Will Cameron's business Olympics clear the economic hurdles?

The PM wants the nation to cash in on the Games but, says Mark Leftly, the credit crunch may have spoiled its chances
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The Independent Online

In a Victorian mansion, a little more than a stone's throw from The Ritz and once home to the second son of King George III, David Cameron woos some of the world's most powerful chief executives. He bombastically declares that "Britain is back open for business", that trade is "a personal mission for me", but looks disappointed as he is greeted with bemused silence when he offers his audience the opportunity to ask him some questions.

Outside, delegates sip Earl Grey-flavoured cocktails as Boris Johnson, shorn of most of his lavish locks in a bid to look a little less ruffled for the Olympics, boasts that the games is "a wonderful global calling card for British engineering and construction companies".

The press are roped off from the dignitaries, chaperoned and told off whenever they move more than a few feet away from their pen. Advertising boss Sir Martin Sorrell chuckles when he discovers that his occasional tormentors can't go to the toilet without a marshal escorting and waiting for them to complete their ablutions.

The prime minister kicked off two weeks of business summits at Lancaster House in London's West End to help foster deals and inward investment off the back of the Olympics. As well as this showpiece event last Thursday, which was attended by nearly 200 bosses of huge conglomerates and gloriously rich sovereign wealth funds, there are summits dedicated to the Chinese, the Brazilians, the creative industries and education.

Much has been said about the regeneration benefits of the games for east London and that sporting tourists will spend a small fortune in what will at least be a short-term boost for the London and wider economies. But these summits show that the Government views the Olympics as a massive business opportunity that could help pull the country out of its recessionary hole.

The clout of these events is difficult to underestimate. European Central Bank president Mario Draghi said little the world did not really know when he told the delegates that he would do everything he could to "preserve the euro", but uttering them at such a heavyweight event meant those words boosted markets the world over.

UK Trade & Investment, the agency running the summits, has estimated that some £1bn in extra investment will be generated by the games. The presence of International Monetary Fund boss Christine Lagarde added to the sense that the UK is, for a fortnight at least, the centre of world business.

Britain's economic reputation has largely been founded on its financial services industry in recent years, a reputation that took a hit in the wake of the credit crunch and all the scandals that have followed. This first summit, for example, was supposed to have been closed by Bob Diamond, but he was airbrushed from these events when he quit Barclays after the bank was found to have rigged Libor rates.

Instead, the Government is taking these two weeks to present itself as a world leader in more modern, dynamic industries. Cisco Systems chairman John Chambers and Google chairman Eric Schmidt were wheeled out to extol the virtues of east London's Tech City development, in the hope that the attendant bosses of the likes of the Abu Dhabi Investment Authority and Canadian pension funds might pump some dough into "the Silicon Roundabout".

All fabulously upbeat – no more so than when Mr Johnson compared the ration-book London games of 1948 to the city that today is abundant with Michelin star restaurants – yet the spectre of awful economic data hangs over these events.

Mr Cameron vowed to keep interest rates low to help business, but the reality is a rate cut below the historic low of 0.5 per cent might be necessary simply to arrest three quarters of economic decline. Last week, George Osborne faced a call from Lord Oakeshott to be replaced as Chancellor by the Business Secretary Vince Cable, a close friend of the peer.

And then there's the construction sector, which for years looked forward to the boost that was expected from London 2012-related work. In the past year, construction has collapsed by nearly one-tenth and is the major factor behind last week's shock GDP figures, which showed the economy contracted by 0.7 per cent between April and June.

The construction drop is due to the steep cuts in the public sector on which it so relies. Mr Cameron swatted away talk of an economic Plan B and lectured his audience that "getting our debts under control is clearly important for growth", while boasting the event was "the biggest business summit in Olympic history".

That summit, though, and even Mr Draghi's comments, may not be enough for the business promise of the Olympics to overcome the gloom of the credit crunch.

Cameron will be hoping, though, that investors focus on the country's ability to deliver an outstanding sporting event with top rate infrastructure rather than its stuttering economy.