CBI Lunch: Post Olympic Legacy

Published on 2012-09-13

On the 30th August, the British Chamber of Commerce invited the Confederation of British Industries (CBI) International Director, Ms Rhian Chilcott, to give an appraisal of the London Olympics and an outlook for UK businesses and the other key players in the global economy.

On the 30th August, the British Chamber of Commerce invited the Confederation of British Industries (CBI) International Director, Ms Rhian Chilcott, to give an appraisal of the London Olympics and an outlook for UK businesses and the other key players in the global economy.

During a time of global economic uncertainty, the Olympics provided a welcome respite both through a predicted £13bn boost (conservative Government estimate) and a less quantifiable ‘feel good factor’ generated by the level of British success. Work was completed on time and under budget and, for the first time in history, the event is set to turn a profit.

Despite the short term euphoria, even a spectacle the size of the Olympics cannot mask the underlying problems in the world economy with many countries now experiencing a technical double dip recession.

The Eurozone is casting the largest shadow as the major trading partner continues to falter. People are anxious about the likes of Greece, Italy and Portugal and are also worried whether more will experience a similar fate. The complex interplay of variables within the Schengen area represents largely unchartered economic territory so nobody can predict exactly how the situation will play out but a key question remains: how long can Germany continue to bail out its neighbours?

Meanwhile, other markets find themselves dogged by political uncertainty. The next six months is a pivotal time for the USA with their election in November and Congress to follow in January. The possibility of a lameduck Congress - meeting after its successor is elected, but before the successor's term begins – could prove troublesome as negotiation will be needed to make some of the most important economic decisions in recent history.

India and Brazil also find themselves hampered by politics. India remains the focus of perpetual scandals and business in Brazil is as cumbersome as ever as companies factor in a 5-10% increase on their costs as a tax for ‘hassle'.

The overall message from the West is one of politics acting as a drag on growth which stands in stark contrast to China. Although, China may also be experiencing a ‘slowdown’ the consensus suggests that the government is controlling the situation, encouraging a sensible consolidation and a necessary recalibration.

While, the London Olympics was a sporting and financial success it can do little to mask the deeper structural problems within the wider global economy. Furthermore, a transitional political period, characterised by instability, means the private sector will have to wait even longer before it is provided with the confidence necessary to begin a recovery.