July 18 (Bloomberg) -- Younes Semlali, sales manager at Mr. Bagel Ltd. in London, is looking forward to the city hosting the Olympic Games. He’s also worried his business may suffer.
The company, based in Hackney, relies on the A12 highway linking east London with other parts of the city to deliver its baked goods. Access to that road will be restricted between 6 a.m. and midnight during the games to make way for Olympic traffic.
“It is a good thing to have such an event, to regenerate London,” he said in a phone interview. “But the small businesses here will suffer.”
Mr. Bagel is one of 35 firms in Hackney, one of the London boroughs where the games will be held, that tried to sue Olympic organizers to prevent the route being partially shut. Their case, which collapsed last week when the plaintiffs ran out of money, shows that not all companies will get a windfall from the Olympics. The British government estimates the games, starting on July 27, will bring in 13 billion pounds ($20.3 billion) in extra revenue for the U.K., while Goldman Sachs Group Inc. said in a report the event may boost the U.K. economy by as much as 0.4 percent in the third quarter.
By contrast, only 7 percent of small firms believe the games will benefit them overall, according to a December survey carried out by the British Federation of Small Businesses. A quarter expected a negative impact.
Simon Larson, a spokesman for the government’s Olympic communications team, said residents were consulted about the road closures in 2011.
“We will constantly review and monitor our arrangements to ensure that everyone can get to their destinations safely and on time,” he said in an e-mail.
Sam Dennis, a spokesman for the London Organizing Committee of the Olympic and Paralympic Games, declined to comment.
The first travel disruption from the Olympics came this week, as athletes arriving at Heathrow Airport hit traffic and special “Games Lanes” proved insufficient to compensate for London’s overcrowded roads. American hurdler Kerron Clement said in a post on his Twitter account that the journey across the city took four hours.
The games will also have a crowding-out effect on small and medium-sized enterprises as the redevelopment of one of the city’s least-affluent areas raises rents and local taxes, according to Dr. Richard Wellings from London-based think tank the Institute of Economic Affairs.
“Overall it almost certainly will be a loss-making enterprise,” he said. “Not just for London, but for the whole country.” Wellings said the main winners will be large corporations who can afford a presence at the games venues.
His views were echoed in a May report by ratings firm Moody’s Corp., which said that corporate sponsors, including McDonald’s Corp., Adidas AG and General Electric Co., will benefit most. The 2012 games will have some of the strictest-ever rules against unauthorized advertising, meaning businesses that didn’t pay for official status can’t even mention the event.
Organizers have all but ignored the interests of local businesses, according to John Halford, an attorney who represented the firms in the road-closure lawsuit.
“For these businesses, the principles the Olympics are supposed to represent -- shared endeavor and fair competition -- have been utterly devalued,” he said in an e-mail last week.
Another plaintiff in the lawsuit, Graham Phelps, who runs a hauling business near the site of the road closures, said he still doesn’t know exactly which routes are affected. He said congestion caused by tens of thousands of extra vehicles will stop his trucks getting through and estimates losing as much as half his typical revenue during the games.
“I’ve always loved the Olympics,” he said in a phone interview. “You can’t get any enthusiasm for it if all you are worried about is whether your company is going to be there come September.”
Not all small firms agree with Mr. Bagel and Phelps, according to Stephen Nelson, principle director of the South East London Chamber of Commerce. An increase in people visiting the area will help more companies than it hinders, he said in a phone interview. “I’m not a big fan of negativity.”
Wellings, from the Institute of Economic Affairs, isn’t excited for the first Olympic Games to take place in the U.K. for more than 50 years.
“I actually live near the Olympic Park, so I know Stratford quite well,” he said. “I’ll be going on holiday.”
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