Recession refers to a period in a country or nation when there is a decline in the economy. It refers to the decline in GDP which lasts for more than two quarters. Recession is as a result of a drop in stock market, rise in the rates of unemployment and a turn down in housing market. This was a situation that the UK was facing before the 2012 Olympics. This paper looks into the effects of Olympics on Britain’s economy.


 There are various reasons that are deemed to contribute highly to recession. Some of these reasons include a fall in demand. When demand rates decreases it is most likely that the country will go on recession. The reasons for a fall in demand  includes a decline in wages, decrease in purchaser confidence, decline in bank loan rates a time of deflation that makes people to delay expenditure and an increase in exchange rates which leads  to a higher price for exports and a decline in the need for exports. Inflation is another major factor that contributes to recession. This is a period when the prices of goods and services over a specific period of time. When the rate of inflation goes up the number of goods and services that can be purchased using the same amount of cash goes down. In the same sense people reduces the rate of expenditure and begins to save. Over the years, the UK government has gone through periods of recession which threatens their economic growth. Between the years 1930-1932 there was a great depression that was caused by a crush in the stock markets which lead to financial crisis and reduced consumer confidence (Horne & Whannel, 2012).

The world nature of downturn too led to a fall in trade. Together with this was a deflationary fiscal policy which made the situation worst. In the year 1981, the UK recession was caused by high value of the pound which led to an increase in the cost of exports and, therefore, less demand. There were also higher interest rates on borrowing. In 1991, the economic growth went up to an unsustainable point which led to over 10% increase in the rates of inflation. The counter effect of the government was to raise the interest rates which also lowered spending and hence recession. The government got involved in an exchange rate mechanism which kept the high value for the pound. In 2008 to 2009 there was another recession which was attributed to credit crunch, decline in house values and also a decline in confidence of finance sector.

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According to the views of various classical economists, any decline in real gdp is temporary and will come to an end when the labor markets amend to the new prices. Before the Olympic Games the economy of Britain was at struggling stage. It was not stable given various economic recessions that have hit the country. Olympics were therefore viewed by many as playing a major role in boosting the economy. The 2012 Olympics for the UK was the most successful. There was an influx of visitors to London from all parts of the world which means it will impact positively to the economy. The success of the Olympics in London was a challenge to Britain’s economy. It shows that success is the product of hard work and even the boost to Britain’s economy is as a result of hard work. It challenged Britain’s economy to invest more on education and reform their banking systems so as to focus on investing in building business that will serve the customers for long time. In Britain, the Olympic Games increased the rates of production and consumption and hence bringing the nation out of recession (Rogan, Matt & Rogan, Martin 2011).

Olympic Games had a boost in the travel and tourism sector. This was highly dependent on the perception the visitors received through the adverts in the television (Poynter & MacRury, 2009). Even though it cannot be argued that the presence of the Olympic Games has boosted the economy it is clear that the economy is slowly coming back to normal. Through the motivation that the nation got from the success of the Olympic Games the Bank of England is and will continue to do all it can to build the economy. The interest rates have declined, the rate of inflation is low and the government has put in money to boost the economy. Other benefits to the economy that come as a result of the Olympic Games are the developments that are a necessity for an Olympic host. Infrastructural developments and investments made because of the event go a long way in boosting the economy. Development of tourism facilities and industries are long term activities that boost the economy (Vanhove, 2012).

Sports generate an environment of confidence and understanding, this act leads to countries relying on one another in difficult economic times. It is crucial for countries to work together and support each other financially. This is because the origin of financial crisis is worldwide and therefore its solution should be global. Despite the boost that a country realizes because of the Olympic Games, there are various negative impacts that are as a result of the Olympics. First, due to the need for the development of various facilities that are necessary for hosting the Olympic event, some of the existing structures and businesses might be brought down to pave way for these facilities. On the other hand, some people are rendered jobless. These acts of increasing the rates of unemployment and destroying existing businesses are key to increasing the rates of inflation in a country and hence recession.


Olympics 2012 had both negative and positive impacts on the economy. It brings in motivation for a nation that an economic boost is achieved through the government’s effort and input. 

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