Olympic Stadium
London 2012 is costing taxpayers as much as £11bn but they may not see all of this back (Reuters)

Goldman Sachs economists have warned the UK not to let expectations of the economic benefit from holding the London 2012 Olympic Games race ahead of reality, after the government said it believes Britain will make £13bn in the long term from hosting the world's biggest sporting event.

Australia and China have both failed to see the returns anticipated from holding the Olympic Games in pre-event forecasts, after tourism barely increased and labour markets were not as flexible as thought in Sydney 2000 and Beijing 2008.

"While prospective studies of this kind certainly set the expectation for a significant economic return, retrospective studies suggest that the economic benefits were significantly overstated," said a Goldman Sachs report called The Olympics and Economics 2012.

Australian taxpayers lost out after Sydney 2000 cost the New South Wales government AU$6.5bn (£4.3bn) and generated AU$5.2bn, leaving a clear deficit.

There was "no discernible increase" in the number of tourists, said Goldman, while the Australians were closer to full employment than they thought, leaving little slack in the labour market and therefore less scope for economic benefit from the Games.

"While the Head of the Australian Olympic Committee, John Coates, recently conceded that London is set to host an even better event than Sydney, the economic issue of whether the London Olympics delivers a positive economic return may well come down to the degree of slack in the UK economy at the time of hosting the event," Goldman wrote.

As of June there were 2.61m people out of work in the UK, not far from its 17-year high.

China saw little investment after hosting the Olympic Games and also failed to see any boom in its tourist industry.

"The specific investment numbers released by the government related to gross investment, and a large but unknown share of this gross investment would have been made with or without the Olympics," said the report.

"In addition, other investment may have been cut back as China's economy was overheating during most of the period when Olympic-related investments were under way.

"This means that the unknown amount of additional investment made by Beijing and other host cities was at the cost of the other cities/areas of the economy.

"It is unlikely that the economy was overheating due to the Olympic-related investment itself, as the amount was relatively small compared with total GDP."

The report added that tourism expectations in China "did not live up to expectations either".

Britain's government said it expects an extra 4.5m visitors bringing an additional £2.3bn boost to the tourism industry in the UK - all as a result of London 2012.

"I am confident that we can derive over £13bn benefit to the UK economy over the next four years as a result of hosting the Games," David Cameron, Britain's prime minister, said.

"I am certain that when you add in the benefits from construction the total gain will be even greater."

The Games could cost the country's taxpayers as much as £11bn - soaring to almost four times the original budget.

Goldman Sachs cautioned over the real benefits of holding the Olympic Games.

"While the spillover benefits from the hosting of the Olympics extend far beyond the government sector-to include associated tourist spending, national recognition and intangibles such as convenient viewing times and the promotion of healthy lifestyles-a fuller assessment of the economic benefits of hosting the Olympics reveal that the benefits may not be worth the costs," Goldman wrote.