LONDON, July 26 (Reuters) - "Everyone here hates the Olympics," says the graffiti spray-painted on the wall of a derelict peanut factory just outside London's glitzy new Olympic stadium.
Tucked away in one of London's roughest neighbourhoods, the crumbling factory is long out of use, having been taken over by a motley crew of artists, musicians and circus performers united by their disdain for the 2012 Olympic Games.
"The stadium is right next door. But it doesn't aid the local community," said Kunal Modi, a 25-year-old musician living in bohemian squalor in the huge Victorian building.
"They are all talking about how it's going to have a knock- on effect on the local community but people haven't been allowed to capitalise on it. So that's outrageous."
Millions of foreign visitors descending on London this month may not notice, but within sight of the gleaming Olympic venues are some of the city's most troubled neighbourhoods where the unattainable glamour of the Games has only fuelled resentment.
It was here, in worrying proximity to the Olympic sites, that gangs of masked teenagers went on the rampage last year, looting shops and turning streets into battle zones - a trauma that still hangs heavily over the socially segregated area.
People in big cities complain the world over and London is no exception but in the British capital problems are confounded by the proximity with which the rich live next to the poor.
In contrast to the million-pound town houses of London's plush West End, the East End is a scruffy, post-industrial world where alienated youths live side by side with immigrants, young aspirational families and artists squatting in old warehouses.
And with the Olympic bandwagon rolling into town, complete with electric fences and soldiers, many are struggling to see how they will benefit from the regeneration of east London.
"Inspire a generation" is the motto of the Games and officials are confident there will be a positive long-term impact, with plans to spend more than 300 million pounds ($470 million) to transform the area into a new and prosperous part of London.
The regeneration is much needed.
Outside one Olympic venue in the industrial area of Hackney Wick, M Royce - he gave only his initial - stared blankly at a security fence around the facility as he described his struggle to find a job.
"It's two different worlds. They are not going to meet in the middle. The rich are getting richer and the poor are getting poorer," said Royce, a second generation Londoner whose family came from Ghana and who has been jobless for two years.
"That's what it boils down to. Give me a job and I'll do it. I've been promised a job working at the Olympics as a security guard, they've done all the vetting, all the checks, and I am still waiting. I am one of the statistics, one of the victims."
When London was chosen as the host city for the Games, the main selling point was that the new facilities such as the 80,000-seat stadium would help breathe new life into the poor boroughs of Newham, Hackney and Tower Hamlets.
Home to immigrants from all over the world, Hackney is the second most deprived area in England in terms of income and employment. Only just over 65 percent of its inhabitants are employed - below the national average of 70 percent.
Ethnically, it is a melting pot, with more than 100 languages spoken within Hackney alone, including Turkish, Yiddish and Bengali. In nearby Newham, 74 percent of primary school pupils listed English as their second language last year.
As it prepared, London looked to Sydney for inspiration after its 2000 Olympics were recognised as hugely successful, but even there the authorities struggled to find suitable uses for all the venues, and some were labelled white elephants.
Paul Brickell, in charge of regeneration in the area, said 8,000 new jobs would be created locally by 2030. The Olympic park would have five new neighbourhoods, including affordable housing, family homes and sought-after gardens.
The giant Westfield shopping centre, which opened in 2008, would not have been built if it had not been for the Games, he said. Now it employs 10,000 people, mainly locals.
"Business is booming there and the additional footfall is passing through to other local businesses," he said. "Yes for three weeks there will be disruption, I live here and it's a pain in the neck, but the longer term benefits frankly make it worth it."
Pravin Dewdhory, a designer and Hackney resident who designed Olympic badges and a special 50 pence coin, agreed.
"The Olympics coming to these boroughs is not a golden ticket to solving all its problems... but overall, having this global event on our doorstep will hopefully inspire many of the youth throughout the boroughs," he said.
The Olympics will no doubt be a moment of pride for many Britons and some local businesses have expanded to tap into the increased numbers. But for others it represents a logistical nightmare since firms are only allowed to handle deliveries between midnight and 6 a.m. for security reasons.
Peter Viner, managing director of Algha Group, a local eyewear firm famous as the maker of Harry Potter's glasses, said he expected business to fall by 25 percent during the period.
"Everybody is saying it's going to bring prosperity to England, to the country. I don't think they are calculating the loss to business that has been created," he said.
"Overall, is it going to be good for this area? I am not too sure. They are sprucing up where they need to, but they won't maintain it and it will fall away and become derelict again."
Heavily bombed during World War Two, east London forms a colourful patchwork of urban life where elegant Victorian houses owned by young families working in the nearby city stand alongside ramshackle council blocks and dock basins.
In many ways the peanut factory collective, where more than 100 artists share communal space to make art, epitomises the way the East End has evolved over the years, attracting aspiring artists and turning gritty areas into hip enclaves.
Professor Mike Hardy of the Institute of Community Cohesion, who has advised the government on social issues in London, said the arrival of better housing and richer tenants in the area could add to people's sense of alienation if mishandled.
He said the local residents needed to understand how they would benefit from the new facilities, and not be left on the outside looking in.
"In London the haves and have-nots live cheek by jowl and generally we do that pretty well," he said. "I'm concerned that if the local community isn't fully involved then the investment in infrastructure could paper over the underlying problems."
Last year's riots were a bitter reminder of those problems. Hackney witnessed some of the worst unrest, prompting local residents to defend their shops with baseball bats and truncheons after police failed to contain the violence.
"The Olympics has changed the geography of London and moved the centre East," said Liza Fior who designs public spaces as part of a London architecture and art project known as muf.
"The Games will raise aspirations and expectations but the Olympic investment in East London has masked the full extent of the cuts in public services - cuts which will be even greater in the next financial year."
Tensions may be high in some areas, but residents tend to play down the ethnic component, pointing to the fact that youth gangs of all races took part in last year's looting and rioting.
"A lot of these kids don't know why they are angry ... I can imagine were I 10 years younger I could've been there," said Modi the musician, whose family came from India in the 1970s.
"I was an angry kid I guess. It's easy to get swept in these things when you are 15," he added. As he spoke, police helicopters rumbled overhead and a scruffy t-shirt reading "Don't touch me, I am local" fluttered on a clothesline. (Writing by Maria Golovnina; editing by Mike Collett-White)