Government Expenditure on Sport


Published on

Published in: Economy & Finance, Technology
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Government Expenditure on Sport

  1. 1. MA Sports Management Philip Barnes The Sports Business Government Expenditure on Sport: An Analysis of the Positive and Negative Economic and Social Impacts on Society. Gratton & Taylor (1996) suggest there are direct and indirect benefits of sport.Direct benefits include economic impact and regeneration alongside an improvementon societal health, productivity and quality of life. Sport indirectly produces a widearray of public good benefits ranging from national pride and well being, to areduction of crime and healthcare expenditure. Stewart (2007, p.6) reinforcesportraying sport as ‘a vehicle for making better people and better communities;’ hencewhy the State takes substantial involvement in sport through UK Sport, Nationalsports councils, the sports lottery fund and other local authorities. Since its launch in1994, the National Lottery has invested £3.5 billion in sports participation projectsand elite performance (National Lottery 2008) whilst the Government has invested anestimated £2.94 billion (Playing to Win: A New Era for Sport 2008) since the LabourParty’s inauguration in 1997, which Oakley & Green (2001) considered a crucialmove to alter funding priorities; one that gave the government the impetus to realisetheir duty to get heavily involved in sport due to it’s many advantages (Beech &Chadwick 2004; Torkildsen 2005). As identified there is a great expenditure of public money on sport and in partthis is justified by an assumed economic impact on society entailing tourism(Kurtzman 2005), infrastructure development (Payne 2006), urban regeneration(Coalter, Allison & Taylor 2000) and employment (Kasimati 2003). These Buying Olympic Success?developments are essential for a nation to move forward and sport provides the 250perfect catalyst for initiating, stimulating and improving such growth. Governmentinvest in sport under the supposition that the social and economic benefits generated UK Sport Funding (Millions) 200will surpass the initial deficit; through elite sport, sports events, school sport and massparticipation. 150 R2 = 0.9988 100 Team GB’s triumph of 47 medals at the Beijing 2008 Olympic Games cost anestimated £5 million each.1 Arey Olympic medals really worth this amount of money? = 9.4679x - 210.38 501 £235 million Invested in Beijing 2008 Athletes through UK Sport’s World Class Performance Fund 0 25 30 35 40 45 Page No. 1 50 Olympic Medals
  2. 2. MA Sports Management Philip BarnesWith an increase in national morale, reputation and sporting participation, manywould justify the financial support of elite sport. Looking at the funding from UKSport through the world class performance programme compared to the OlympicGames Success through the same period we can see an extremely strong coefficient ofdetermination value of 0.9988 (See Figure 1); drawing a strong similarity to the‘significant linear relationship between money spent and total medals won’ identifiedby Hogan & Norton (2006, p.203). Figure 1 - Buying Olympic Success? Funding - Medal Count Analysis Taking into consideration the estimated £500 million of public funding setaside for London 2012, the equation derived suggests Team GB may look forward toachieving approximately 75 medals which could see them overleap Russia to 3rdplace, who achieved 72 medals in Beijing. The model needs more values to be moreaccurate, although is still a useful comparative tool to forecast future Olympicsuccess. Beech & Chadwick (2004) confirm that a successful sporting systemrequires solid investment however suggest that it goes hand in hand with a variety ofother factors. Apart from the development of school sport, sporting infrastructure andorganisational structure, hosting major sports events has a major impact on the Page No. 2
  3. 3. MA Sports Management Philip Barnessporting system, particularly the level of funding. Hosting or participating in a megasporting event places the hosting or performing nation’s sports system on aninternational pedestal leading Culture Secretary Andy Burnham to defend theGovernments great expenditure on sport:"Sport is such a great thing to invest in, even in difficult economic times. Its notfrivolous spending in any way, shape or form. This is money that brings real benefitin terms of greater activity in the population and real joy, real happiness when we seeour national team do well.” Andy Burnham, Culture Secretary 2008 The next decade will see the UK enthralled by sport from a series of highprofile sports events including the Twenty20 Cricket World Cup in 2009, 2010Women’s Rugby World Cup, London 2012 Olympic Games and Glasgow 2014Commonwealth Games. Potential events which are relying on successful bids includethe 2012 Rugby League World Cup, 2015 Rugby Union World Cup and 2018 FIFAWorld Cup. Throw in the world’s most popular domestic football competition (Kerr& Gladden 2008) the Football Association Premier League (FAPL), the prestigiousWimbledon Tennis Championships and the British Grand Prix at Silverstone and it isfair to say that the UK is truly synonymous with world class sports events. Accordingto Roche (1994, p.1) these are ‘short term events with long term consequences for thehost.’ Taking the FAPL as a prime example, a White Paper on Sport, HC 347suggests that the sports event has become ‘an important economic agent, with asignificant impact on employment, GDP and national and local economies (2008,p.19).’ A large variety of industries continue to benefit from the FAPL’s globalpopularity, namely the broadcasting, marketing, gambling, communication, travel,tourism and hospitality industries. Clubs also take a prominent position in manyurban communities developing a great sense of pride and affiliation whilst often beinggreat ambassadors for their host cities in the UK and worldwide. HC 347 continues tojustify government expenditure on the sport suggesting the ‘economic success of thePremier League generates significant taxation revenues for national and localgovernment, giving the Government and local authorities a direct interest in the Page No. 3
  4. 4. MA Sports Management Philip Barnescontinued economic health of our competition (2008, p.19).’ The FAPL provideslargely positive economic and societal impacts, however a glass ceiling does appear toexist for home grown players (Madichie 2009) as clubs tend to purchase foreign talentinstead; there are 316 foreign players registered in the current 2008/09 Seasonopposed to 273 from the UK. This could have a double sided effect on home talentvalue as top players will command greater prices as they are rare commodities2 asopposed to the others who will be compared within a global shop window. Regarding the most anticipated sports event of the next decade, London 2012,Toohey (2007) proposes that the Olympic Games are no longer just a sporting event;they are a catalyst for urban regeneration. They are an opportunity created in part toexecute infrastructure development projects, which would otherwise remain anarchitects dreams (Payne 2006). Witness to the notorious prostitute serial killing‘Jack the Ripper,’ the ‘East End’ of London has historically been subject to heavycrime and was destroyed in World War Two. It is no coincidence therefore that theEast End is the site of London 2012, with David Higgins, Chief Executive of theOlympic Delivery Authority (ODA), suggesting a different motive for hosting theevent:“There’s no doubt that the 2012 Games will be a fantastic sporting event, but I wantus to think about the Games as the Regeneration Games, a chance to change forevera part of East London that really deserves the level of investment that will come, andit will only come because the Olympics will be the catalyst for that level ofinvestment.” David Higgins, London Excel Forum 2006It appears that the ODA viewed the Olympic bid as ‘less important as a sporting eventat the grassroots than as a symbol of expectations of economic betterment (Hiller2003, p.449).’ The ‘Regeneration Games’ is the alternate motive for bidding for andhosting such an event, with the East End derelict and in desperate need for arenaissance. On the contrary, Andreff & Szymanski (2006) question whether theeconomic impact of a mega sports event can compensate the host destination for thesubstantial infrastructure costs that it will incur; the estimated budget required was set2 Especially Considering the UEFA ‘Home Grown’ Rule Page No. 4
  5. 5. MA Sports Management Philip Barnesat £9.3 billion but may fluctuate as the developments continue. This may seem abargain when compared to the estimated £20 billion invested on Beijing 2008however such a large amount of public money has to be justifiably spent; potentialeconomic benefits include sports tourism, infrastructure, regeneration andemployment which will surely prevail as they have done in the past (Brunet 1995;Andersen 1999; Hede 2005). To remove an element of risk, it has become the normfor bidding cities to commission ‘economic studies to provide a measure of the netgains that hosting the Games may provide (Kasimati 2003, p.433)’ There is an overlap between what is required for sport and that for tourism(Standeven & DeKnop 1999). Substantial development in transportation will enable agreater expansion of all forms of tourism in the area (Weed & Bull 2004). Anincrease in tourist numbers ensures more capital circulates in the economy, commonlyknown as the multiplier effect (Sharpley & Telfer 2002; Ritchie 2004; See Figure 2).Figure 2 - The Rational for Taxpayer Support of Sports Stadia and Events (Stewart 2006, p.165)Ritchie additionally proposes the showcase effect, where high profile media coveragehelps promote tourism and business investment. Roughly 70% of the world’spopulation3 watched Beijing 2008 enhancing the city’s brand (Brown et al. 2002;3 4.7 billion according to Nielsen Media Research Page No. 5
  6. 6. MA Sports Management Philip BarnesWesterbeek, Turner & Ingerson 2002; Evans 2003). The publicity of mega sportsevents gives the host destination high prominence in the tourism market place for ashort, well defined, period of time (Gratton & Henry 2001, p.169). With regard tothe influx of visitors spending, creating reason for development and creating jobs, theimpact of sports tourism is mainly positive however some potential negative impactshave to be considered. For example, according to Hinch & Higham (2003) distancedecay occurs where sports tourist numbers decrease as the distance from the originincreases; thus the claimed UK benefits for London 2012 may be more of an idealisedvision than a potential reality. But with UK taxpayers partially funding the expensivegames, surely a lack of an impact in areas increasingly outside London will causedisappointment. Parallel with the economic impact of sports tourism are socio-cultural impacts (Standeven & DeKnop 1999; Mason 2003). Smith (1978) developeda typology of tourists which ranges from small groups of explorers to vast amounts ofcharter level tourists. Smith suggests that irritation increases with larger numbers oftourists and this can damage local culture, however in the case of London, the fourthmost popular tourist destination in the world4 and deemed the ‘multicultural capital ofEurope,’ one could propose that their culture may just be strengthened. The Government are openly honest about their ulterior motive and thus thepublic should look forward to the changes proposed by the ODA; a regenerated arealeaving new housing, schools and health facilities for the community together withworld class sports facilities. A major social impact on society will be the provision ofthese facilities for public sport, with the recent ‘Swim for Free’ initiative launched5 aspart of the Game’s participation legacy. Such initiatives show the State’s desire toencourage the public to get physically active. Physiological benefits include healthyweight maintenance, lower blood pressure and cholesterol whilst exercise alsocontributes to psychological well being eliminating stress, leading Rutten et al. (2001)to recommend to the state a great need for emphasis on physical activity and healthpromotion; effective epidemiological action is the most valuable solution to raisepublic health levels and prevent disease (Epp 1987; Buck et al. 1996; Davies 2005).Again, the Government invest on the premise that it will have a major economic andsocial impact on society. Health promotion can considerably reduce the economic4 Forbes Financial News5 Launched on the 31st March 2009 Page No. 6
  7. 7. MA Sports Management Philip Barnesburden on the NHS (Buck et al. 1996) which is estimated to cost the UK economyover £8 billion a year (Allender et al. 2007). Health promotion therefore holds amuch broader agenda; a healthier nation could reduce government health expenditure,increase workforce production, national morale and potential sporting talent amongstmany other benefits. Sport is influential in the development of urban communities, acting as acatalyst for the formation, development and pride of identity and culture, socialcohesion and crime reduction. In terms of identity and culture, the UK, and indeedthe world, enjoy a great sense of affiliation through sport with the perfect examplebeing FAPL teams; Manchester United remarkably sell more replica shirts in the USAthan all Major League Soccer Clubs combined (Isidore 2005). As identified earlier,sport also draws the nation together to support their national teams. Social cohesionis an important by-product of sport which has a tendency to generate national prideand sense of patriotism (Nicholson & Hoye 2008; Walton, Longo & Dawson 2008).However, one must consider the other end of the spectrum, where social exclusionprevents people participating, spectating or getting employed in sport due to theirrace, gender, income, ability, age, geography or sexuality (Sugden & Tomlinson2002; Collins & Kay 2003; Houlihan 2008). Social exclusion is explicitly linked tocrime and sport is seen as a valuable resource for combating this problem (Collins2008; Liu 2009). Again however, to a much lesser extent, a negative impact of sportcan occasionally arise from hooliganism, organised crime, match fixing, alcohol andillegal drugs (performance enhancing and recreational). All sports ‘events have, to differing extents, impacts upon the communitywithin which they take place (Ohmann, Jones & Wilkes 2006, p.129).’ This study hasfound the majority of impacts to be overwhelmingly positive although potentialdrawbacks have been identified. Potential economic benefits include urbanregeneration, sports tourism, infrastructure development, employment and businessgrowth opportunities. Social impacts meanwhile are significant in building strongcommunities nationwide through social cohesion, participation encouragement andhelping establish a sporting culture. Government will continue to invest heavily insport nationwide to ensure the nation benefits from the impacts of sport, however asmentioned before they will continue to scrutinise funding options and judge their Page No. 7
  8. 8. MA Sports Management Philip Barnesprofitability in terms of impact. The idiom ‘two birds with one stone’ perfectlydescribe their actions, using sport as a camouflaged vehicle to fix, control and developmuch wider agendas. ReferencesAllender, S et al. (2007) Coronary Heart Disease Statistics. London: British HeartFoundation. Page No. 8
  9. 9. MA Sports Management Philip BarnesAndersen, A. (1999) Economic Impact Study of the Sydney 2000 Olympic Games.University of Tasmania: Centre for Regional Economic Analysis.Andreff, W., Szymanski, S. (2006) Handbook on the Economics of Sport. London: Sports &Recreation. Pg 177-185.Beech, J., Chadwick, S. (2004) The Business of Sport Management. London: PearsonEducation.Brown, G., Chalip, L., Jago, L., Mules, T. (2002) ‘The Sydney Olympics and BrandAustralia.’ In Morgan, N., Pritchard, A., Pride, R. Destination Branding. Oxford: Butterworth– Heinemann.Brunet, F. (1995) ‘An Economic Analysis of the Barcelona 1992 Olympic Games: Resources,Financing and Impact’. In Miquel, M.D., Botella, M. The Keys to Success. Barcelona:University of Barcelona. Pg 203-237Buck, D et al. (1996) Reducing the Burden of Coronary Heart Disease: Health Promotion, it’sEffectiveness and Cost. Health Education Research, 11(4):487-499Burnham, A. (2004) Sports Handed London 2012 Budgets. [Online]. Available: [26th March 2009]Coalter, F., Allison, M., Taylor, J.A. (2000) The Role of Sport in Regenerating DeprivedUrban Areas. Edinburgh: Scottish Executive Central Research Unit.Collins, M., Kay, T. (2003) Sport and Social Exclusion. London: Routledge.Collins, M.F. (2008) Social Exclusion from Sport and Leisure. In Houlihan, B. Sport andSociety. London: SAGE.Davies, M. (2005) Health Promotion Theory. Berkshire: McGraw-Hill Education.Epp, J. (1987) Achieving Health for All – A Framework for Health Promotion. HealthPromotion, 1(4):419-428Evans, G. (2003) Hard-branding the Cultural City from Prado to Prada. International Journalof Urban and Regional Research, 27(2):417-440Gratton, C., Henry, I. (2001) Sport in the City: The Role of Sport in Economic and SocialRegeneration. London: Routledge.Gratton, C., Taylor, P. (1996) Research Digest No.44 - The Economic Benefits of Sport.Edinburgh: The Scottish Sports Council.Hede, A-M. (2005) Sports-events, Tourism and Destination Marketing Strategies: anAustralian Case Study of Athens 2004 and its Media Telecast. Journal of Sport Tourism,10(3):187-200Higgins, D. (22nd/23rd November 2006) London Excel Presentation. Thames GatewayForum: Keynote Transcript.Hiller, H.H. (2003) Mega-events, Urban Boosterism and Growth Strategies: An Analysis ofthe Objectives and Legitimations of the Cape Town 2004 Olympic Bid. International Journalof Urban and Regional Research, 24(2):449-458 Page No. 9
  10. 10. MA Sports Management Philip BarnesHinch, T., Higham, J. (2003) Sport Tourism Development. Clevedon: Channel ViewPublications.Hogan, K., Norton, K. (2000) The ‘Price’ of Olympic Gold. Journal of Science and Medicinein Sport, 3(2):203-218Houlihan, B. (2008) Sport and Society. London: SAGE.Houlihan, B., Green, M. (2007) Comparative Elite Sport Development. Oxford: Butterworth –Heinemann.House of Commons: Culture, Media & Sport Committee. (2008) European CommissionWhite Paper on Sport HC 347. London: The Stationary Office.Isidore, C. (13th May 2005) ‘Man who? UK team has big US prospects.’ Available: [23rd March2009]Kasimati, E. (2003) Economic Aspects and the Summer Olympics: A Review of RelatedResearch. International Journal of Tourism Research, 5(1):433-444Kerr, A.K., Gladden, J.M. (2008) Extending the Understanding of Professional Team BrandEquity to the Global Marketplace. International Journal of Sports Management andMarketing, 3(1/2):58-77Kurtzman, J. (2005) Economic Impact: Sport Tourism and the City. Journal of Sport Tourism,10(1):47-71Liu, Y.D. (2009) Sport and Social Inclusion: Evidence from the Performance of PublicLeisure Facilities. Social Indicators Research, 90(2):325-337Madichie, N. (2009) Management Implications of Foreign Players in the English PremiershipLeague Football. Management Decision, 47(1):24-50Mason, P. (2003) Tourism Impacts, Planning and Management. Amsterdam: Elsevier.Nicholson, M., Hoye, R. (2008) Sport and Social Capital. Oxford: Butterworth – Heinemann.Oakley, B., Green, M. (2001) Still Playing the Game at Arm’s Length? The Selective Re-investment in British Sport. Managing Leisure, 6(1):74-94Ohmann, S., Jones, I., Wilkes, K. (2006) The Perceived Social Impacts of the 2006 FootballWorld Cup on Munich Residents. Journal of Sport and Tourism, 11(2):129-152Payne, M. (2006) Olympic Turnaround: How the Olympic Games Stepped Back from theBrink of. London: Sports & Recreation.Ritchie, B. 2004. Sport Tourism: Interrelationships, Impacts and Issues. Clevedon: ChannelView Publications.Roche, M. (1994) Mega-Events and Urban Policy. Annals of Tourism Research, 21(1):1–19 Page No. 10
  11. 11. MA Sports Management Philip BarnesRutten, A et al. (2001) Self-reported Physical Activity, Public Health, and PerceivedEnvironment: Results from a Comparative European Study. J. Epidemiol - CommunityHealth. 55:139-146Sharpley, R., Telfer, D. (2002) Tourism and Development: Concepts and Issues. Clevedon:Channel View Publications.Standeven, J., De Knop, P. (1999) Sport Tourism. Leeds: Human Kinetics.Stewart, B. (2007) Sport Funding and Finance. Oxford: Butterworth – Heinemann.Sugden, J.P., Tomlinson, A. (2002) Power Games. London: Routledge.The National Lottery. (2009) Funding History Search Results. [Online]. Available: [24th March 2009]Toohey, K. (2007) Olympic Games : A Social Science Perspective. Oxfordshire: CABIPublishing.Torkildsen, G. (2005) Leisure and Recreation Management. London: Routledge.United Kingdom. (2000) Department for Culture, Media and Sport. Playing to Win: A NewEra for Sport.. London: Her Majesty’s Stationery Office (HMSO).United Kingdom. (2002) Department for Culture, Media and Sport/Strategy Unit. Game Plan:A Strategy for Delivering Government’s Sport and Physical Activity Objectives. London:HMSO.Walton, H., Longo, A., Dawson, P. (2008) A Contingent Valuation of the 2012 LondonOlympic Games: A Regional Perspective. Journal of Sports Economics, 9(1):304-317Weed, M., Bull, C. 2004. Sports Tourism: Participants, Policy and Providers. London: Sports& Recreation. Pg 11-13Westerbeek, H.M., Turner, P., Ingerson, L. (2002) Key Success Factors in Bidding forHallmark Sporting Events. International Marketing Review, 19(3):303-322 Page No. 11