If England were knocked out of the FIFA World Cup early, might your business suffer?
For some of us, the FIFA World Cup is merely a sporting event several months away. For certain companies, however, it is already a key commercial consideration.
If the England team is knocked out at the group stage of the competition (rather than progressing to the last 16, quarter finals and beyond), the effect on the economy could run into hundreds of millions, if not billions, of pounds.
It was calculated that every goal scored by England was worth £200m to the retail and leisure industry.
It’s not just retailers, pubs, clubs and gambling firms that would be affected – any company whose business is influenced by broader feel-good factors could take a hit.
Then there are the effects that the World Cup and other major sporting events can have on workplace morale and productivity.
Ahead of the 2014 FIFA World Cup, one report calculated that every goal scored by England was worth £200m to the retail and leisure industry.
Early signs had pointed to a bonanza, with official data showing retail spending rising at the fastest pace in almost a decade. According to the Office for National Statistics, sales in sports shops during May 2014 were nearly 30% higher than the year before. Meanwhile, John Lewis showed a sharp weekly rise in demand for TVs, while Waitrose saw beer sales jump by 50%.
In the end, however, England’s World Cup failure reportedly put a £1.3bn hole in the economy.
The mood of the nation can affect more than we sometimes imagine. In 2016, it was estimated that if England was forced to fly home after the initial stages of the UEFA European Championship, the stock market could lose as much as £6bn in one day. (There was found to be no effect of a win on the stock market.)
During the FIFA World Cup in 2010, the number of trades made when the national team was playing fell by 45%. It dropped an additional 5% when a goal was scored.
It was estimated that if England exited during the initial stages of the Euros, the stock market could lose as much as £6bn in one day.
The forthcoming World Cup might also materially affect workplace morale and productivity. Research into the expected rate of work absence found the 2014 World Cup might cost the UK economy £4bn.
Prior to the 2006 FIFA World Cup, 70% of British men and 62% of women said the tournament would affect their working lives. In turn, 63% of men and 52% of women thought that sporting success (ie, their team winning) affected their approach to work, according to a YouGov national poll of 2,000 people aged between 18 and 70.
There is no reason to suppose that the stakes won’t be similar for many companies this summer.
Of course, this applies not only to England: each country will have its own exposures, depending on where and when its team is eliminated.
Companies should not underestimate the impact the 2018 FIFA World Cup, and specifically the impact that England’s progress, or lack of, could have on its employees, workplace, and bottom line.
By putting systems in place to allow flexible working arrangements, relaxing rules on radios and internet access and providing communal facilities such as TV screens, businesses might be able to avoid, or at least reduce, falls in productivity.
Asda offered employees up to two weeks’ unpaid leave during the World Cup 2006.
Asda, for example, offered employees up to two weeks’ unpaid leave during the 2006 FIFA World Cup. Consequently, the retailer did not suffer absenteeism and staff morale remained high.
Employers who stick too rigidly to the view that employees are paid to work during work hours might engender resentment and diminish loyalty.
Meanwhile, there is insurance that can provide revenue protection. Essentially the insurance product covers loss of revenue that results from England exiting the tournament earlier than a business expected and planned for.
For example, if stock was bought on the expectation that England progressed past the group stage, and England didn’t progress, insurance would cover the cost of that stock.
Generally, the policy would pay out if England did not progress past the group stages, though this ‘trigger point’ can be tailored to the needs of the individual business.
The insurance removes financial uncertainty and allows long-term strategic planning. While businesses have no control of what goes on on the pitch, they can ensure this uncertainty doesn’t hit their bottom line.
For more information, please contact Robert Barron on:
+44 (0)20 7933 2715