By Dr Jing Du, Lecturer in Finance
Birmingham Business School, University of Birmingham.
The Commonwealth Games will take place next year from 28 July to 8 August in Birmingham and at least 5,054 athletes from 72 Commonwealth nations are expected to participate. The Commonwealth Games has a huge reputation and the large-scale international multi-sport event is second only to the Olympic Games. The successful holding of the Commonwealth Games in Birmingham in 2022 will bring huge economic stimulation and long-term economic and social benefits to the area.
It is an indisputable fact that international sports events bring enormous economic benefits to the venue based on the historical data. The previous Commonwealth Games was held on the Gold Coast of Australia and according to a report published by the Commonwealth Games Federation, the 2018 Games had the biggest economic impact with a boost of £1.2 billion, followed by £1.1 billion for Manchester in 2002, £1 billion for Melbourne in 2006 and £800 million for Glasgow in 2014. Local residents also benefited a lot. A large amount of sports infrastructure drove the development of related industries and the adjustment and upgrading of the industrial structure. For example, the Glasgow Games attracted approximately 690,000 unique tourists who came to attend the Games or the related festivals. The 2010 Games in New Delhi, India brought an economic benefit of 4.94 billion U.S. dollars and created an employment opportunity close to 2.47 million. In addition, the overall economic benefits of the 2012 London Olympics exceeded £14 billion with former Prime Minister, David Cameron commenting that the 2012 Olympics brought a continuous economic and sports legacy to the UK.
The economic benefits are not just for the 12-day period of the Games – the flow of benefits to the host city normally starts well before the Games and will continue to generate returns over the post-Games period. The 2022 Commonwealth Games in Birmingham is expected to bring short-term rapid economic growth. For example, a projected £750 million will be contributed to the economy and Birmingham City Council estimates around 4,500 jobs will be created annually until 2022, supporting engineering and construction companies alongside the hotel and tourism, transport and sports sectors. Thousands of spectators are expected to travel to Birmingham for the Games and the increase of additional tourists will generate comprehensive tourism benefits. Birmingham 2022 will use multi-site Athlete Villages, which can host around 6,300 athletes and the Alexander Stadium will be upgraded to 40,000 seats for the Games and then set at 20,000 permanently with the aim of becoming the home of national athletics. The economic benefits generated by accommodation, catering, souvenirs and transportation are also expected to show considerable growth and the operating profits of commercial retail will also be enhanced. Finally, the broadcast of sports events and sponsorship are anticipated to produce huge economic benefits and overall the upstream and downstream industries associated with sports will develop rapidly, effectively improving and enhancing the industrial structure in Birmingham.
In addition, Birmingham 2022 is predicted to have more prominent mid and long-term benefits for regional economic growth, which will drive production productivity to increase significantly. Due to the driving effect of the event on national sports and fitness, it is expected to save £7.6 billion pounds in medical insurance funds in the next ten years. Sports legacy will continue to have a positive effect on urban functions. The image of regional economic brands will be improved in many ways, including the rapid growth in urban population flow during the event period, increased media publicity, a sound ecological governance environment, public infrastructure construction and a good social security image. This will result in regional economic aggregation benefits and innovation benefits.
The Commonwealth Games will stimulate the regional industrial structure and effectively increase the employment rate before, during and after the Games. Due to the construction and transformation of the athletes’ villages, stadiums, public facilities, transportation and management of sports facilities, the overall increase in employment positions will have significant effects on the development of local human resources and the subsequent increase in employment levels.
However, the direct economic benefits of the Birmingham Commonwealth Games may drop under the conditions of the COVID-19 pandemic. This negative effect has been demonstrated from the just-concluded 2020 Tokyo Olympics in Japan. The 2020 Tokyo Olympic Games in Japan invested 28 billion U.S. dollars. It was originally expected that 6.5 million people would visit and attend the Olympic Games in Japan and 2 million jobs would be created. However, due to the pandemic, there were no audiences during the games and the ticket revenue was zero. No visitor consumption reduced Japan’s income by at least 15.1 million yen. Similarly, if the COVID-19 pandemic cannot be well controlled all over the world, especially in the UK, by 2022, then the direct economic benefits may be greatly affected. This impact could mainly take place by ticket revenues potentially dropping sharply and the number of tourists potentially decreasing with tourism consumption is expected to be at least 80% lower than normal circumstances and employment related to tourism services will lose opportunities. Due to the restrictions on people’s movement because of the pandemic, the motivation for sponsorship and the investment of advertising may be greatly reduced, affecting the revenue of Birmingham 2022 further.
On the one hand, we can see that the city is ready to further develop and transform itself by the time it plays host to the 2022 Commonwealth Games, offering an excellent Games experience for all the athletes, fans, businesses and communities that look to benefit from this extraordinary event. Yet on the other, it is o necessary to keep in mind that COVID-19 may have a continuous effect on the potential economic benefits. It is crucial for Birmingham to plan a long-term legacy for the 2022 Games and to covert this opportunity into an enduring set of outcomes, especially as there is evidence that the economic and infrastructure impact can be felt long after the event has taken place.