In 2008, the sports economy in the UK grew by 2.0%, reaching £21.5 bn in value. In doing so, it outperformed the Gross Domestic Product (GDP), which increased by only 1.5%. This was contrary to most expectations, as normally when the economy slows down, we would expect the sports sectors to decline at a faster rate than the economy as a whole. In our view, there are two explanations for this seemingly anomalous performance by the sports market. First, consumers try to maintain their spending habits. In doing so, they wrongly assume that the current economic difficulties are of a short-term nature. They finance their established spending patterns either via savings or by borrowing. Secondly, the preparations for the London Olympics have had positive effects on consumer spending outside of the usual business cycle. Prices in the sport economy rose by 1.6% compared with 2.5% (Consumer Price Index) for the economy as a whole. The economy was hit by rising fuel prices, declining housing prices, and increasing debt. The decline of the finance sector and the American housing market (interlinked with many UK banks) created uncertainty and reinforced the credit squeeze.
The sector of the sport economy with the greatest growth in 2008 was sports clothing and footwear, rising by 5% in real terms and reaching a value of £4.3 bn. This was followed by sports gambling (4.4%) and boating (2.4%). On the other end of the scale, the markets for sport-related publications and spectator sports declined by 5% and 5.5% respectively. In the health and fitness sector, there was a marked slowing down, mainly during the second half of 2008. Preparations for the Olympic Games have already had a positive effect as a result of capital investment (such as North East's first 50 m swimming pool) made with 2012 in mind. The sport TV and DVDs market increased by 1% in real terms, reaching £2.7 bn in value. Similarly, the sports equipment market increased in real terms by 2.2%, aided by the increasing importance of supermarkets and `value' retailers. Its value in 2008 was £1.6 bn. Overall, sport goods are growing at a faster rate than sport-related services (3% and 1.6% respectively). This is partly because services tend to be more vulnerable during an economic slowdown of the present magnitude. Sport-related subscriptions are among the first expenditure items to be sacrificed during times of economic difficulty.
The analysis of the leisure markets assumes certain developments in the global economic climate. There is a consensus that the current financial crisis is the most important crisis of Western economies since the Wall Street Crash of 1929 and subsequent depression. It is also widely accepted that the catalyst was, on the one hand, a lack of financial regulation, and on the other, a bubble in the US housing market together with all the fictitious accumulation of capital that this generated. These effects have also been observed to a lesser degree in the UK economy. The housing bubble, coupled with rising energy prices, initially left the UK economy flirting with recession. At the beginning of 2008, recession was not the unavoidable outcome it seems to be now, following the financial disasters of September 2008. According to the Financial Times (December 16, 2008): "Subprime mortgage lending in the US to high risk borrowers, were merely symptoms of a larger problem: global imbalances, in particular a highly indebted US which sucked up the savings of the rest of the world and consumed more than it produced."
An economy cannot over-consume forever. To a lesser extent, the same is true for the UK. The current crisis marks the end of smaller credit expansions that have occurred since the Second World War. Although new borrowings may energize the economy and facilitate interbank lending, it is unlikely to offset the predicted incoming economic pain. It must be clear by now that no national economy can negotiate its way out of the crisis easily in the face of a deteriorating US economy. The ability of the latter to stimulate its economy depends on the declining willingness of the rest of the world to accumulate dollar reserves. |
