World Cup Fever: The economic effects of sporting events
The 2018 FIFA World Cup came to an end earlier this month, during which over 3 billion people from around the world tuned in to witness the highs and lows of 32 countries as they fought their way to the final of one of the most unpredictable tournaments in history.
Following a host of twists and turns, France ultimately came out on top, claiming the trophy following a dramatic 4-2 win against Croatia in the final.
Now a few weeks on, we’re taking a look at the wider impact of the World Cup and sporting spectacles like it, exploring how these types of event have the power to change economic conditions in the UK and around the globe.
The ‘feel-good’ factor
In the two years since Britain voted to leave the European Union, there’s no doubt that the home nations have suffered from the fallout. The pound has dropped significantly against the Dollar and Euro and wage growth has remained relatively stagnant, so it’s no surprise that consumers have been less willing to go out and spend.
What the World Cup has shown; however, is that bringing the country together can have a huge positive effect. At the start of the tournament, ‘it’s coming home’ was England’s ironic nod to summers past, but as the games went on and the team’s success continued to carry them all the way to the semi-finals, those three words came to mean so much more.
A survey from the Bank of England confirmed that “among the factors likely to affect consumer sales volumes over the next 12 months, the World Cup was expected to give a positive sales boost.” This was reinforced by a study from Retail Research, which found that an estimated £1 billion was added to the UK economy just from England reaching the quarterfinals.
Despite this boost, the pound dropped below $1.30 for the first time since September 2017 in June. While the World Cup and good weather gave food and drink sales a helping hand, it actually kept shoppers away from the high street. As a result, doubt has now been cast as to whether a potential interest rate rise would go ahead next month.
Elsewhere, in the world of business, employers often find that productivity can be affected. It’s no surprise that distraction from work can have a negative effect, but when it comes to watching your team win, productivity can in fact increase by 10-12%.
Which sectors benefit?
The scale of global participation during events like the World Cup has many short and long-term economic benefits, particularly on sectors such as construction, leisure, retail and tourism.
According to a research paper from the European Central Bank, when a major game is taking place during market hours, volumes of sales fall. In recent tournaments sales across different markets fell as a whole by 48% in 2014 and 36% in 2010 during a match and reduced further by 10% around the time of a goal.
While some retail activity and consumption is generally lost as a result of people watching the football, rather than shopping, the food and drink industries sees an increase in sales. Football supporters gather together to visit pubs and bars for the games, boosting revenues for these chains, while those who decide to stay in to watch the games drive up sales of big screen TVs, takeaways and food and drink from supermarkets, particularly alcohol. During this time, investors are much more likely to look in the direction of big name supermarkets (Tesco, Asda, Sainsburys etc.), delivery firms (Deliveroo, Domino’s Pizza, Just Eat) and consumer electronic stores such as Dixons Carphone.
However, the inflation of sales can be a short-lasting effect, depending on the results of the national team. In the first week of matches in the 2014 Brazil FIFA World Cup, sales of alcohol, soft drinks, confectionery, pizza and party food had risen by more than £50M in the UK; however, the week after England lost to Uruguay, sales dropped again by £38M, IRI reports claim.
Tourism and Airline Groups also benefit due to a high demand for flights, particularly to the host nation; which this year was Russia. Flight costs are inflated around the time of the tournament and customers are more than willing to pay peak prices to take a certain flight, rather than choose their destination route and date / time of departure based on best value.
How does the host country benefit?
Out of all countries involved in this year’s World Cup, Russia will experience the biggest impact. Even before the tournament began, Russia had already spent approximately $11 billion on improving stadiums and airport facilities across the 11 locations hosting the games, to support the influx of visitors during the month-long event.
Despite the cost, a survey conducted by the Russian government estimated that the country would experience a boost in gross domestic product (GDP) of between $26 billion and $30.8 billion over the 10 years from 2013 through to 2023, directly as a result of the World Cup. Not to mention the increase in revenues for businesses and the creation of around 220,000 jobs.
What about 2022?
Turning our attention to four years down the line, the World Cup will be heading to the Middle East for the first time, with Qatar formally handed the torch by Vladimir Putting at this year’s closing ceremony.
In another shake up, FIFA have decided to reschedule the 2022 games to be held during November and December, when temperatures are considerably lower in Qatar, than in the summer months.
Qatar will spend approximately $100 billion on infrastructure projects to support the World Cup, including 9 state-of-the-art stadiums, new road and railway developments and hotels to accommodate the players and the fans.
As we wait patiently for 2022 to come around, a couple of the next world sporting events to have your eye on will be the Cricket World Cup in 2019, held here in the UK, the 2019 Rugby World Cup and the 2020 Olympics, both taking place in Japan. With the estimated cost of hosting the Olympics at a whopping $20 billion, Japan will certainly hoping for some return on investment. Whether this happens remains to be seen.