July 26, 2012 / 8:14 AM / in 5 years

Cash-strapped Britain eyes Olympic business bounce

LONDON (Reuters) - British Prime Minister David Cameron urged global business leaders gathered in London on Thursday ahead of the Olympics to invest in Britain, a day after data showed the economy is in much worse shape than previously thought.

Cameron is under pressure to turn around Britain’s economic fortunes, and Wednesday’s data showed the economy shrank far more than expected in the second quarter, battered by everything from an extra public holiday to the euro zone crisis.

Speaking at a trade and investment summit designed to harness the July 27 to August 12 Games to drum up business deals, Cameron reiterated his commitment to cutting the budget deficit and getting the recession-hit economy back on track.

“Yes, I want medals for Britain. And there will be no more passionate supporter of Team GB than me. But I’ve got a job to do this summer. And a big part of that job is to get behind British business,” Cameron said.

Cameron tried to deflect calls to amend his government’s flagship seven-year austerity plan after Wednesday’s data, and assured gathered dignitaries that deficit reduction remained at the top of his agenda.

“We’ve taken bold decisions to sort out our public finances and earn credibility with the markets .... And my message today is clear and unequivocal. Be in no doubt: we will go on and finish the job,” he added.

He also reaffirmed his commitment to improve regulation of Britain’s banking sector, whose reputation has been hit by a bank rate-fixing scandal in recent weeks.

Delegates to the trade and investment summit, the first of 17 planned to coincide with the Olympics, include International Monetary Fund Managing Director Christine Lagarde and the heads of global firms such as Google’s Executive Chairman Eric Schmidt and Vodafone Chief Executive Vittorio Colao.

Britain hopes to seal one billion pounds ($1.5 billion) of deals this summer as businesses capitalize on the Olympics, the first to be held in Britain since 1948.

OLYMPICS COST

A London 2012 sign is pictured before the women's Group E soccer match between Cameroon and Brazil at the London 2012 Olympic Games in the Millennium Stadium in Cardiff July 25, 2012. REUTERS/Francois Lenoir

The government is also keen to assuage critics of the Games who say the event is too expensive at a time of strained public finances, by highlighting the business opportunities offered by the event and uses of Olympic venues after the Games have ended.

British officials say the Games will cost 9.3 billion pounds ($14.5 billion) to host.

Despite forking out to host the event, Cameron and others say a credible austerity plan is crucial if Britain is to retain market confidence and keep its borrowing costs low.

Angel Gurria, secretary general of the Organisation for Economic Co-operation and Development (OECD), warned on Thursday that the markets would come down on Britain “like a tonne of bricks” if they detected weakness.

“The UK adjustment programme cleared the markets. This is why you have very low borrowing costs. This is why I think you should just persevere. You are now sowing the seeds of what will be the elements for recovery,” Gurria told BBC Radio 4.

“You have to have credible public finances before you start moving on the growth,” he said.

Britain reported this week a gain of nearly 53,000 new jobs in the 2011-12 financial year from inward investment, an annual rise of 26 percent.

However, figures from the United Nations World Investment Report show that $54 billion of foreign direct investment in 2011 is only a fraction of the $196 billion recorded in 2007, before the global banking crisis.

Others attending Thursday’s investment conference include Bank of England Governor Mervyn King, European Central Bank President Mario Draghi and Mexico and Brazil’s central bank chiefs, who all warned of the deep challenges facing the global economy and Britain’s euro zone trading partners in particular.

However, London’s mayor Boris Johnson sought to give a more upbeat outlook.

“In the coming weeks, with major global investors in town for the Games, I am embarking on a gigantic schmooze-athon, to highlight this and the wealth of other amazing investment opportunities that exist,” he said.

Additional reporting by David Milliken, Tim Castle and Estelle Shirbon, editing by Justin Palmer

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