In a downturn, why has sport got away scot free?

Sport enthusiasts are still splashing out on season tickets.

The Premier League is the world’s most lucrative football league. In its response to last year’s somewhat critical Culture Media and Sport Select Committee report on the game’s administration, the league sought to stress that its booming revenues are “reflected in the contribution made by Premier League clubs to their local economies, particularly in smaller urban communities such as Blackpool, Sunderland and Stoke”.

One such smaller urban club is Swansea City, who have thrived in the Premier League since promotion in 2011, and whose economic impact was the subject of a recent study by the Welsh Economy Research Unit at Cardiff University, which estimated that the club’s economic activity supported 295 full-time equivalent (FTE) jobs in the area, on top of the 125 employed directly.

Swansea are regarded as one of the best-run clubs in the country, making a profit of £14m on £65m turnover in their first season in the top division. They have swiftly become a middle-ranking Premier League club, usually filling their 20,000-capacity stadium and seeing their income and profile soar again in February with their Capital One Cup triumph.

The WERU report surveyed spectators’ spending habits over three games towards the end of last season, against Newcastle United, Blackburn Rovers and Wolverhampton Wanderers. Extrapolating from this, it estimated that gross spending by visitors to Swansea matches was around £8.13m per season, leading, after deductions, to an initial injection to the Welsh economy of £4.72m and £3.15m Welsh Value Added.

Additional spending generated by spectatorship is considerable, it says: “For home fans that were non-season ticket holders the average reported spend per person was £46.34. Around 63 per cent of this represented purchase of match day tickets, with the next, largest category being food and drink at an average of £9.15 per person.” But it is the Premier League’s sizeable away supports that bring the most additional spending. Visiting fans who worked full-time reported an average spend per person of £79.88. The largest item of expenditure for those working full-time was food and drink, representing nearly 40 per cent of this. Of course, Swansea’s relatively isolated geographical location makes them an untypical case – 44 per cent of away fans were staying overnight.

“It’s the add-in impact of visitors that makes the difference,” said Dr Annette Roberts of the Welsh Economy Research Unit and one of the report’s authors. “And the fact that they spend on areas that are labour-intensive [such as food and drink and retail]. The multiplier effects are higher than they would be for a normal enterprise because of this visitor impact.” And it is retail and food and drink sectors that tend to prosper most from proximity to stadiums. In east London, Glyn Roberts, operations manager of the Tap East pub in the neighbouring Westfield shopping centre is anticipating an increase in trade of about 20 per cent when West Ham move to the Olympic Stadium.

What marks Premier League football clubs out from normal medium-sized businesses is, of course, the phenomenal sums paid to players. Swansea spent £29m on wages last season, of which it is estimated that playing and non-playing staff spent around £4.5m in Welsh goods and services, which have additional multiplier effect impacts of £1.63m supporting 60 FTE jobs. With 12 of Swansea’s 31-strong first-team squad coming from outside the UK, they are more likely to own property and splash their cash elsewhere, as the report acknowledges: “The usual assumption… that additional disposable income is spent in a similar fashion to the average Welsh household cannot hold; players may invest a higher proportion of their income in anticipation of a short career; players may invest in high-value real estate acquisition (either locally or in other places); players are likely to buy high-end consumer goods unavailable in Wales.”

“We assume that much more of this wage will be saved or spent non-locally than average wages in our modelling,” adds Calvin Jones of the WERU. “Of course, this will be true of most professional sports these days so the Premier League is not unique. This has, of course to be counterbalanced with the large numbers attending matches that DO have a regional economic impact, but aren’t captured in Swansea City FC turnover.” Less tangible but still significant, however, are the other effects of Swansea’s success on the city. The city’s university, for example, has seen applications rise 25 per cent in the past year, which vice chancellor Professor Richard B Davies attributed to Premier League football “putting Swansea on the map”.

Rugby union’s socio-economic profile has always been more affluent than that of football, and the flagship Six Nations tournament continues to sell out, this year’s tournament drawing a total of 1,042,965 supporters (69,531 per match). The Six Nations’ allure resides in both its regular and its “event-like” nature. It happens every year, unlike the Olympics, but the matches are rare and important enough to be showpieces. A report carried out for Mastercard by the Centre for the International Business of Sport at Coventry University in 2011, looking at the previous year’s Six Nations, found that the cumulative positive economic impact of the tournament across the competing nations was £420.94m, from total attendance of 1,054,654 (£88.38m in England, £72.5m in Wales, £62.9m in Scotland).

This increased economic activity came from expenditure in bars, shops, restaurants, hotels, transport and spending inside stadiums. The distance travelled by many spectators also generates overnight stays. Such appeal also draws in those without tickets. “To add to those travelling to the match venues, a large number of people watch the games in pubs, clubs, bars or cafes, as well as at home. The projected economic impacts also incorporate a potentially longer-term economic legacy for the hosts, through increased tourism, civic sponsorship and a greater likelihood of repeat visits,” the report says.

Rugby is also followed strongly by men between 20 and 44 with relatively high amounts of disposable income. “While 24 per cent of the adult population are from group AB, 54 per cent of those that play rugby or watch and attend rugby are from the top social grouping,” the report adds. The prolonged economic stasis appears to have had only a limited effect on hospitality income too. Twickenham saw a 35 per cent drop in revenue from corporate packages in 2009, but it jumped again by 60 per cent the following year.

The CIBS report also cites a key driver of sport consumption in recessionary times – its capacity to act as an escape from gloom. The report identifies “people and organisations who deliberately seek to engage with the Six Nations in some way in order to displace the pessimism associated with harsh economic conditions. Amongst some organisations such as advertisers etc, there will be a feeling that the tournament constitutes a safe haven and good value for money given the exposure and profile it provides... Indeed, further evidence suggests fans, broadcasters and commercial partners seek safe havens during times of economic hardship.”

Cricket internationals have similar characteristics in both their regular and big-event nature, as is illustrated by the increasingly intense competition among venues to win the right to host Test matches and One Day Internationals. Australia’s visit in particular has long been big business. An economic impact assessment of the Ashes Test at Headingley, Leeds, during their last tour here in 2009 claimed that the city’s economy benefited to the tune of more than £1.2m per day.

The report, commissioned by Yorkshire County Cricket Club and Yorkshire Forward, the former regional development agency for Yorkshire and the Humber, found that during the three days of the Test more than 32,000 additional people visited the city, accounting for around £3.7m additional spend in the local economy. Another county, Nottinghamshire, commissioned a similar study into the benefits of hosting matches at the World Twenty20 the following year, which claimed that £12.1m of value added was generated in the East Midlands.

The Marylebone Cricket Club, owner of Lord’s, also points to a report it carried out six years ago (PDF) on the impact of one Test, against the West Indies in 2007, which argued that the match had a positive economic impact of between £9.5m and £10.8m, supporting the equivalent of between 133 and 151 FTE jobs. That all these venues are jockeying for hosting rights to matches should be acknowledged, but the sums generated are noteworthy nonetheless

Wimbledon tennis has no such anxieties. The 2012 tournament brought in record profits of £37.7m for the Lawn Tennis Association, and though criticisms of the patchy development of the grass roots of the sport remain, Wimbledon is a prime example of major sporting events’ tendency to be recession-proof.

The success of Andy Murray and the rising profile of up-and-coming British players such as Heather Watson and Laura Robson has helped keep interest high – the event drew 484,000 spectators in total last year, many thousands of whom travelled to the area from outside and queued overnight or in the early hours of the morning.

What cannot be assessed for certain is where or whether this money would be spent without these regular major events. Yet it is clear that Britain’s sport enthusiasts, where they can, are still splashing out on season tickets and days and nights out. It is no easy cure for tough financial times but sport’s capacity to raise not just revenue, but profile and a certain feel-good – or sometime feel-bad – escapism means it will continue to make an economic impact where other sectors may toil.

This article first appeared on economia

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The Future of the Left: A new start requires a new economy

Creating a "sharing economy" can get the left out of its post-crunch malaise, says Stewart Lansley.

Despite the opportunity created by the 2008 crisis, British social democracy is today largely directionless. Post-2010 governments have filled this political void by imposing policies – from austerity to a shrinking state - that have been as economically damaging as they have been socially divisive.

Excessive freedom for markets has brought a society ever more divided between super-affluence and impoverishment, but also an increasingly fragile economy, and too often, as in housing, complete dysfunction.   Productivity is stagnating, undermined by a model of capitalism that can make big money for its owners and managers without the wealth creation essential for future economic health. The lessons of the meltdown have too often been ignored, with the balance of power – economic and political – even more entrenched in favour of a small, unaccountable and self-serving financial elite.

In response, the left should be building an alliance for a new political economy, with new goals and instruments that provide an alternative to austerity, that tackle the root causes of ever-growing inequality and poverty and strengthen a weakening productive base. Central to this strategy should be the idea of a “sharing economy”, one that disperses capital ownership, power and wealth, and ensures that the fruits of growth are more equally divided. This is not just a matter of fairness, it is an economic imperative. The evidence is clear: allowing the fruits of growth to be colonised by the few has weakened growth and made the economy much more prone to crisis.

To deliver a new sharing political economy, major shifts in direction are needed. First, with measures that tackle, directly, the over-dominance of private capital. This could best be achieved by the creation of one or more social wealth funds, collectively held financial funds, created from the pooling of existing resources and fully owned by the public. Such funds are a potentially powerful new tool in the progressive policy armoury and would ensure that a higher proportion of the national wealth is held in common and used for public benefit and not for the interests of the few.

Britain’s first social wealth fund should be created by pooling all publicly owned assets,  including land and property , estimated to be worth some £1.2 trillion, into a single ring-fenced fund to form a giant pool of commonly held wealth. This move - offering a compromise between nationalisation and privatization - would bring an end to today’s politically expedient sell-off of public assets, preserve what remains of the family silver and ensure that the revenue from the better management of such assets is used to boost essential economic and social investment.

A new book, A Sharing Economy, shows how such funds could reduce inequality, tackle austerity and, by strengthening the public asset base, rebalance the public finances.

Secondly, we need a new fail safe system of social security with a guaranteed income floor in an age of deepening economic and job insecurity. A universal basic income, a guaranteed weekly, unconditional income for all as a right of citizenship, would replace much of the existing and increasingly means-tested, punitive and authoritarian model of income support. . By restoring universality as a core principle, such a scheme would offer much greater security in what is set to become an increasingly fragile labour market. A basic income, buttressed by a social wealth fund, would be key instruments for ensuring that the potential productivity gains from the gathering automation revolution, with machines displacing jobs, are shared by all.  

Thirdly, a new political economy needs a radical shift in wider economic management. The mix of monetary expansion and fiscal contraction has proved a blunderbuss strategy that has missed its target while benefitting the rich and affluent at the expense of the poor. By failing to tackle the central problem  – a gaping deficit of demand (one inflamed by the long wage squeeze and sliding investment)  - the strategy has slowed recovery.  The mass printing of money (quantitative easing) may have helped prevent a second great depression, but has also  created new and unsustainable asset bubbles, while austerity has added to the drag on the economy. Meanwhile, record low interest rates have failed to boost private investment and productivity, but by hiking house prices, have handed a great bonanza to home owners at the expense of renters.

Building economic resilience will require a more central role for the state in boosting and steering investment programmes, in part through the creation of a state investment bank (which could be partially financed from the proposed new social wealth fund) aimed at steering more resources into the wealth creating activities private capital has failed to fund.

With too much private credit used for financial speculation and property, and too little to small companies and infrastructure, government needs to play a much more direct role in creating credit, while restricting the almost total freedom currently handed to private banks.  Tackling the next downturn, widely predicted to land within the next 2-3 years, will need a very different approach, including a more active fiscal policy. To ensure a speedier recovery from recessions, future rounds of quantitative easing should, within clear constraints, boost the economy directly by financing public investment programmes and cash handouts (‘helicopter money’).  Such a police mix – on investment, credit and stimulus - would be more effective in boosting the real economic base, and would be much less pro-rich and anti-poor in its consequences.

These core changes would greatly reform the existing Anglo-Saxon model of capitalism and provide the foundations for building support for a new direction for progressive politics. They would pioneer new tools for building a fairer, more dynamic and more stable economy. They could draw on experience elsewhere such as the Alaskan annual citizen’s dividend (financed by a sovereign wealth fund) and the pilot basic income schemes launching in the Netherlands, Finland and France.  Even mainstream economists, including Adair Turner, former chairman of the Financial Services Authority, are now talking up the principle of ‘helicopter money’. For these reasons, parts of the package are likely to prove publicly popular and command support across the political divide. Together they would contribute to a more stable economy, less inequality, and a more even balance of power and opportunity.

 

Stewart Lansley is the author of A Sharing Economy, published in March by Policy Press and of Breadline Britain, The Rise of Mass Impoverishment (with Joanna Mack).