to push the UK into a double-dip recession.

Shona Dobbie, head of the economic research centre, at Alliance Trust, suggests that the UK economy will grow by around 0.3 per cent in 2012, with much of the improvement generated by the games.

James Carrick, economist at Legal & General Investment Management, is also predicting that Olympic-generated growth in the third quarter will be enough to lift the UK out of recession.

“There may be a slight dip in the second quarter as we lose an extra day for the Queen’s Jubilee.

a�?But there will be a boost in the third quarter, it will be positive growth that will decisively pull the UK out of recession,” he said.

However, Moodya��s said that the Olympics was ‘unlikely to boost’ the economy.

The ratings agency said that investment on infrastructure for the event has already had its effect on GDP figures and any further benefits will be short-term ones.

According to Moody’s, increased visitor numbers for the duration of the event could boost sales of retail and consumer products, but longer-term benefits will come from the increased visibility of brands rather than additional sales.

Richard Morawetz, senior credit officer at Moodya��s said: “We expect the net impact of the Olympics on UK tourism will be positive overall, but far less than gross visitor numbers would suggest.”

The agency also warned that disruption to businesses during the Olympics could offset the economic benefits of the event.

Meanwhile the CBIa��s latest quarterly economic forecast suggests that the UK economy will return to growth in the second half of 2012.

It has downgraded its economic growth forecast for 2012 to 0.6 per cent, from its earlier forecast of 0.9 per cent.

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