Pre-1990s, professional football in England was in a state of serious decline. Attendances were falling, revenues were stagnant and the image of the game was marred by hooliganism. However, in the last couple of decades, professional football in England has experienced an astonishing transformation. Football’s importance in England has not only been economic, but also social and cultural. The amount of social welfare created by football is perhaps even larger than the revenues suggest, as the following positive externalities can be considered. At grassroots level, football’s popularity as the national sport generates benefits for society in the form of a healthier population and lower social tension (than previous levels at least). At the highest level, international or European success generates enormous benefits: prestige for the nation and goodwill among the people. Yet, Football’s economic contribution should not be underestimated, as you can discover by reading on.

English Football can be considered to have a noticeable effect on Consumption (and Investment) in the UK, whether that is the revenues generated at the top level or providing custom for the local pub. The facts show that England’s top 92 clubs generated income of over £1.75 billion in 2003/04, the 20 Premiership clubs alone earning £1.3bn of this revenue, equating to an average revenue of £66.3m per club. These revenues, however, do not tell the whole story. The Multiplier Effect set-off by a game of football is huge, having a far reaching influence on society. From the investment in a stadium providing local employment, leading to improved local infrastructure, right through to a higher yield for the pub situated a stones throw from a championship winning side’s ground; everyone can benefit. The Premiership is the biggest football league in Europe, representing 18% of the total £7.5 billion European football market; this leads to a beneficial affect to the UK’s Aggregate Demand. Conversely, Football can also dampen economic growth, lower national morale and raise policing costs. Firstly, operating losses do occur in football, for example, in the Championship, losses increased from £42m to £53m in 2005/06, an average of just over £2m per club. Losses in Leagues 1 and 2 (£15m and £5m respectively) also increased slightly. Profits in the Premiership are the tip of the iceberg. As we descend down the football league ladder, we see increasing losses, and profit-making organizations become as rare as a Frank Lampard England goal.

Football also contributes significantly to Investment within the UK. In Deloitte’s Annual Review of Football 2007, it is forecasted that total investment in stadia and facilities will exceed £2 billion by the end of summer 2006, and for this, England boasts the best stadia in Europe. Recently completed stadiums are Arsenal’s Emirates Stadium, the City of Manchester Stadium and the new Wembley, not to mention investment further down the Football League Pyramid as the likes of Shrewsbury, MK Dons and Doncaster all move into state-of-the-art 10,000+ all-seater stadiums in 2007. Alan Switzer, a Senior Consultant in the Sports Business Group at Deloitte, commented, ‘Utilisation of stadia capacity is increasing, as are revenue yields per seat on matchday.  Clubs are also becoming more sophisticated in treating their facilities as 365 days a year assets.’ In the same vein, reducing their unemployed resources and moving as close as possible to their PPF is important, if football clubs are to make profits. It is no longer possible to host a match once a fortnight to pay the bills. Football Clubs need to arrange summer concerts, own restaurants or even at AFC Bournemouth’s homeground, host weddings to make ends meet.

Government Spending, a 15% contributor to Aggregate Demand, is partly funded by the little appreciated tax contribution from English Football. Deloitte reported that clubs in England’s top four divisions contributed around £600m of tax to the Government in 2003/04. Jason Hargaden, Tax Director in the Sports Business Group at Deloitte, commented: “There is sometimes a perception that the game does not pay much tax. In fact, professional football contributed around £600m of tax to Government in 2003/04. By the end of the 2004/05 season we estimate the clubs in the top four divisions have paid Government £4.3 billion in tax over the last 13 years. A tidy sum for the Exchequer.” Having more than quadrupled in the last ten years from £149m in 1995/96, a record £647m in taxes were levied on English professional football clubs in 2005/06, up 8% (£46m) from 2004/05, Premier League clubs account for around 75% (£480m) of this total. So, the next time you hear a passerby complaining that footballers get paid too much, although true, do please bring their attention to the fact that English Football might have funded their Education, or the NHS Health Care they are receiving. The tax contribution from Football will help the UK reduce its Budget Deficit, resulting from Gordon Brown’s expansionary Fiscal Policy, particularly unsustainable Government Spending over the last 4 years.

Believe it or not, English Football also has an impact on the Balance of Payments and the Current Account in the UK. In the 2003/4 season the amount of transfer fees and agent’s fees leaving the English game to overseas clubs or agents was a record at £263m, a smidgen of the £12.7bn deficit on the Balance of Payments Current Account. A rarely considered factor of the Premiership’s success is that overseas club’s continue to be financial beneficiaries. You will be happy to note, however, that Swansea City contributed nothing in 2006/7 to the stampede of English £’s leaving the nation in the form of footballers’ transfer fees.

English Football understandably has an impact on inflation in the UK, inherent in which are the wage demands of footballers. In recent times there has been a slowdown in wage increases, contrary to popular belief. In the 2002/3 season wage rises were at their lowest rate ever (7%) in the Premiership’s history and actually declined, if Chelsea are excluded.  The Football League clubs did better still and reduced overall wages for the second year running. Financially, English Football remains sound, as the wages/turnover ratio, a key performance indicator, increased to 62% in 2005/06, which in general remains a comfortable level for the finances of clubs in England’s top division. Championship clubs’ total wage costs for 2005/06 increased by 5% to £228m, with the overall wages/turnover ratio remaining relatively stable at 72%. On the other hand, in the Championship alone, four clubs (out of 24) in 2005/06 had a wages/turnover ratio in excess of 100%. Yet to evaluate, for two of these clubs the ratio was pushed over 100% due to significant performance bonuses to players and management for securing promotion to the Premiership – Sheffield United (£2.3m) and Watford (over £3m). Lets be honest, what are the chances of that happening again?

Overall, English Football has been a convincing contributor to the economic growth and prosperity of the UK over the last few years. The greatest benefits of English Football remain in the participating or witnessing of a sport that helps breakdown social and cultural barriers and thus improves social welfare. In the future, we can only hope that English Football will continue to grow and realize its potential as ‘The Beautiful Game.’