Olympics to boost the economy by £16.5bn

A welcome forecast from Lloyds and Oxford Economics, with the cost of Games construction at £11.9bn.

Cable car construction activity in London. Photograph: Getty Images

The London 2012 Olympic and Paralympic Games are estimated to contribute £16.5bn to the UK gross domestic product (GDP) spread over 12 years, according to a study by the research firm Oxford Economics, commissioned by Lloyds Banking Group.

Of the figure, construction activity is expected to contribute 82 per cent, while tourism and hosting expenditure should contribute 12 and 6 per cent, respectively.

Most of the benefit will be felt in London, yet other regions too are likely to feel the effects of the boost.

Between 2005 and 2017, it is estimated that £11.9bn will be spent on 2012 Games-related construction in total. The construction activity during this time is expected to support the equivalent of 267,000 years of employment in the UK economy, 78,000 of which are in the construction sector.

The study estimates that 70 per cent of the impact on the UK GDP will occur prior to the Games, but with a "legacy impact" of £4bn still to come in the five years to 2017.

A temporary feel-good factor may arise from the event. The study finds that this factor may translate into increases in consumer confidence and spending, though the evidence for these effects is mixed.

The study, The Economic Impact of the London 2012 Olympic and Paralympic Games, investigates the economic impact of these games on the UK economy and its nations and regions between July 2005 and July 2017.