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 improvement
on societal health, productivity and quality of life. Sport indirectly produces a wide
array of public good benefits ranging from national pride and well being, to a
reduction of crime and healthcare expenditure. Stewart (2007, p.6) reinforces
portraying sport as ‘a vehicle for making better people and better communities;’ hence
why the State takes substantial involvement in sport through UK Sport, National
sports councils, the sports lottery fund and other local authorities. Since its launch in
1994, the National Lottery has invested £3.5 billion in sports participation projects
and elite performance (National Lottery 2008) whilst the Government has invested an
estimated £2.94 billion (Playing to Win: A New Era for Sport 2008) since the Labour
Party’s inauguration in 1997, which Oakley & Green (2001) considered a crucial
move to alter funding priorities; one that gave the government the impetus to realise
their 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 part
this 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
250
perfect catalyst for initiating, stimulating and improving such growth. Government
invest in sport under the supposition that the social and economic benefits generated
UK Sport Funding (Millions)
200
will surpass the initial deficit; through elite sport, sports events, school sport and mass
participation.
150
R2 = 0.9988
100
Team GB’s triumph of 47 medals at the Beijing 2008 Olympic Games cost an
estimated £5 million each.1 Arey Olympic medals really worth this amount of money?
= 9.4679x - 210.38
50
1
£235 million Invested in Beijing 2008 Athletes through UK Sport’s World Class Performance Fund
0
25 30 35 40 45
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Olympic Medals

2. MA Sports Management Philip Barnes
With an increase in national morale, reputation and sporting participation, many
would justify the financial support of elite sport. Looking at the funding from UK
Sport through the world class performance programme compared to the Olympic
Games Success through the same period we can see an extremely strong coefficient of
determination value of 0.9988 (See Figure 1); drawing a strong similarity to the
‘significant linear relationship between money spent and total medals won’ identified
by Hogan & Norton (2006, p.203).
Figure 1 - Buying Olympic Success? Funding - Medal Count Analysis
Taking into consideration the estimated £500 million of public funding set
aside for London 2012, the equation derived suggests Team GB may look forward to
achieving approximately 75 medals which could see them overleap Russia to 3rd
place, who achieved 72 medals in Beijing. The model needs more values to be more
accurate, although is still a useful comparative tool to forecast future Olympic
success. Beech & Chadwick (2004) confirm that a successful sporting system
requires solid investment however suggest that it goes hand in hand with a variety of
other factors. Apart from the development of school sport, sporting infrastructure and
organisational structure, hosting major sports events has a major impact on the
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3. MA Sports Management Philip Barnes
sporting system, particularly the level of funding. Hosting or participating in a mega
sporting event places the hosting or performing nation’s sports system on an
international pedestal leading Culture Secretary Andy Burnham to defend the
Governments great expenditure on sport:
"Sport is such a great thing to invest in, even in difficult economic times. It's not
frivolous spending in any way, shape or form. This is money that brings real benefit
in terms of greater activity in the population and real joy, real happiness when we see
our national team do well.”
Andy Burnham, Culture Secretary 2008
The next decade will see the UK enthralled by sport from a series of high
profile sports events including the Twenty20 Cricket World Cup in 2009, 2010
Women’s Rugby World Cup, London 2012 Olympic Games and Glasgow 2014
Commonwealth Games. Potential events which are relying on successful bids include
the 2012 Rugby League World Cup, 2015 Rugby Union World Cup and 2018 FIFA
World Cup. Throw in the world’s most popular domestic football competition (Kerr
& Gladden 2008) the Football Association Premier League (FAPL), the prestigious
Wimbledon Tennis Championships and the British Grand Prix at Silverstone and it is
fair to say that the UK is truly synonymous with world class sports events. According
to Roche (1994, p.1) these are ‘short term events with long term consequences for the
host.’
Taking the FAPL as a prime example, a White Paper on Sport, HC 347
suggests that the sports event has become ‘an important economic agent, with a
significant impact on employment, GDP and national and local economies (2008,
p.19).’ A large variety of industries continue to benefit from the FAPL’s global
popularity, namely the broadcasting, marketing, gambling, communication, travel,
tourism and hospitality industries. Clubs also take a prominent position in many
urban communities developing a great sense of pride and affiliation whilst often being
great ambassadors for their host cities in the UK and worldwide. HC 347 continues to
justify government expenditure on the sport suggesting the ‘economic success of the
Premier League generates significant taxation revenues for national and local
government, giving the Government and local authorities a direct interest in the
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4. MA Sports Management Philip Barnes
continued economic health of our competition (2008, p.19).’ The FAPL provides
largely positive economic and societal impacts, however a glass ceiling does appear to
exist for home grown players (Madichie 2009) as clubs tend to purchase foreign talent
instead; there are 316 foreign players registered in the current 2008/09 Season
opposed to 273 from the UK. This could have a double sided effect on home talent
value as top players will command greater prices as they are rare commodities2 as
opposed 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 to
execute infrastructure development projects, which would otherwise 'remain an
architects dreams (Payne 2006).' Witness to the notorious prostitute serial killing
‘Jack the Ripper,’ the ‘East End’ of London has historically been subject to heavy
crime and was destroyed in World War Two. It is no coincidence therefore that the
East End is the site of London 2012, with David Higgins, Chief Executive of the
Olympic Delivery Authority (ODA), suggesting a different motive for hosting the
event:
“There’s no doubt that the 2012 Games will be a fantastic sporting event, but I want
us to think about the Games as the Regeneration Games, a chance to change forever
a part of East London that really deserves the level of investment that will come, and
it will only come because the Olympics will be the catalyst for that level of
investment.”
David Higgins, London Excel Forum 2006
It appears that the ODA viewed the Olympic bid as ‘less important as a sporting event
at the grassroots than as a symbol of expectations of economic betterment (Hiller
2003, p.449).’ The ‘Regeneration Games’ is the alternate motive for bidding for and
hosting such an event, with the East End derelict and in desperate need for a
renaissance. On the contrary, Andreff & Szymanski (2006) question whether the
economic impact of a mega sports event can compensate the host destination for the
substantial infrastructure costs that it will incur; the estimated budget required was set
2
Especially Considering the UEFA ‘Home Grown’ Rule
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5. MA Sports Management Philip Barnes
at £9.3 billion but may fluctuate as the developments continue. This may seem a
bargain when compared to the estimated £20 billion invested on Beijing 2008
however such a large amount of public money has to be justifiably spent; potential
economic benefits include sports tourism, infrastructure, regeneration and
employment 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 norm
for bidding cities to commission ‘economic studies to provide a measure of the net
gains 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 a
greater expansion of all forms of tourism in the area (Weed & Bull 2004). An
increase in tourist numbers ensures more capital circulates in the economy, commonly
known 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 coverage
helps promote tourism and business investment. Roughly 70% of the world’s
population3 watched Beijing 2008 enhancing the city’s brand (Brown et al. 2002;
3
4.7 billion according to Nielsen Media Research
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6. MA Sports Management Philip Barnes
Westerbeek, Turner & Ingerson 2002; Evans 2003). The publicity of mega sports
events gives the host destination 'high prominence in the tourism market place for a
short, well defined, period of time (Gratton & Henry 2001, p.169).' With regard to
the influx of visitors spending, creating reason for development and creating jobs, the
impact of sports tourism is mainly positive however some potential negative impacts
have to be considered. For example, according to Hinch & Higham (2003) distance
decay occurs where sports tourist numbers decrease as the distance from the origin
increases; thus the claimed UK benefits for London 2012 may be more of an idealised
vision than a potential reality. But with UK taxpayers partially funding the expensive
games, surely a lack of an impact in areas increasingly outside London will cause
disappointment. Parallel with the economic impact of sports tourism are socio-
cultural impacts (Standeven & DeKnop 1999; Mason 2003). Smith (1978) developed
a typology of tourists which ranges from small groups of explorers to vast amounts of
charter level tourists. Smith suggests that irritation increases with larger numbers of
tourists and this can damage local culture, however in the case of London, the fourth
most popular tourist destination in the world4 and deemed the ‘multicultural capital of
Europe,’ one could propose that their culture may just be strengthened.
The Government are openly honest about their ulterior motive and thus the
public should look forward to the changes proposed by the ODA; a regenerated area
leaving new housing, schools and health facilities for the community together with
world class sports facilities. A major social impact on society will be the provision of
these facilities for public sport, with the recent ‘Swim for Free’ initiative launched5 as
part of the Game’s participation legacy. Such initiatives show the State’s desire to
encourage the public to get physically active. Physiological benefits include healthy
weight maintenance, lower blood pressure and cholesterol whilst exercise also
contributes 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 health
promotion; effective epidemiological action is the most valuable solution to raise
public 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 and
social impact on society. Health promotion can considerably reduce the economic
4
Forbes Financial News
5
Launched on the 31st March 2009
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7. MA Sports Management Philip Barnes
burden on the NHS (Buck et al. 1996) which is estimated to cost the UK economy
over £8 billion a year (Allender et al. 2007). Health promotion therefore holds a
much broader agenda; a healthier nation could reduce government health expenditure,
increase workforce production, national morale and potential sporting talent amongst
many other benefits.
Sport is influential in the development of urban communities, acting as a
catalyst for the formation, development and pride of identity and culture, social
cohesion and crime reduction. In terms of identity and culture, the UK, and indeed
the world, enjoy a great sense of affiliation through sport with the perfect example
being FAPL teams; Manchester United remarkably sell more replica shirts in the USA
than all Major League Soccer Clubs combined (Isidore 2005). As identified earlier,
sport also draws the nation together to support their national teams. Social cohesion
is an important by-product of sport which has a tendency to generate national pride
and sense of patriotism (Nicholson & Hoye 2008; Walton, Longo & Dawson 2008).
However, one must consider the other end of the spectrum, where social exclusion
prevents people participating, spectating or getting employed in sport due to their
race, gender, income, ability, age, geography or sexuality (Sugden & Tomlinson
2002; Collins & Kay 2003; Houlihan 2008). Social exclusion is explicitly linked to
crime and sport is seen as a valuable resource for combating this problem (Collins
2008; Liu 2009). Again however, to a much lesser extent, a negative impact of sport
can occasionally arise from hooliganism, organised crime, match fixing, alcohol and
illegal drugs (performance enhancing and recreational).
All sports ‘events have, to differing extents, impacts upon the community
within which they take place (Ohmann, Jones & Wilkes 2006, p.129).’ This study has
found the majority of impacts to be overwhelmingly positive although potential
drawbacks have been identified. Potential economic benefits include urban
regeneration, sports tourism, infrastructure development, employment and business
growth opportunities. Social impacts meanwhile are significant in building strong
communities nationwide through social cohesion, participation encouragement and
helping establish a sporting culture. Government will continue to invest heavily in
sport nationwide to ensure the nation benefits from the impacts of sport, however as
mentioned before they will continue to scrutinise funding options and judge their
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8. MA Sports Management Philip Barnes
profitability in terms of impact. The idiom ‘two birds with one stone’ perfectly
describe their actions, using sport as a camouflaged vehicle to fix, control and develop
much wider agendas.
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