What is the economic impact of the shutdown of the English football season? [Year 12 Enrichment Task]
In the second of a series of weekly Enrichment tasks for economics students, here is a task which considers the wider economic impacts of the shutdown of the English football season - look out for all the third party impacts and externalities which could result from the lack of sport during the coronavirus shutdown.
Update 5th May - the BBC have just published this article, with 8 charts on the impact of completing the football season behind closed doors, without any fans attending games: https://www.bbc.co.uk/sport/football/52529679
Sports finances and the virus: what is the economic impact of the shutdown of the English football season?
For top-flight football clubs, TV broadcasting deals make up around 60% of their annual revenue. In the 2019-20 season, the English Premier League clubs were set to receive £1.665bn for domestic broadcasting, of which Sky and BT committed to £1.575bn to show 180 matches live, and Amazon a further £90m for 20 matches. However, the postponement of the season due to coronavirus means that there are no matches to broadcast, and the clubs stand to lose out on up to £762m from the broadcasters, with a further £338m from lost ticket sales. The result is that many clubs, like any other business, fear bankruptcy. At the start of April, Burnley FC warned that they faced a potential loss of £50m and that for some clubs, it could be as much as £100m in lost revenue.
This spells potential bankruptcy for a great many clubs, at all levels, and risks the jobs of all their non-playing staff including groundsmen, maintenance staff, cleaners and restaurant staff, and those of hundreds of third-party suppliers in the local economy – with the risk of wide-ranging negative externalities. A number of top clubs announced that they were going to furlough their non-playing staff, but not the players, and received a great deal of negative publicity because of it. By 15th April Liverpool, Tottenham and Bournemouth had all reversed earlier decisions to furlough staff members; you can read about their reasons here. Professional footballers also faced a great deal of criticism when they were asked to take a 30% pay cut for the season, in order to protect the financial position of their clubs; the players responded by launching an initiative ‘Players Together’ which enables them to donate cash to a group of charities called NHS Together. Please read this article.
The impact of losses for the Premier League will be felt throughout the sport, as income filters down from the top league to lower Football League clubs and beyond, to grassroots amateur football. At all levels, clubs are at risk of going under.
While the top management of several clubs have taken a voluntary pay cut to help protect their club’s finances, some clubs have refused to accept offers from their non-playing staff to take a pay cut: Brighton and Hove Albion’s chairman Tony Bloom has ‘politely declined’ the offer from many of his club’s staff according to this article.
Nevertheless, there are real concerns about how, or even whether, the sports industry can survive the effects of the pandemic. Two articles in the FT explore this in more depth, which should be accessible through the FT for Schools initiative
Use these and other resources to research the impact of financial loss being experienced by football clubs throughout the economy in the UK, and to write a response to the question
“What is the potential economic impact of the shutdown of the English football season?”