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The Globe and Mail

U.K. retailers fear Olympics might ring hollow

Brazilian Olympic footballer Juan Jesus shops in a store in the Athletes Village in London July 22.

Neil Hall/Reuters

It is not so much "faster, higher, stronger" – the Olympic motto coined more than 100 years ago – as "slower, lower and weaker" for many of the U.K. businesses that had expected to profit from Britain's summer of sport.

Optimism that the games would generate a rise in economic activity, to offset the effects of the recession and the euro crisis, has given way to scepticism as the opening ceremony creeps closer.

The U.K. government has billed the games as a springboard for growth, setting up a British Business Embassy on the Mall which, it says, will bring together more than 3,000 business leaders from across the globe for summits to promote Britain's business talent.

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Investment managers, meanwhile, have identified specific U.K. companies in line for a revenue boost. Last month, Fidelity Worldwide Investments tipped Chime Communications, and its sports marketing arm, as likely beneficiaries of the games. So, too, Braemar Shipping Services, which has rights to cruise liner berths on the Thames, and Snoozebox, the portable hotel group that has supplied beds for G4S's security personnel.

Fidelity also reckons Burberry will reap the benefits of the millions of extra visitors to London during the Olympics. The luxury goods retailer has been preparing stores and increasing floor space in several stores.

But as August looms, doubts are surfacing over how bright the Olympic halo effect might be.

"People are waiting to see whether the Olympics will be the massive global event and a catalyst for growth or a false dawn," says Graeme Smith, partner at Zolfo Cooper, the restructuring specialist. He echoed concerns that the Games has done little more than concentrate spending and bring forward investment from next year and beyond.

Store bosses have privately expressed concerns that consumers and businessmen will be put off from coming into London by the games.

Mulberry cautioned recently that luxury shoppers may avoid London during August. The international shopper shops in London," said Godfrey Davis, chairman. "I don't know what will happen during the Olympics. The city will be full of sports fans. I don't know what impact that will have on our business, but I'm feeling cautious about it, rather than bullish."

The capital's infrastructure – particularly the mobile telecoms networks, which already operate at full capacity – are also expected to come under stress.

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Worried mobile networks executives talk of the "men's 100-metre test" – when the audience in the Olympic stadium will use their mobiles to e-mail friends or post pictures of the sprint final on Facebook and Twitter.

When O2's network crashed earlier this month, it had to offer almost eight million customers several days of free service in compensation.

Luxury hotel brands had been buoyed by the strength of Olympic bookings made before January – with Jones Lang LaSalle Hotels expecting average daily rates to be "six or seven times" last year's levels for August.

But many London hotels say they have since been caught out by a sudden upsurge in the supply of room stock, as the London games organisers – who had block-booked thousands of rooms at preferential rates for international Olympic delegates and officials – returned thousands of unwanted rooms.

Pubs are hoping for more passing trade. London-based brewer Full Smith & Turner is targeting the crowds following the Olympic Torch on its way to the capital. The Chiswick brewer said it was operating at "full tilt." But it also said that more rain, which has already depressed its summer trading, would dampen the mood.

Other groups say any boost will be too localised to impact performance nationally. Mitchells & Butlers – the pub company whose shares jumped 10 per cent in January when analysts factored in an Olympic boost to profits, said last week: "Only a handful of our 1,600 pubs and restaurants will directly benefit, so overall we don't expect the games to have much impact at a company level."

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Not even the millions of stay-at-home spectators are offering scope for more sales. Some broadcasters had been forecasting a year-on-year rise in advertising revenue of more than 5 per cent for July and August. Latest forecasts from media buyers indicate that advertising will decline by as much as 10 per cent year-on-year, as the ad-free BBC, Olympic host broadcaster in the U.K., dominates viewing figures.

However, irrespective of advertising spend, the link between viewing and consuming appears short-lived. While audiences soared for Euro 2012, the Tour de France and the Queen's jubilee celebrations, Halfords and JJB Sports found that increased demand for football shirts, bikes and tents did not help trading overall. They seem unlikely to see their share prices move "faster, higher, stronger" – no matter how well Team GB performs.

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