Why the Rugby World Cup’s economic impact is nothing to get excited about
The economic benefits of international sporting tournaments to national economies have been loudly trumpeted, not least by sporting bodies themselves. Whilst UK investors might witness some short-term movement in the markets following the Rugby World Cup, history suggests that the true lasting value on the UK economy is likely to be limited.
Yes, the short-term impact of the tournament is likely to see certain companies benefit from an increase in consumption, which could subsequently see an improved share price. Companies such as Heineken and Domino’s Pizza look set to benefit, while brewer SABMiller would be seen as another potential beneficiary. However, the actual business impact would only be known several months after the event, when trading updates and results are published. Even then, aside from a few warm words in the accompanying statement, the overall impact is likely to be modest at best.
Of the major sponsors for the Rugby World Cup, Heineken are probably the only one that will see an upturn in revenue, along with Emirates airlines which might pick up a slightly larger slice of the travelling fans from New Zealand, Australia and South Africa. The others Mastercard, Societe Generale, Land Rover and DHL are more likely to benefit from the improved branding of their business rather than any real upturn in revenue.
Over the longer term, the economic effect on the economy will be less than has been touted. To put the numbers in context, tourism in the UK brings in around £126bn each year, employing over three million workers, or around 9.6 per cent of the total workforce – according to Visit Britain. The Rugby World Cup is expected to add just under £1bn during its period, with 41,000 jobs created. Of the £85m invested in infrastructure for the tournament, £74m has gone on the Twickenham stadium itself. This is arguably a process that would have happened anyway.
The demographics for those nations taking part in the event and the natural volume of visitors from those countries make it difficult to accurately judge the number of increased visitors. A large proportion of the anticipated 466,000 coming for the tournament – including Australians, Kiwis and South Africans – may well have visited the UK anyway.
The largest demographic of supporters from another currency is likely to be from Europe as Ireland, Italy & France all use the euro. It is hard to believe that this increase in tourism will outweigh the fundamentals of what is going on in the Eurozone, though.
Furthermore, the Rugby World Cup carries less weight in the pantheon of global sporting events than the football World Cup, which was expected to add around $30bn to Brazilian GDP over a four-year period. Yet, even here, with annual Brazilian GDP running at $2.246trn, the annual impact of the football extravaganza is limited to say the least.
There is also a case to be made that for the very big events, such as the football World Cup and the Olympics, some tourists will actually stay away from host countries. 309,000 visitors visited South Africa during the 2010 World Cup, but for the year as a whole the monthly average was around 620,000.
For workers in time zones far removed from the event itself, the problems of staying up late to watch games can hit productivity at work. Such numbers are difficult to quantify, but so is the overall impact of a sporting event. Whilst benefits perhaps fractionally outweigh the disadvantages, there is little to suggest that major sporting events overall add a significant amount to the host’s economy.
At least Twickenham will still be used for many years to come, unlike the white elephants of the Athens Olympics.