The London Olympics 2012 are well under-way and we have already seen great performances from athletes from around the world. Hundreds and thousands of fans and supporters have flown in to catch the live action, and as always, Britain is proving to be a good host. But the games and excitement aside, concerns have been raised over how much has been spent in the games. Britain has already gone overboard the initial bidding amount of around £2.4 Billion, which raises one widely-asked question. How much will the London Olympics Cost? And how much will London make from the Olympics? Well, let’s first take a look at what it’s costing.
The Olympics were originally meant to cost around £2.4 Billion, but in 2007, the cost shot up to £9.3 Billion. More recently, the House of Commons’ public accounts committee revealed that the cost was nearing £11.5 Billion, more than four times the original bid.
All this money hasn’t been squandered either. Around £5.3 Billion have been spent on building venues and infrastructure, such as the Olympic Village and the Olympic Park, up-gradation of the transport system, etc. £1.7 Billion have been spent on the regeneration of the Lower Lea Valley, £600 Million have gone for security and policing, and Elite sport and Paralympic funding has cost around £400. The VAT is valued at £800, while some £2.7 Billion have been set aside as Contingency Fund for emergencies.
Where does all the money come from?
The £11.5 Billion come from a £9.3 Billion public-sector funding, and a £2.2 Billion funding from the London Organising Committee of the Olympic and Paralympic Games (LOCOG). The public sector funding comes from central Government, tax-payers, the National lottery, and other local authorities in London. Public-sector funding is responsible for building infrastructure, security, policing etc.
The LOCOG is solely responsible for the organization of the event. It gets its funding from local sponsors (£700 Million), ticket and merchandise sales (£700 Million), and the International Olympics Committee (£700 Million). The IOC in turn gets its funding from global sponsors.
Ticket sales and Sponsorship
Ticket sales and sponsor-money goes to the LOCOG for organization of events. Local sponsors such as Adidas, Cadbury, Lloyd’s etc are responsible for funding the LOCOG directly, while global sponsors and multi-national companies such as McDonald’s, Coca Cola, Proctor and Gambol’s etc fund the IOC, which in turn funds the LOCOG.
Most people think that the Olympics generate all necessary revenue from sponsorships and the ticket they pay for. That is far from true. That revenue goes into the organization of the games only. Ticket sales generate around £600 Million, while local sponsors provide £700 Million. Another £700 Million is provided by the IOC. This revenue is only a fraction of the total £11.5 Billion. So yes, London is putting a lot more money than it is earning. But the question is, is it worth it? The opening ceremony alone costed £80 Million!
How much will London get?
According to a report by Lloyd’s Banking Group, London’s economy will get a boost of around £16 Billion by 2017. In the short term though, London will face a deficit due to the costs of rapid construction and up-gradation work. But in the long run, the economy is expected to benefit.
These Olympic spendings are more of an investment than anything else. An improved transport system will help people commute more efficiently. More than 130,000 people were employed to work for the event. Improvement in other infrastructure and security will lead to more prosperity, and most importantly, the tourism industry will get a boost. The Olympics will be over within a week or so. But it will leave behind a legacy in the form of the Olympics Park and Olympics Village. These will become tourist spots. And the Olympic Village will be sold for housing to get some returns out of it. All-in-all, the economy will get a boost.
The Olympic games have been notorious for draining immediate resources. According to The New York Times, it took Montreal 30 years to pay off the $2.7 Billion debt from the 1976 Summer Olympics. In 1992, the Barcelona Games left Spain in a debt of $6.1 Billion, while Athens went ten times its estimated budget of $1.6 Billion in the 2004 games in Greece. And now, Britain is more than $14 Billion over its own bid. Of course, there’s a risk it might go the returns in the near future, but with all the infrastructure developments, it is bound to benefit greatly.
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