Goldman Says U.K. to Win Growth and Golds From Hosting Olympics
The event could lift the economy by as much as 0.4 percent in the third quarter and the country may enjoy a longer-term boost greater than the 13 billion pounds ($20 billion) estimated by Prime Minister David Cameron’s government, Goldman Sachs economist Kevin Daly told reporters in London today.
“The net benefit of hosting the Olympics is significant,” Daly said at the launch of a Goldman Sachs report on economic research on the Olympics.
The host nation has typically won 54 percent more medals on average than at games located elsewhere, helping to explain Goldman Sachs’s projection that the U.K. will win 30 gold medals, up from 19 at the previous summer Games in Beijing.
The games begin July 27 and last three weeks. In the short term, the recession-hit economy will be supported by increased spending, while longer term, the U.K. should be helped as a potential location for foreign investment and tourism, Daly said.
Once over, a portion of the government’s 8.5 billion-pound bill will be recouped through sales of land and other facilities, he said. While Cameron last week said the Games could generate 13 billion pounds for the economy over the next four years, Daly declined to produce such an explicit forecast.
The Goldman Sachs economist also found that gold medals tend to be won by economies with the highest gross domestic product per capita and where the environment for growth is strong.
Their economic model, which was also based on factors such as population and host nation, projects the U.S. will win 37 gold medals in London, followed by China with 33. It predicts the U.S. will also win the most medals with 108, besting China’s 98 and Russia’s 74.
The equity markets of all recent Olympic hosts have also outperformed the MSCI World Index in the year following the event, they calculated.
While the Olympics is viewed as unlikely to affect exchange rates, the Goldman economists found $100 invested in dollars prior to the Los Angeles games and then rotated through the currencies of each subsequent host would have generated $1,020. That compared to a return of $700 investing the same sum in rolling, one-year dollar investments.
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