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Economy Jul 26, 2012

UK, emerging economies hope to capitalise on London Olympics

By Sourav Majumdar

Even as the curtain is about to lift on the London Olympics 2012, a survey has found businesses in emerging markets most value the ability of big sporting events to attract investment to their economies, whilst counterparts in developed economies view them as less important.

According to new research from the Grant Thornton International Business Report (IBR), as a result, developed economies must work hard to maximise the economic opportunity these events present and win support from businesses.

London like its emerging market peers is hoping to attract investment after the Olympics. Reuters

With the 2012 Olympic Games opening ceremony tomorrow, the IBR reveals the extent to which developing economies place greater importance on major sporting events in attracting inward investment. In Latin America, almost three quarters (74 percent) of business leaders believe major sporting events are important in attracting investment to their economy and across the BRIC nations over half (54 percent) hold this view. In contrast, far fewer businesses in the EU (42 percent) and North America (44 percent) believe in the ability of big sporting events to attract investment, dropping to just over one in three (36 percent) in the G7.

The data for India shows that business leaders believe sporting events help in building relationships with existing clients and acts as a great team building tool (27 percent).

Grant Thornton India's Partner & Practice Leader, Business Advisory Services, Vinamra Shastri, said, "Home advantage in sporting events is not only linked to an improved medal haul, but the IBR research shows that it is also considered very important in garnering additional investment. Emerging economies use these mega events to allow a worldwide audience to 'window shop', before making their investment decisions."

"It is an opportunity to showcase their infrastructure, their masses of consumers, their organizational ability and their willingness to be a part of the global village. For more established economies, international sporting competitions are still a great opportunity, but appear to be just one element of a much bigger offensive to attract investment," he said.

"Also developed economies will have the venues, transport and technology infrastructure already in place for major events, and hence they do not have the need or the scope to absorb significant capital investment from outside their borders, compared with the level of investment required in emerging markets such as China and Brazil," Shastri said.

But the UK is proving to be different from their G7 counterparts, given that Olympics hysteria in London has now reached fever pitch. Businesses in the UK are far more enthusiastic than their G7 counterparts - 61 percent say big sporting events are important for attracting investment. Indeed, the UK government anticipates that the London Olympics will bring a hefty 13bn of economic benefits over the next four years - 6bn in the form of foreign direct investment.

The findings also suggest that developed economies have to work a lot harder than emerging economies to make a convincing case. The findings state that 58.8 percent of Indian businesses consider success by individuals or teams competing in major sports events as an important factor for businesses as it boosts the profile of the staff or the country globally.

The research also indicates that business leaders in those economies which have recently held, or are soon to hold, major sporting events are more bullish about the investment they bring (the exception is China, where the legacy of the 2008 Olympic Games in Beijing remains unclear).

Business leaders in Brazil - which is gearing up to host the 2014 FIFA World Cup and the 2016 Olympic Games - show the greatest faith in sport's ability to deliver investment (83 percent). Business leaders in India (63 percent) - Commonwealth 2010, (Poland (82 percent) - host of this year's European Championships - and South Africa (78 percent) - the FIFA World Cup 2010 are also positive in this regard, the survey shows.

by Sourav Majumdar

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