Economic Value of Sport in England 1985-2008

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Economic Value of Sport in England 1985-2008 c Economic Value of Sport in England 1985-2008 August 2010 Sport Industry Research Centre Sheffield Hallam University Contents Page Definitions iii Executive Summary iv Chapter 1: Introduction 1 1.1: Terms of Reference 1 1.2: Methodology 1 Chapter 2: The Sport Economy in England 4 2.1: Summary of key indicators 4 2.2: Consumer Spending 5 2.3: Sport-related Output 7 2.4: Sport-related Employment 8 2.5: Summary of Income and Expenditure flows 9 Chapter 3: Comparison of English Regions 10 3.1: Spending, Output and Employment 10 3.2: Importance of Sport in England 11 Chapter 4: The Sports Economy 1985-2003 21 4.1: Growth of the Sports Economy 22 4.2: Sport and the Leisure Industries 24 Appendices: A1: Statistical Sources 27 A2: Model Output 28 A3: Sources and Methods 42 ii Definitions 1. National Income Accounting The concepts of National Income Accounting were developed for macro-economic analysis in the 1930s and 1940s. The basic principle is that there is accounting equality between total output, total income and total expenditure. The most common definitions of total output in the economy as a whole are the Gross Domestic Product (GDP) and Gross Value Added (GVA). For example, assume that the total output in a factory producing football boots is £100m. This is equivalent to the income generated as wages (say £60m) as profits (say £10m) and as flow to the companies selling inputs (£30m) required in the production. In this example GVA is the sum of wages and profits. Further, total income will also be identical to total expenditure because output that is not sold in the current financial year is treated as investment expenditure. 2. Gross Value Added (GVA) GVA is the difference between total income (based on wages and profits) and the cost of inputs used in the production process (raw materials and services). Alternatively it can be expressed as: GVA = GDP - taxes on products + subsidies on products. GVA shows the contribution of the sports sector to the economy as a whole. 3. Sport We follow the definition employed in the publication Sport Market Forecasts 1. Sport is divided into the following sectors: Sport clothing and footwear, Sport equipment, Health and fitness, other participant sports, Boats, Spectator sports, Sport gambling, Sport TV and video, Sport related publications and Sport related travel. 4. Employment 1 Sport Market Forecasts 2009-2013, Sport Industry Research Centre (SIRC), 2009 iii This is full time equivalent (FTE) jobs. In this case two half-time jobs are measured as one full time equivalent. Executive Summary Introduction This report is part of Sport England's ongoing commitment to build the evidence of the economic value of sport. The research has been carried out by The Sport Industry Research Centre (SIRC) as a follow up of the 2005 economic reports. The economic value of sport has been assessed across England as a whole and separately for each region. The 2008 economic recession has been a factor influencing the size of the sports sector nationally and within each region. This report focuses on the economic importance of sport in England in 2008, providing comparisons with estimates since 19851. Methodology The methodology employed in this report is based on national income accounting2 and the income and expenditure flows between sub-sectors of the economy, namely: Consumers – including the personal or household sector. Commercial Sport – including spectator sport clubs, sports good manufacturers and retailers. 1 Cambridge Econometrics: The Value of the Sports Economy in the Regions, 2000 2 The basic principle is that there is accounting equality between total output, total income and total expenditure. The most common definitions of total output in the economy as a whole are the Gross Domestic Product (GDP) and Gross Value Added (GVA). GDP is obtained by valuing outputs of goods and services at market prices and then aggregating. Note that all intermediate goods are excluded and no adjustment is made for indirect taxes and subsidies. GVA is the difference between total income (based on wages and profits) and the cost of inputs used in the production process (raw materials and services). Alternatively it can be expressed as: GVA = GDP - taxes on products + subsidies on products. GVA shows the contribution of the sports sector to the economy as a whole. iv Commercial Non-Sport – including suppliers for the production of sport-related goods and services. Voluntary – including non-profit making sport organisations such as amateur clubs run by their participants. Local Government – including income from local government sport facilities, sport related grants from the Central government and rates from the commercial and voluntary sector. Central Government – including taxes, grants and wages on sport related activities. Outside the Area sector – including transactions with economies outside the region. The 'double entry' accounting principle is applied, so every expenditure flow from say the commercial non-sport sector to the commercial sport sector has a corresponding income flow in the commercial sport sector accounts. The income and expenditure accounts are then used to derive estimates for the following economic indicators of the sport economy: Consumer expenditure on sport Gross value added by sport Sport related employment Results Sport-related economic activity Estimates of sport-related output are based on gross value added (GVA)1 by the sport sector. Gross value added is calculated as the sum of wages and profits generated in the sector. Figure A shows that sport-related economic activity increased from £3,358 million in 1985 to £13,649 million in 2003 and £16,668 million in 2008 (based on current prices). This represents a real increase of 140% over the period 1985 to 2008 (based on constant prices). 1 GVA is the difference between total income (based on wages and profits) and the cost of inputs used in the production process (raw materials and services). Alternatively it can be expressed as: GVA = GDP - taxes on products + subsidies on products. GVA shows the contribution of the sports sector to the economy as a whole. v In the same period (1985 to 2008) the English economy (gross value added) grew by 97% in real terms. This highlights that the growth of the sport economy has outstripped that of the English economy as a whole (Figure B). Figure B: Sport‐related gross value added vs Total gross value added in the English economy, constant prices (1985=100) 300 250 200 n o li il 150 m £ 100 50 ‐ 1980 1985 1990 1995 2000 2005 2010 Year Englich Economy Sport Economy (England) vi Source: Sports Industry Research Centre, Sheffield Hallam, and UK National Accounts * Indexing is based on constant prices from the UK National Accounts. It is constructed assuming that both sport GVA and total UK GVA are 100 for the year 1985 vii During the period 2003-08, England's gross value added from sport increased by 22%. During the 2005-08 period, sport related GVA increased by 8% in terms of this methodology and 12% in terms of the ABI statistical definition of sport. This compares favourably with the corresponding growth in 'gambling' and 'motion picture and video activities', both decreasing because of the recession. Sport-related consumer expenditure Figure C shows consumer expenditure on sport in England was £17,384 million in 2008, an increase from £3,536 in 1985 (based on current prices). This represents a real increase of 138% over the period 1985 to 2008 (based on constant prices). Consumer expenditure in constant prices in 2008 is almost equal to that of 2005. In 2008, the recession stopped the growth of the sport economy; however the latter resisted the strong economic downturn. This is also true in terms of GVA and employment. There has been a 6.9% increase in consumer spending on sports equipment over the period 2003-2008 (constant prices). The abolition of direct tax on gambling had a significant effect on the sport economy: It considerably expanded the size of gambling within the sport market. In 2008, viii expenditure on sport gambling was £3,100 million, or 17.8% of total spending on sport. Moreover, it increased profits for sport gambling companies, hence increasing value added in the commercial sector. Sport Consumer Expenditure in England, 2008 23% 20% Clothing & footwear Sports equipment Subscriptions & fees 7% Admissions 11% Sport gambling TV 18% Other 18% 3% Sport-related employment Sport-related employment in England is estimated at 441,000 in 2008, accounting for 1.8% of all employment in England. Sport-related employment has increased from 304,000 in 1985 to 441,000 in 2008, a 45.1% increase (see Figure D). In the eight years between 2000 and 2008, employment in sport increased by 20.7%. Sport related employment bucked the declining trend of the UK economy. During the period 2005-2008, sport related employment increased by 2%. ix The majority of these jobs are supported by the commercial sectors - accounting for 339,000 jobs or 76% of the total sport-related employment in England. x 1. Introduction 1.1 Terms of Reference This report has been prepared by the Sport Industry Research Centre (SIRC) at Sheffield Hallam University on behalf of Sport England. The purpose of the report is to provide an estimate of the economic importance of sport in England. It builds on similar research carried out by Cambridge Econometrics in 20001 and SIRC in 2003 and 2005 that measured the value of the sport economy in the nine English regions. ABI provides information such as gross value added, wage bill, and number of enterprises for each industry under consideration. Selected comparisons have been made with the 2003 and 2005 studies to illustrate the change in the importance of sport to the national economy.
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