Passing the baton How small businesses have been affected by the London 2012 Games A report by the London Region of the Federation of Small Businesses February 2013
Passing the baton How small businesses have been affected by the London 2012 Games A report by the London Region of the Federation of Small Businesses February 2013
Introduction
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012 was the year when the eyes of the world were firmly fixed on London. From the Diamond Jubilee to the end of the Paralympic Games, London took centre stage and showcased itself as more than simply a financial centre. London delivered remarkably diverse Olympic and Paralympic Games and achieved both on and off the sporting field. Before the start of the Games, small businesses were enthusiastic about their prospects. The aim of this report is to assess the impact of the Games on those servicing London and on small businesses that operate within the London boroughs. In December 2012, the Federation of Small Businesses (FSB) surveyed 200 businesses across London and in the surrounding areas to obtain a better understanding of the likely legacy for micro and small businesses. 2
Nearly one in five (18 per cent) of the businesses that responded to the survey were based within the retail sector and 21 per cent were within the professional, financial and business service sectors. Furthermore, 28 per cent of those businesses based in London that responded were active in the retail sector. This report shows that the majority of micro and small businesses have not been affected by the Olympics and Paralympics at all, and so will not have benefited from it or expected to see future long-term benefits. The simple truth is that, from 27 July to 9 September 2012 (viewed as the short term), more small businesses experienced a negative, as opposed to a positive, impact on trade. But, on the flip side, the survey identifies an array of businesses that participated in events, workshops and the delivery of Games contracts which could leave a longer-term legacy.
Passing the baton — A report by the London Region of the Federation of Small Businesses — February 2013
The general impact of the Games The London 2012 Games provided many opportunities for small businesses in the city to raise their organisational profile. When asked whether the London Games were a good thing for the UK and London, 69 per cent of businesses from the total sample said that they were good for London and 59 per cent said they were good for UK PLC. Of purely London-based businesses, 60 per cent said that the Games were good for London and 54 per cent felt that they were a good thing for UK PLC. At the wider (macro) level, the general picture among small businesses is that the London Games brought a feel-good factor because of the great sporting achievements, the positive mood and the sense of well-being and pride among people across the capital at a time of economic uncertainty. One member in the construction sector said that the Games offered:
Figure 1 Did the preparation and staging of the Games have a positive or negative effect on the performance of your business?
Very positive Somewhat positive No change Somewhat negative Very negative
Figure 1 shows that 41 per cent of the total sample, inside and outside London, felt that there was a negative impact on the performance of their business during the Games. Furthermore, Figure 2 shows that over half (55 per cent) of businesses inside London deemed the Games to be negative during the six-week Games period. 3
7% 9%
9%
29% 47%
65% 23%
24% 32%
15%
During the Games
Since the Games
13% Prior to the Games
11%
Figure 2 Did the preparation and staging of the Games have a positive or negative effect on the performance of your business? (London Based Businesses)
“A feel-good factor about England, hopefully strengthening attitudes towards English products by showing we can do it!” Small businesses are operating in difficult economic conditions. Rising costs and falling demand continue to prevail across the capital.1 Regular surveys of FSB members throughout 2011 and 2012 predicted that the Games would have a greater negative than positive effect.2 This preconceived view of the Games on the part of small businesses turned out to be realistic when we consider the actual impacts before, during and after the Games.
5% 11%
Very positive Somewhat positive No change Somewhat negative Very negative
5%
7%
11%
9%
9%
29% 47%
65% 23%
24% 32%
15%
During the Games
Since the Games
13% Prior to the Games
11%
1. http://tinyurl.com/bpze3u2 2. http://tinyurl.com/c389v62
Passing the baton — A report by the London Region of the Federation of Small Businesses — February 2013
The general impact of the Games (continued)
One small retailer in London said:
“No benefits for small businesses in the retail sector.We had a negative impact during and after the Games.We saw fewer tourists than usual, locals taking long holidays and not coming back until September, and in general lower than usual August and September sales figures.We do really hope for a better 2013 without special events and games. Last but not least, we are in a premier location for shopping in London, so we had a direct and significant view of the impact.”
Since the Games came to an emotional end in September, over a third (76 per cent) of total businesses surveyed and almost two thirds (65 per cent) of London businesses have said that the Games have made no change to the overall performance of their business. FSB members raised concern throughout the Games about a lack of footfall caused by serious mismanagement in pockets of London, particularly in Greenwich and Waltham Forest, with sales falling by as much as 75 per cent in certain pockets of East Greenwich.
Case study The East Greenwich business association reported that shops in the area face financial hardship owing to the negative impacts of the London 2012 Games – primarily because of LOCOG’s mismanagement of fencing, traffic signage, marshalling and people movement arrangements, which eliminated footfall almost completely from Trafalgar Road in East Greenwich. FSB members also made us aware of overzealous parking enforcement in areas such as East Ham and Blackheath, prior to and after the Games, which led to reduced trade throughout the Games period.
The FSB view The FSB encourages councils (most affected by the Games) to concentrate on measures to boost local high street trade. In particular, the FSB would support reduced-rate or free parking measures to stimulate trade, utilising best practice across boroughs.3 3. http://tinyurl.com/ckk3vhw
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Passing the baton — A report by the London Region of the Federation of Small Businesses — February 2013
Adjustments made by business Figure 3 What adjustments, if any, did you make for your business during the Games? 50%
I did not make any adjustments 30%
Reduced travel commitments Flexible working patterns 8%
Changed opening/closing times
7%
Arranged night time deliveries
8%
Other (please specify)
12% 0%
10%
20%
The FSB, along with other business organisations, worked closely with authorities such as LOCOG, Transport for London (TfL) and the Metropolitan Police to deliver a campaign promoting comprehensive awareness of the potential negative impacts. A series of road shows, seminars and workshops were advertised by business groups to their members to get businesses to understand and mitigate the threats to business operations. Figure 3 shows that half (50 per cent) of all micro and small businesses based in London said that they could not make any adjustment to their business operations during the Games. About a third (30 per cent) of retail businesses were not able to adjust their operations. This appears to be predominantly a result of economic difficulties confronting retailers with a lack of demand in the run-up to the Olympics. Nearly a third (30 per cent) of businesses said they reduced travel commitments for themselves, their customers and their employees. The sectors that were able to accommodate fewer travel commitments tended to include desk-based and home-based businesses, such as professional and business services. 4. http://tinyurl.com/chn7g7l 5. http://tinyurl.com/cr4tqar
A fifth (20 per cent) of London-based businesses implemented flexible working patterns (e.g. home working and early/late starts), and nearly one in ten (8 per cent) arranged night-time deliveries to their business premises.
20%
Greater use of telecommunications
30%
One sales and marketing business said: “We purchased photocopying paper, etc. in advance of the Games, so didn’t need any deliveries during the period.”
40%
Of those businesses that organised night-time deliveries, the majority made arrangements for very early in the morning or late in the evening (before 7am or 8-11pm), with fewer smaller businesses delivering after 11pm. Disappointingly, micro and small businesses unanimously told us that there were no lasting benefits for businesses of their size from the changes to their delivery arrangements.
50%
However, on the positive side, the relaxation on night-time deliveries during the Games proved beneficial to larger businesses by freeing up road space during the working day, thereby easing congestion. Congestion levels in London damage the competitiveness of businesses in the city, and the level has even risen back to pre-congestion-charge levels.4 Using NISA as an example, during the three-week Olympic period over 430 ambient and 1,140 chilled deliveries were made to customers in twilight or night-time slots, achieving a 99 per cent delivery service.5 Transport for London ran a pilot prior to the Olympic/Paralympic relaxation on night-time deliveries, with businesses adhering to a code of practice to ensure that residents were not affected by the noise levels. The pilot proved successful, with few complaints from residents. We encourage TfL and the Mayor’s Office to publish an assessment of how councils were affected by noise levels during the Games.
The FSB view The Federation of Small Businesses (FSB) is calling for night-time deliveries to be enabled across all London boroughs, to help create a lasting legacy for business operations and congestion levels in London. 5
Passing the baton — A report by the London Region of the Federation of Small Businesses — February 2013
Business development as a result of the Games
So what was the impact on small businesses?
The bid to win the 2012 Games was built on a promise to deliver a comprehensive legacy for London. This legacy was to include sporting, economic, cultural and environmental benefits. In the lead-up to the Games, businesses were encouraged to explore the economic benefits that might result from a greater number of visitors, an increase in skills levels, the enhanced global profile of the city, and the redevelopment of the Olympic Park and the Stratford area in general.
Of those that participated in events or programmes linked to the Games, more felt that the most significant impact was on their ability to secure new business contracts. A few businesses recruited new staff as a direct result of the events, and all said that this had a significant positive impact on their business. Disappointingly, there was little success for small businesses looking to secure contracts in export markets, which can be put down to the streamlined focus on securing inward investment in London as opposed to export opportunities.
Many workshops and events were set up before and during the Games. The London Business Network hosted a variety of events run in partnership with the Mayor’s Office, and was responsible for a series of London 2012-related business conferences at City Hall during the Games. There were also a selection of National Houses, which were set up in various locations across London during the Games period to provide the public face of competing countries at the 2012 Olympics. The aim of these was to promote their particular country as a tourist and business location, and they included activities such as exhibitions, conferences, a VIP and athletes’ lounge, cultural events, performances and medal ceremonies. Nearly a fifth (17 per cent) of businesses that responded to the survey participated in at least one business event or programme linked to the London 2012 Games. As regards awareness levels and the perceived importance for the bottom line of business, a significant majority of micro and small businesses were uninterested by the prospect of Games interaction. A retail business summarised the opinion of many micro and small businesses thus: “It was the most fantastic sporting event I have ever been to and something I will never forget, but it was never going to be of much use to small businesses, in my opinion, unless you had some unique connection.” 6
Passing the baton — A report by the London Region of the Federation of Small Businesses — February 2013
Games communications
The FSB worked closely with TfL and the Metropolitan Police in the run-up to, and during, the Games. Many small businesses suffered a short-term shock during the Olympics. The FSB held regular update meetings with a panel of members to find out how businesses, particularly inside the Olympic boroughs, were being affected during the Games. Transport for London figures show that 30 per cent of normal public transport users changed their behaviour: some reduced their overall travel, others retimed and rerouted journeys to avoid busy periods or stations, and some shifted to walking or cycling for part or the whole of their journey.
FSB members commented on the professionalism and vital role that “Games Makers” played during the Games. FSB members also welcomed twice-daily updates by TfL and regular communication channels, which enabled small businesses to plan journeys more effectively. The Cross-sector Safety and Security Communications project (CSSC) was established in 2011 by the London police service, the Home Office and business groups. The purpose of the CSSC is to be “a communications structure that was implemented in the run-up to the London 2012 Games, and continues afterwards as a lasting enhancement to safety and security in the capital”.8 These communication channels were effective and gave the FSB real-time information to feed down to its members.
It was clear from the reports of small businesses in central London, predominantly in the first week of the Olympics, that footfall reduced as a result of messages from the authorities advising people to avoid using private and public transport in the capital if possible. Early indicators showed that levels of tourism did not meet expectations – this point was made by the British Hospitality Association.6 Furthermore, the Office of National Statistics estimates that the total number of 3 million visits in August (for any purpose) was 5 per cent lower than in August 2011. However, the London 2012 Games did attract over half a million overseas visitors in July and August 2012.7
6. http://tinyurl.com/ccxcvfl 7. http://tinyurl.com/cwre2zu 8. http://www.vocal.co.uk/cssc/
The FSB view To continue and build on these strong stakeholder forums that enable small businesses to gather quick and valuable information to help them plan their business operations. 7
Passing the baton — A report by the London Region of the Federation of Small Businesses — February 2013
Delivery of contracts Criticism can be directed, however, at the lack of focus on exporting, with 95 per cent of businesses saying that the contracts provided little access to export markets.
The Olympic Delivery Authority (ODA) was responsible for the closing-out of more than £6 billion of commercial contracts.9 Over one in ten (12 per cent) of the businesses that responded to the survey said that they had worked on an official Olympic or Paralympic Games contract. Small businesses within the manufacturing and professional services sectors won more such contracts. Figure 4 shows that over half (55 per cent) of small businesses that won Games contracts experienced growth in the overall turnover of their business. Furthermore, nearly a quarter (24 per cent) employed new staff to fulfil the contract. Hosting the Games also created a boost in employment, with figures indicating that the workforce in the capital increased by 91,000 ahead of the Games. The employment picture among FSB members in the months leading up to the Games showed that 18 per cent had taken on new staff, compared with 13 per cent who saw decreased employment levels. This net balance of +5 compares to a UK net balance of -3.10 A fifth (20 per cent) of businesses obtained further work as a result of the contract and only one firm experienced any financial problems within their business. In Figure 5 there is clear evidence of small businesses achieving added value as a result of winning Olympic and Paralympic contracts. One half (50 per cent) of companies felt that their reputation had been boosted by this. Almost a third (32 per cent) have seen the market position of their business improve and 28 per cent have seen a higher level of skills within their business.
Finally, small businesses welcome the relaxation of rules on “advertising” the fact that they delivered a Games contract.11 This will allow for further opportunities to advertise during other major events and in their business literature. Figure 4 What were the impacts on your business of the delivery of a Games contract?
growth in the turnover of your business
45%
new staff being employed to deliver the contract
76%
Further work obtained as a result of the contract Financial problems for your business
55%
24%
81% 19%
10% 85%
5%
Don't know
No
Yes
Figure 5 What has been the impact of your company’s work on the Olympic and Paralympic Games contract?
Reputation of your business
Company's market position Workforce skills
27%
18% 14%
23%
50%
14%
68%
14% 73%
Access to new export market 5% 95%
Very positive
Somewhat positive
No impact
 9. http://tinyurl.com/bteudlh 10. http://tinyurl.com/bpze3u2 11. http://www.culture.gov.uk/news/media_releases/9698.aspx 8
Passing the baton — A report by the London Region of the Federation of Small Businesses — February 2013
CompeteFor
Statistics from CompeteFor, which was originally set up to “ensure the transparency and availability of London 2012 business opportunities, to maximise the number and diversity of businesses contributing to the London 2012 programme, and to create a legacy of increased capacity and expertise”,12 showed that approximately 75 per cent of the total number of contracts had been won by small and medium-sized businesses. However, from FSB members, the resounding message is that this important procurement tool must find a way to benefit the smallest businesses in society – especially as 95 per cent of them employ fewer than five people.13 Only 17 per cent of the businesses surveyed had registered on the CompeteFor portal, which can be attributed to the fact that there are currently too many procurement portals in operation in London, i.e. Contracts Finder, Due North and Procure4London. Three fifths (60 per cent) of businesses that won contracts were not registered on CompeteFor. More notably, not a single business that responded to the survey won a contract through CompeteFor. More businesses found the CompeteFor service easy to use (55 per cent) than found it nonuser-friendly (33 per cent).
12. https://www.competefor.com/business/visionAndObjectives.html 13. http://www.fsb.org.uk/gloswestofengland/lobbying/statistics
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Passing the baton — A report by the London Region of the Federation of Small Businesses — February 2013
Conclusions and future prospects
The Prime Minister said he was confident that the Games will generate over £13 billion for the economy. However, the great majority of micro and small businesses, in all sectors, feel that the impact has and will continue to be of minor significance. For the Games to have a genuine legacy there are key areas that the Government must concentrate on.
Boost to tourism What is of major significance during these difficult economic times is that we support the sectors that rely most on discretionary spending, particularly in the area of tourism, to ensure that the businesses that suffered during the Games can benefit from increased tourism potential. Beijing, the last city to host the Olympics before London, found in the months after the Games that the slump in tourism continued, with international arrivals down by more than 20 per cent. The forecast is mixed when it comes to whether the London 2012 Games will help boost the economy, with some economists believing they will not have much of an impact. And with 2012 growth (disappointingly) being revised downwards, it is important that we build on the achievements of the Games. Barcelona saw 2.9 per cent growth in GDP and Sydney14 2.1 per cent when they held their Olympic Games. But the world’s economy was in a very different situation then. London must
and can build on the reputation and feel-good factor of 2012. One way of stimulating London’s tourism is by focusing on Air Passenger Duty (APD). Current UK APD rates can add more than £170 to the cost of a return flight to the UK, a serious deterrent to increasing inbound tourism. For example, last year a family of four visiting from India or China had to pay £568 in APD to fly to the UK compared with just over £200 to visit all 25 countries in the EU’s “Schengen zone”.15 When APD was restructured in 2008, the rationale given was to help reduce CO2 emissions. However, with the inclusion of the aviation sector in the European Emissions Trading Scheme, a strong case can be made for a significant reduction in, or even the complete removal of, APD. The FSB was therefore disappointed to see the Chancellor press ahead with an increase in APD, as announced in the 2011 Autumn Statement. Such rates will only serve as a deterrent to international tourists, with negligible environmental benefits.
14. Despite claims the Olympics would spur a big growth in inbound arrivals, the total number of tourists coming to Australia in 2010, a decade after the Games, was 5.7m – only 16 per cent higher than the 4.93m in 2000. 15. Tourism Alliance figures
The FSB view This policy therefore needs to be re-examined as a matter of urgency and, as a minimum, the level of duty decreased. 10
Passing the baton — A report by the London Region of the Federation of Small Businesses — February 2013
Conclusions and future prospects (continued)
Procurement
Inward versus outward investment
The FSB has been a firm advocate of the CompeteFor model of enabling and assisting small businesses to bid for and win procurement contracts – however, for the smallest businesses, the process of registering a bid is not satisfactory. We welcome the Mayor of London’s intention to “strengthen the CompeteFor service so it continues to deliver easy access to contract opportunities across the GLA group for [SMEs]”.16 However, there is still a significant amount of work to do to encourage the smallest businesses to bid for contracts.
The “GREAT” Campaign17 is designed to use the platform of the Games in 2012 to showcase Britain’s capabilities, to promote and enhance our reputation abroad, and to maximise the economic potential of the Games
The FSB view The FSB calls for the Mayor to undertake an audit of all public procurement portals and ensure that CompeteFor is made the “one stop shop” for all private and public contracts, with best practice from other portals being amalgamated into a single system. Furthermore, contracts (both private and public) should not be constructed in a way that automatically reduces the opportunities for small businesses to compete. Aggregation of contracts should be resisted and turnover requirements should be reviewed to ensure that the annual value of a contract is the figure used to assess the financial viability of potential suppliers.
At a London-centric level, London & Partners was established to connect international businesses with London, helping them to set up, succeed and grow. The FSB supports the desire of the Government and the Mayor’s Office to promote inward investment in the capital and across the UK; however, with fewer small businesses capitalising on export opportunities during the Games, it is vital that UKTI, London & Partners and the “GREAT” Campaign work closely together to ensure that imports and exports receive equal attention. The FSB view The FSB is keen to work with London & Partners and UKTI on a series of events to promote export opportunities in 2013 and beyond.
16. Boris Johnson, Mayoral Manifesto, 2012 Mayoral Elections 17. http://tinyurl.com/capmkdy
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Passing the baton — A report by the London Region of the Federation of Small Businesses — February 2013
Š Federation of Small Businesses 2013 Federation of Small Businesses London Regional Office 2 Catherine Place, London SW1E 6HF Website www.fsb.org.uk/London Twitter: @FSBLondon This report can be downloaded from the FSB website: www.fsb.org.uk/london For more information contact Matthew.Jaffa@fsb.org.uk All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission of the Federation of Small Businesses (FSB). While every effort has been made to ensure the accuracy of the facts and data contained in the publication, no responsibility can be accepted by the FSB for errors or omissions or their consequences. Articles that appear in the report are written in general terms only. They are not intended to be a comprehensive statement of the issues raised and should not be relied upon for any specific proposes. Readers should seek appropriate professional advice regarding the application to their specific circumstance of the issues raised in any article.