The government is pressing sporting bodies to be more financially self-sufficient. It’s time for the sector to get innovative in its search for funding sources and efficiencies
This article was first published in the October 2016 UK edition of Accounting and Business magazine.
West Ham United FC has just finalised its lease of the Olympic Stadium in east London. The stadium cost £700m to build and £272m to convert for football, yet West Ham paid just £15m towards the capital costs and will pay £2.5m rent a year for the 99-year lease.
We have been here before. Manchester City’s Etihad Stadium started life as the City of Manchester Stadium, built for the 2002 Commonwealth Games. It cost £112m to build and £42m to convert, with the club paying for about half of the conversion cost.
To critics, these arrangements seem like cheap deals for major football clubs with no shortage of money – a petition protesting against West Ham’s lease attracted more than 25,000 signatures.
Local authorities are keen to promote local clubs like Manchester City which, along with Manchester United, gives the city an important and international brand image. Walk around Manchester and the positive impact on tourism from the many visiting fans quickly becomes apparent. But because the top clubs are also massive businesses, financial support for them has led to complaints that they are getting unfair state aid. The European Commission is investigating government support for top Spanish football clubs, but has rejected complaints about help from public finances for English football and Welsh rugby clubs.
But support for sport runs even deeper. The main point of a sporting strategy is to encourage citizen participation and fitness rather than boost elite clubs. Fitness, social inclusiveness and the provision of shared green spaces are all positive outcomes for a good sports and leisure policy at a local level. At the end of last year, the Cabinet Office published its finalised strategy in Sporting future: a new strategy for an active nation, establishing a framework for how public bodies should be helping the development of sports.
Public policy on sport needs to move on from helping our athletes and other sporting stars to win as many medals and victories as possible, explains the document. ‘In the future, funding decisions will be made on the basis of the social good that sport and physical activity can deliver,’ it adds. ‘We are redefining what success looks like in sport by concentrating on five key outcomes: physical wellbeing, mental wellbeing, individual development, social and community development, and economic development.’
The strategy recognises the key role of local government in sports development within communities, not least because it is the main source of public finance, spending £1.4bn a year (not including capital infrastructure) on the sector. The role of local government in promoting sport to improve personal wellbeing has become even more important since public health responsibilities were transferred to it from the NHS in 2013.
A recent Local Government Association (LGA) policy document explains: ‘Councils have seized the opportunity to integrate physical activity into public health policy as part of a shift from a system that treats ill health to one that promotes wellbeing.’ It adds: ‘Demand for costly health and social care interventions could be reduced by a locally led approach that leads to higher participation rates, maximising the wider benefits from investing in sport.’
The LGA has responded positively to the government strategy. Councillor Ian Stephens, chairman of the LGA’s culture, tourism and sport board, explains: ‘This new strategy is a positive step forward for councils and their communities in helping to promote grassroots sport and get more people active, while highlighting local authorities’ leadership role and continued investment. The extension of Sport England’s remit to focus on children aged five and upwards is in line with councils’ new public health responsibilities for this age group and offers great opportunities for joined-up work on tackling inactivity and driving up participation.’
Nevertheless, the strategy places a much stronger emphasis on the need for sporting bodies to move towards financial self-sufficiency. ‘With continued pressure on public funding, it is more important than ever that the [public] money available is used as wisely as possible,’ declares the strategy. ‘Those organisations that are particularly reliant on it for their survival are increasingly at risk and therefore less able to plan and deliver over the longer term.’
The strategy calls on sporting bodies to seek diverse funding sources. ‘Some parts of sport have traditionally been good at exploring and exploiting the potential of some alternative income streams (for example, sponsorship and selling media rights) but there are other areas (for example, philanthropy and fundraising, crowdfunding, social impact bonds or partnerships with the private sector) that have yet to be fully utilised,’ it explains.
As a result, the remits of Sport England and UK Sport are evolving so that they can help bodies become more commercial, expand income and be more effective in raising finance. Both agencies will also work with sporting bodies to improve their efficiencies – for example, by merging back-office functions, using shared services and co-locating different sports’ facilities and offices.
It is also intended that sporting bodies will take greater advantage of social investment, including through social impact bonds. Commissioning bodies, such as a clinical commissioning groups, can invest through the bonds to specify social outcomes that must be delivered as a return on the investment. The outcomes sought may be reductions in particular health conditions or a reduction in social problems. Some 32 social impact bonds have been issued over the past five years.
The government would also like to see more engagement in sports by social enterprises, by taking advantage of social investment tax relief, for example.
Central and local government are both keen to see Premier League clubs invest more in local sporting infrastructures. ‘Government,’ says the strategy, ‘has been discussing with the Premier League the level of investment in grassroots football it expects to see in future given their significant increase in income, and we welcome their new commitment that, pending the outcome of the Ofcom investigation into how the Premier League sells its broadcasting rights, they will more than double their investment in grassroots football over the coming three seasons.’
In the future it should be less a case of what can be done for clubs like West Ham and Manchester City, and more about what can be done for others.
Paul Gosling, journalist
"Those organisations that are particularly reliant on public funding for their survival are increasingly at risk"