The Coronavirus: Economics, Questions and Priorities

14th March 2020

The reports on the spread of the coronavirus – and the various measures being taken to contain it – are dominating the news agendas across the world.

Perhaps not surprisingly, a disproportionate amount of the media coverage has related to the impact on spectator sports. Of course, it is the case that the scale of the disruption to major events – which yesterday alone included announcements on the postponements of the Masters’ golf tournament and the first four races in the Grand Prix season, the abandonment of England’s cricket tour of Sri Lanka and a temporary halt to the Premier League and other soccer schedules in England and Scotland – is unprecedented in the post-Second World War period. Whilst most societal activity takes place outside the sporting arena, the presentation of the virus’s impact on sport does assist – if we needed assisting – in emphasising the overall magnitude of the challenges currently faced by all governments and civic societies.

When watching the news coverage, I was reminded of some research with which I was involved – in my former role as an economic consultant – over 30 years ago. In 1985, my colleague Richard Lewney and I were commissioned by the Sports Council to estimate “The Economic Impact and Importance of Sport in the UK”. Our independent report[1] was generally well received in both academic and policy-making circles and led to further investigations of the economic impact of sport in two local areas (Bracknell and the Wirral, as it happens) as well as in Northern Ireland and Wales. We also collaborated with the Sports Council in being the lead partner in a Council of Europe-funded programme of research across several countries. (There is a curious satisfaction in seeing the publication of a journal article in Finnish).

Our analytical framework was based on the system of National Income Accounting, which enabled us to examine not only the first-round effects of sport-related spending (for example, by consumers on admission charges, clothing and footwear, equipment, and so on), but also the backward linkages and “multiplier” effects of this expenditure throughout the economy. Our findings included that, at that time, over 370,000 jobs were sport-related in the UK and the value-added exceeded that created in a number of traditionally important sectors of industry, including motor vehicles/parts and drink/tobacco.

Three decades on, I would expect that the economic impact of sport in the UK is now proportionately greater than the estimate that Richard and I made in the 1980s. This reflects a range of social and economic factors. The former includes significant changes in lifestyle patterns, such as the increased popularity of running and cycling, the growth in spending on sport-related casual clothing and the huge expansion of sport’s media coverage in the satellite age.

More generally, even allowing for a couple of recessionary periods, 30 years of more or less uninterrupted economic growth has meant that, on average, people have more disposable income on which to spend on service-based activities. Moreover, it is the case that – for much sport-related spectating activity, in particular – the real price of attendance has increased: that is, the cost has risen faster than the general rise in the price level. (I noted an illustration of this in An Ordinary Spectator, when I reported that, between 1994 and 2012, the nominal price of a balcony ticket in the Football Stand for the Headingley test match rose from £27 to £65 i.e. by 141%. As the increase in the All Items Consumer Price Index – the CPI – over the same period was 48%, the real price increase was 63%).

And so we know that sport’s role in overall economic activity is significant. What, then, about the impact of the coronavirus on sport’s finances?

This can be considered in the same way as examining the effect of the virus on other areas of economic activity, including those such as travel and tourism which are being severely affected. The reduction – in some cases, collapse – of demand for sports spectating and/or participation will obviously adversely affect the income of sport-related businesses (whether Premier League football club or local gym) and they, in turn, will reduce their own spending to the suppliers of the goods and services that they would normally purchase. Such are the multiplier effects down through the supply chain. The employees of those businesses are also likely to cut their expenditures, either because their personal incomes have fallen or, even if not, due to the enhanced “precautionary” motive for saving for an uncertain future.

From this, a number of key questions emerge. For how long will the halt to sports events continue? Will sports businesses (and their suppliers) be able to survive through this period of low or non-existent cash-flow? And what will the post-virus sporting landscape look like? The last of these questions relates to the issue of whether the lost sports events have been postponed (as, for example, in the case of the London Marathon from April to October) – in which case the finances of sport will make a quicker recovery – or cancelled altogether.

It is the prospect of outright cancellation that is focusing (some) minds on the political jockeying-for-position that this will generate. Yesterday, when interviewed, the Celtic FC manager Neil Lennon wasted no time in stating that, under these circumstances, his club – with their 13-point lead at the top of the Scottish Premiership – should be awarded the championship.

Meanwhile, Jurgen Klopp, the manager of Liverpool FC (which is leading the Premier League by 19 points) released his message to the club’s supporters on social media. It did not refer to the league table at all and ended with the following appeal:

“It would be entirely wrong to speak about anything other than advising people to follow expert advice and look after themselves and each other.

The message from the team to our supporters is only about your well-being. Put your health first. Don’t take any risk. Think about the vulnerable in our society and act where possible with compassion for them.

Please look after yourselves and look out for each other”.

It is clear that, in the current circumstances, the social fabric is being tested, the death rate is higher than it otherwise would have been and the future is uncertain. To his great credit, Mr Klopp recognises that some of the interests of those engaged in the sporting environment need to be placed in their proper perspective.

Some things are more important than others.

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