Economic Updates

Economic Updates that affect energy prices

COVID 19 and the Impact On the Sports Industry

2020 will forever be remembered as the year Covid-19 shut down the sports world. But Covid-19 continues to have a huge impact on the world of sports. Whether it’s soccer, athletics or any other type of sport, we are seeing many events and tournaments being affected by the Covid-19 pandemic. Not only is this an issue for competitors, but organisations and fans are getting caught up in the web of the sports industry.

Think about the athletes and employees who are affected, their lives depend on their wage for the sport they love. They’ll be struggling to meet rent, food and necessities. These players may have to surrender their sports dreams and have to pursue other opportunities to make ends meet.

In this article, we will look into the different ways in which sports have been affected. From the big businesses to the athlete, to the smaller clubs who are creating inventive ideas to prevent losses from the pandemic.

Fans and Stadiums

 

One of the areas that may be forgotten about during Covid-19 is the stadiums. Sports arenas and stadiums have a large impact on local governments, with thousands of part-time staff with no work. Just picture a regular sports event, you have concession stands, turnstile staff, parking area employees and cleaning teams. These people are all now without work and many will have no benefits.

In an average stadium of 20,000 seats, you could see over 300 workers on site. Then picture the amount of food supplied on game day, all those suppliers will be at a loss. There is a domino effect with the closure of stadiums, impacting many different sectors and businesses.

Most sports now are incorporating a new ‘virtual crowd’ to try and make the viewers at home feel like they’re part of the event. However, it is nothing compared to the real atmosphere. Many people live for these sports events and can be suffering without their sporting release.

Stadiums and Energy Usage

During game-day, arenas and stadiums use an enormous amount of energy to keep up with the demands of sports. For just one sports example, here is a list of ways football stadiums use energy:

  • Giant TV Screens
  • Electronic Advertising Boards
  • Floodlights
  • Changing Room Lighting/Water Usage
  • Sprinklers
  • Audio Systems
  • Broadcasting Equipment
  • Retractable Roof
  • Under-floor Heating

Brand new stadiums can on average use 750 megawatts over the course of an event, costing over £22,000 per hour. Clubs and sports teams will still have to pay for all these energy systems during the season, all without match day income which many clubs survive off. How will sports teams be able to fund all of these outputs, without fans and matchday sales?

A New Form of Revenue That May Help Sports Clubs and Venues?

With sports arenas and stadiums likely to be seeing a lot less traffic, there may be a solution to helping clubs with a new form of revenue. EV (electric vehicle) charging is a new way for companies to generate revenue with ease.

Supplying customers and employees with clean charging for their vehicles, EV stations could be a great solution for many sports teams.

With the UK Government looking at banning the sale of diesel and petrol cars by 2035, we will see a huge rise in EV’s in the near future. Not only are you creating a new source of income, but you can boost your green credentials too, along with improved footfall once stadiums are back open.

Change in the Sports Calendar

 

Another way that Covid-19 has affected sports is the sports calendar. At the beginning of the worldwide pandemic, many events were cancelled or rearranged. The biggest examples being the 2020 Olympics in Tokyo and the UEFA Champions League.

For the first time since World War II, major tennis event Wimbledon was cancelled. Many sports were performed behind closed doors to try and finish the end of the season or tournament.

 

Event Sport Cancelled Rearranged Date
World Athletics Indoor Championships Athletics X
The Madrid Open Tennis X
Chicago Marathon Running X
2021 Japanese, Singapore and Azerbaijan Grands Prix Formula X
Tokyo 2020 Olympic Games Athletics X
Euro 2020 Football X
2021 Uefa Regions’ Cup Football X
2020 Women’s Tour of Scotland Cycling X
2020 Wimbledon Championships Tennis X

 

Covid-19 has been a horrendous time for event organisers, having to replan and think about every single detail of the spreading of the virus.

Some organisations have come under fire for not acting quickly enough. Balancing the risk of players and staff’s health and well-being with the profits and revenues for football clubs is a fine line. With increasing Covid-19 cases in sports worldwide, even with sports bubbles, it is becoming an issue for many associations whether to suspend proceedings or to continue.

In the example of football, there have been discrepancies in different league systems with different rules. For example, Premier League and Football League clubs are continuing to proceed with the competition, however, smaller semi-professional clubs have cancelled their season. Many of these semi-professional players rely on their small income to provide for their families, others use it as a way to combat mental health and is a way to release their energy on a weekend.

Sports Teams and Money During Covid-19

Sport is one of the biggest income streams in the world, valued at approximately 471 billion dollars. These income streams include broadcasting, match day revenue and commercial deals. The big 10 sports leagues are responsible for 60% of the world’s value of sport media rights.

Back in 2020, Sky and the SPFL made an overcompensation agreement, with £1.5m being paid back to the broadcaster over five years. Can clubs afford this repayment? There are predictions of many sporting teams falling into administration with running costs and staff costs not being matched by the revenue needed to survive.

With empty stadiums, Covid-19 is responsible for a huge decrease in matchday revenue for sports events. If we see this rate continue, we may see some major leagues lose contracts with broadcasters and therefore sports may crumble before our eyes.

With a focus on sports teams, many teams have come up with unique ways to combat the revenue loss from Covid-19. Some sports teams are tasing much-needed cash by offering packages and events, such as stadium tours they can attend once the pandemic is over. Others are getting creative, offering tickets with a free drink once stadiums back open.

Sports sponsors are another area that may change due to the Covid-19 pandemic. Can sponsors continue to afford advertising for sports teams and is there a risk to continue support? With many sports events being cancelled, paying for sports sponsorship in this current climate is a gamble many companies are unwilling to make.

Effect of the coronavirus (COVID-19) pandemic on sports industry revenue worldwide in 2020:

Covid-19 and the Affect On Players

In recent news, we have seen 72 tennis players at the Australian Open on a 14-day hotel room lockdown due to a positive Covid-19 test during a flight on its way to the tournament.

Consider athletes due to compete in the 2020 Tokyo Olympics. 4 years of incredible sacrifice and commitment to a craft, to be taken away for a rearranged event. Many have tailored their training to be at an optimal level for 2020. They will now have to replan and reschedule their regime for 2021, possibly causing an increase in injuries or plateauing form. Some athletes may have seen 2020 as their last shot at glory, another year of training could see a huge drop in performance.

There are many obstacles that athletes have to face during Covid-19:

  • Travel to Sports Venues
  • Diets
  • Lack of Gym Equipment
  • No Physio Treatment
  • Mental Health
  • Career Path

Injuries are on the rise too. Many sports are cramming in as many events as possible to finish seasons or tournaments to reach broadcasting targets. This influx of more game time will eliminate the amount of rest-time players need to recover in-between events, thus increasing the likelihood of injuries. In the English Premier League, there has been a 23% increase in injuries from the same time last year, with 33 muscle injuries in total over the first 9 match-days.

There has been a shortened pre-season window for many sports, decreasing the chances of gaining optimal performance and injury prevention. The usual 12-week pre-season for UK football teams was shorted to a 7-week timescale this year.

Many sports teams have also had to cope without star players who have tested positive for Covid-19. Most recently we saw Aston Villa having to field a team of Academy talent against a strong Liverpool team.

During these uncertain times, sport is being missed. Empty stadiums are a sad sight and the ability of sport bringing people together is something we could use. But for now, we have to stay strong and brace ourselves for this new sporting environment.

Biggest Economic Crashes in History

You’re probably all sick to the back teeth from hearing about Covid19 and it’s wonderful array of negative side effects. There does not seem to be any respite from it. Whether it is in the form of an attention-grabbing headline on the front page of a newspaper, a Tik Tok video as you pretend to ‘work from home’, or during your habitual day-time television binge – there is no escaping the constant stream of bad press. Everybody keeps harping on about ‘the economy this’ and ‘the economy that’ – and how it is teetering on the brink of collapse. The UK government released that we are in one of the largest recessions in our history following a record fall of 20.4% in GDP from April to June. Over a fifth of the Gross Domestic Product of the UK vanished in three months – scary. Source

 

Or is it? Records are made to be broken, and I think it’s a good time to look back at the previous gold-medal holders in the economic disaster competition.

It would make sense to start at the top of the pile – The Great Depression. Now, I am not an economist so I won’t bore you with an intricate explanation of market mechanisms and cyclical boom-bust patterns. This is – at best – a layman’s explanation.

The great depression took place between the years of 1929 and 1932 during a difficult transition period for the UK, with the effects of World War 1 still being felt. During this time, it is important to note that the UK economy was still based on heavy industry and these were locally concentrated industries. Further to this, the Chancellor of the Exchequer at the time had just restored the Pound Sterling to the ‘Gold Standard’ – and it was incredibly strong in comparison to our US counterparts.

£1 = $4.86

 

This meant that it was very expensive to purchase UK export goods. For a more detailed explanation of why this is – Investopedia has a great one. This was a perfect recipe for disaster, and disaster happened in 1929 in the form of the Wall Street stock market crash. This panic wiped out millions of investors, consumer investment and spending dropped, which led to millions of jobs being lost as a result of the fall in demand for goods. As-well as worldwide government uncertainty from vanishing American credit.

The effects of this were felt worldwide. One of the things uncertainty causes is people to stop spending money, which will lead to devaluation of goods and services, which will cause more people to panic, further uncertainty, and people will stop spending money… Oh wait, I already mentioned that. You can maybe see now why the situation was so dire.

In response to the falling worldwide demand for British products, businesses attempted to lower wages of workers in-line with the new reduced value for their produce. This forced millions into poverty, and millions more out of work. By the end of 1930 export value plummeted by 50% and unemployment spiked from 1 million to 2.5 million people. The localised heavy industry areas were hit the hardest – by 1933 30% of Glaswegians were unemployed.

The recovery was incredibly slow – as all effected countries tried to save themselves by implementing tariffs and trade barriers to competitors. Following a withdrawal from the Gold Standard and subsequent devaluation of the pound combined with lowered interest rates from 6% to 2%, British exports managed to become more competitive. (Go read the article from earlier if you want to understand why). This led to a rise in demand for British exports, which translated to a fall in unemployment in 1934. Further falls in unemployment were recorded in the years following and the UK slowly began to recover.

You’d be forgiven for thinking that it is only modern economies that can crash and burn so spectacularly – but there are cases of economic disaster dating hundreds of years prior to this. 15th century England was by all measures, an awful time and place to live. Fresh off the back of an incredibly contagious killing disease (sound familiar?) the English economy was booming. As a result of almost half of the population being unable to work on account of being dead – labour was at a premium and wages skyrocketed, causing widespread inflation.

As a result of this inflation, the prices for grain and other products began to spike sharply – this trend hurting landowners as the value of estates across the country struggled to keep up with the rife inflation.  During this time, England was at war with France in the Hundred Years’ War – and if wars are anything, they are expensive. Cicero was famously quoted as saying:

 

“The sinews of war are infinite money”

 

And who pays for reckless government actions? The taxpayer of course! A new Poll Tax was implemented along with taxes on movable property and trade. In combination to this wonderful new policy, there was a huge European coin shortage from severe silver shortage. Silver bullions began to become so expensive due to their scarcity that the mid-14th century inflation began to vanish, and even began to reverse into deflation. It is difficult to quantify the exact scale of how bad the deflation in England was – but what really forces this economic meltdown into the conversation is how long it lasted.

For over fifty years the English economy and associated products contracted and deflated… To put this into perspective – most people alive today will remember the 2008 worldwide economic crisis. For arguments sake, we will say it started in 2008 and recovery wasn’t achieved until around 2013.

This recovery to pre-recession GDP took five years. The 15th century depression lasted for FIFTY years. It is quite unthinkable to comprehend the sheer length of this disaster, and how difficult it must have been for anyone living in 15th Century England.

So – after reading all of this, do you feel quite as scared about the prospect of the current economic crisis? I know I don’t. The two economic disasters selected for brief analysis are far from the only case studies to choose from, and the analysis barely scrapes the tip of the iceberg for why and how they happened. One benefit of looking backwards into history is human behaviour repeats itself, and quite often nestled amongst all of the war, famine, disease, and pestilence are the answers and solutions we are all looking for.

We have recovered from far worse in the past, and we will recover from this too.

So, I say to you – lock the door, put the kettle on, grab a few biscuits and put the telly on. We are nearly at the end of this pandemic, and the light is becoming visible at the end of the tunnel… Right?

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