Do global sporting events help the local community?

One month on from Birmingham’s Commonwealth Games, and the city is, on the surface at least, returning to normality. The kaleidoscopic banners that litter the city are fewer and further between; gone are the volunteers adorned with their ‘Perry hands’ directing disorientated tourists, and the work to disassemble many of the temporary venues is well underway. In fact, to the inattentive observer, the most conspicuous clue that Birmingham has held a major event is that of the giant Bull, pawing outside the city’s library. These (admittedly superficial) observations raise a question that’s far more complicated to answer. Do events of this magnitude actually help the people they impact the most? And what sort of legacy do they actually leave behind?  

When it comes to the short-term economics of a city hosting a sporting spectacle, this is not a difficult question to answer. The Olympics, the biggest multi-sporting event in the world, has not made a host city a direct profit since 1984. The 2012 London Olympics cost an eye-watering $18 billion, whilst making just $5 billion in revenue, of which, half went to the organising committee of the Games. When all the sums are done and the shortfall is seen, it is the local population who pick up the tab. Londoners, who have played host to the Olympics on three occasions, were paying the so-called “Olympic Tax”, or formally, the Olympic precept, until at least 2017, with the UK taxpayer footing the rest of the bill. 

This pattern of overspending is repeated globally across a multitude of high-profile sporting events. The Football World Cup in Brazil cost Brazilians $14 billion, yet even the most generous of predictions suggest Brazil will not break even on it’s costs. Furthermore, this trend looks set to continue throughout the next decade, with Paris’ 2024 budget stretching at the seams under a tide of rising inflation that looks all but certain to reduce the expected $2 billion profit into, at best, a break-even. 

Budgets have once again exceeded expected revenues, and the taxpayer is footing the bill.

 

Birmingham 2022 is no different from the myriad cases that have come before and will follow. Budgets have once again exceeded expected revenues, and the taxpayer is footing the bill, with Birmingham City Council finding a shortfall of £25 million pounds before the Games had even begun. Direct revenues from the Games are expected to make up for approximately two-thirds of the cost of hosting. This is despite the fact that the Games cut corners in venue construction, after the original hosts, Durban, were stripped of the rights to hold the event in 2018. Birmingham will be left with a shortfall in revenues, and no world-class basketball arena, volleyball court,  or velodrome, to show for it. Instead, a combination of temporary and non-Midland venues were used, with the Lee Valley Velodrome from the 2012 Olympics reprising its role as the site of track cycling for the Commonwealth Games, and a number of temporary, scaffolding-based venues based in Smithfield comprising the locations for the other niche sports. 

But this is only half the story when it comes to the idea of legacy. Yes, financially these global events make little sense in the short-term development of communities, with targeted investment far more beneficial.  But what about long-term impacts? Here, the picture is far more mixed. Stratford, the epicentre of the Olympic Games a decade ago, has seen little benefit to its community from the Games. A plethora of affordable housing was meant to be developed off the back of the Olympic bid.  Yet in a borough that still only averages a wage of £30,000, residents would need an annual income closer to £60,000 to afford these new developments, thanks in large part to promises around ‘affordable’ housing being watered down. It appears that gentrification, rather than regeneration, was the primary outcome of that Games. 

And yet, there are impacts that are much harder to quantify, values that cannot be empirically measured and evaluated against costs at the macro level. These are where mass sporting events shine, and where the real legacy of such spectacles can be seen. The FIFA Women’s World Cup, held in France in 2019, at a cost of €200 million, boosted women’s participation in football by nearly a million women and girls just in the UK alone. Back to London 2012, and its motto “Inspire a generation”, whilst potentially grandiose, has, at least in part, come true, with the UK seeing a lasting sporting legacy as a result of the Games. Whether such legacies are enough to offset the huge costs of such events is an entirely separate argument, but the fact remains that there is some value in such sporting events, even if the value is difficult to measure for an economist.  

Whilst the impacts of a sporting legacy can take years to become apparent, Birmingham 2022 has started on the right track to ensure any shortfall in revenue is countered with a sporting legacy far harder to quantify. Sixteen thousand pieces of sporting equipment are currently being given away, for free, to nonprofit organisations; along with a “Commonwealth Games Legacy Fund” designed with the aim of removing barriers children may face when trying to enter sport. 

Birmingham proved itself to be an innovative and dynamic city on the world stage.

 

Yet more change in the realm of ‘legacy’ can be seen in image. With major sporting events comes a real power to alter perceptions of a host city or region. Despite the many shortcomings of Brazil’s World Cup, it had a measurable impact in the international media of updating the country’s image, thrusting it into the 21st century, and remediating concerns over increasingly outdated clichés about the country and its people.  

In this sense, Birmingham and the wider West Midlands (no strangers to often unpleasant and exaggerated stereotypes) have grasped the chance to refresh their image with both hands. Concerns that, perhaps, Birmingham was still stuck in the era of it’s chief cultural export, Peaky Blinders, never got closer than a cameo in the closing ceremony. Birmingham proved itself to be an innovative and dynamic city on the world stage, one which, in the words of ABC Australia: “was invigorating… (it) has set the standard, giving Victoria plenty to live up to in four years’ time.” And with that, the Games have helped the community in a way that more ‘sensible’ investment never could.