Barcelona and the value of a football club to its local economy

WHEN A football club moves out of its traditional home, such as West Ham’s transition to the Olympic stadium at Stratford or Atlético Madrid’s relocation to the Wanda Metropolitano, the local economy is bound to suffer. The restaurants, fast food outlets and bars that, for decades, have depended on the micro-economy that existed around the football club, suddenly finds that 30,000 potential customers have disappeared. There are a few boarded-up bodegas and torn posters around the site that was once the Vicente Calderón stadium in Madrid.

People don’t always like having a football club on their doorstep and the prospect of a floodlight illuminating your home at inconvenient times can be a hurdle to be overcome. Yet inner-city clubs often have a longer history than new housing developments. While some locals may complain, they also have to understand that a major club brings significant economic benefits to the area and removing them to an out-of-town motorway exit or huge retail park could be a genuine negative for businesses that have relied on the peripheral income that can be generated by professional football.

Modern football has become a tourist attraction and major institutions like Real Madrid and Barcelona attract visitors from all over the world. Since 1999, Real’s museum has welcomed over 15 million people, while hordes of overseas fans queue around the Bernabéu to take a tour of the iconic home of the club. Similarly, Barcelona’s Camp Nou is like a magnet for tourists and well over 30 million visitors have been welcomed to their museum. There’s little doubt that a successful football club not only makes a town or city more attractive but also provides a boost for tourism revenues. The economic potential football as a whole is vast and if the game was a country, it would be placed in the top 20 globally.

Strength

The strength of a football club’s presence in its home location can be tested by determining how long it takes to spot some sort of visual representation such as a logo, badge, shirt or advertisement. In cities like Barcelona and Madrid, you don’t have to look too hard, both clubs are firmly embedded in local culture. PricewaterhouseCoopers recently made a presentation that indicated Barcelona’s economic worth to the city. The club’s economic activity amounted to € 1.2 billion (1.46%) of the GDP of the city, which translated into 19,500 jobs and tax revenues of € 366 million. Furthermore, tourists visiting the club accounted for 1.43 million overnight stays in accommodation around the city.

Barca and Real Madrid’s combined revenues (around € 1.6 billion in 2018-19) contribute 0.12% to Spanish GDP – for every € 1,000, € 1.2 comes from Barca/Real. This has grown by € 0.40 since 2009. Barcelona is also vital for the economy of Catalonia, contributing 0.57% of GDP.

When a football club challenges for the league championship can increase economic growth by up to 1.1% , the Centre for Economics & Business Research recently claimed. Likewise, success in a World Cup by a national team can be the catalyst for consumer activity. For instance, the World Cup semi-finalists between 1990 and 2014 saw on average a 4.5% rise in spending in the following year, compared to 3.3% prior to the World Cup (source: Lloyds Bank).

While EY research suggested that Leicester City’s Premier League triumph added £ 140 million to the local economy, the relegation of Sunderland to League One was a drag on the city and the club.

Myths

In the past, football performance was, allegedly, often linked to industrial productivity, with output rising when the local team was playing well. This is, to a certain extent, a mythical perception used to highlight the link between the working man and his favourite pastime. The correlation between football success and the broader economy is also questionable. In the late 1970s and early 1980s, Liverpool FC enjoyed a golden age, winning countless trophies and producing some excellent football – in a time when the city itself was going through economic and political turmoil.

The same could be applied to Spain and its top clubs. The financial crisis hit Spain very hard, but this coincided with the national team’s World Cup win in 2010 and European Championship victories in 2008 and 2012. At club level, Barcelona won the Champions League in 2009, 2011 and 2015, while Real Madrid lifted the trophy four times between 2014 and 2018.

Football is the great distractor and often allows people to forget the trials and tribulations of everyday life. In cities such as Liverpool, a significant sum of disposable income is spent on watching and following the game. The club’s UEFA Champions League run in 2018-19 contributed almost € 500 million to the city, representing 4% of gross value added. On the other hand, the possible two-year ban on Manchester City from European competition could seriously undermine the local night time economy, notably the food and hotel sectors.

All sizes

The demise of Bury FC, albeit on a more humble level, also highlighted the consequences when things go badly wrong for a club. Local politicians claimed that Bury’s collapse was a case of social, economic and cultural capital being “torn from the area”. Certainly, there will have been neighbouring businesses that may have been linked to the club that find themselves with a hole to fill. It’s not Barcelona or Manchester City, but eco-systems come in all shapes and sizes.

Tottenham Hotspur opened their new stadium in 2018-19 with the promise of added bonuses, including investment of around £ 300 million per annum in the local community. Some interpreted this pledge of “regeneration” as an attempt at gentrification and exclusion in an area in urgent need of change. Whatever the outcome, this does underline how some football clubs are trying to link urban revival to their new stadium projects. Again, an example of the economic impact of a major football business.

It’s not just philanthropy, there are clear agendas at play here. A club can have the best ground in the world, but if the neighbourhood is uninviting, it will compromise commercial opportunities and deter some folk from attending games and spending time in the area, spending money. In an age when presentation is everything, football wants the right image and clubs are prepared to spend their cash to ensure they create the right environment. The economic influence is very much linked to the potential social impact of a major club.

@GameofthePeople

Photo: PA

Time for football to look after its own

BURY’s recent expulsion from the Football League was a reminder that the overall state of English football is not as resilient as top Premier League income streams would have you believe.

The reality is that many clubs still live hand-to-mouth and revenues at the lower end of the 92-club structure are merely a fraction of what the likes of Manchester United and Liverpool enjoy.

Mismanagement is one thing and clubs need to do more due diligence on who they get to run their clubs, but why should any new owner continue to plough money into a lost cause? That’s not to say that benefactors who promise the earth shouldn’t try to fulfil the claim they made when taking over a club, but if the financial situation is dire and basically a case of burning money, then common sense and business ethics would tell you not to pour more cash down the hole.

Football fans expect owners to fund their hobby, often with no questions asked, and it has long been a cause for concern that seemingly successful business people who have made their fortune elsewhere then adopt a reckless approach to running a football club. Why should anyone merely maintain the status quo – that of poor financial practices – just to keep a couple of thousand people happy, whose claim to “ownership” is the fact they have turned up week-in, week-out to watch the team?

Hard decisions have to be made and as we all know, “austerity” is generally unpopular with the masses. Yet poor judgement, living beyond their means and careless fiscal policies can send a football club into oblivion. For too long, though, fans look upon a football club as some form of vocational institution and expect the people who prop it up to do likewise. If banks and other corporations didn’t fear the fall-out and negative PR that sending a club to the wall would bring, more clubs would have gone bust over the past 70 years.

Fans complain about the clubs that have received inflated investment, such as the Chelsea’s, Manchester Citys and Paris Saint-Germain’s of this world, but if a wealthy chap with money drives through the stadium gates promising untold riches, they invariably embrace the prospect of joining the elite.

Sugar Daddies (or Mummies) are bad, unless they’re at our club, that’s often the message. How often do you hear that the fans are calling for a new investor, somebody who will provide the cash to buy new players to make the club more competitive? It’s the same in non-league football, where reckless, attention-grabbing behaviour hits the headlines, but makes a club something of a laughing stock.

When bubbles burst, and they mostly do for high-spending can only go on for so long, clubs find they have to pick up the pieces. Too many people look the other way when there’s a car crash and a departed owner is blamed for everything. Very few people appear to be accountable when the extractor fan gets hit.

However, some clubs get into difficulties because of misfortune, lack of public support, ownership problems affected by macro-economics and declining sponsorship. Even a string of postponements can impact the cash flow of a club and make life very uncomfortable for players and staff, who are the real people affected by their employer disappearing. Football, overall, has no shortage of cash, in fact the top clubs are even making a profit these days, something that was almost unheard of 20 years ago.

If it is everyone’s interest to look after football’s eco-system, then why not use football’s wealth to protect the structure? In other words, create an insurance system that clubs contribute to in order to assist clubs who have temporary problems? Not unlike the national pension protection scheme?

Of course, such a scheme should not be a crutch for foolish behaviour or poor ownership and should not amount to a “bail-out”, but short-term assistance to enable a club to overcome existential setbacks. When you consider that a club from League Two may only have a turnover of less than £ 5 million and compare that to the income of Manchester United, there is surely scope for the big clubs to lend a hand?

Such a scheme would be difficult to put in place, there is a culture of the survival of the fittest in football and it is remarkable how little support clubs give each other. There are some that undoubtedly do their best to help, but the game still has too much schadenfreude when another club gets into problems. It should be remembered that football is a fragile game and for many clubs, it is money-in, money-out giving little scope for error. With that in mind, when Bury tipped into trouble, the now out-dated expression, “there but for the grace of God go I” should have been recalled. After all, how many Burys are still out there?

@GameofthePeople

Photo: PA