British economy poised for £1.25bn cash injection as World Cup fever grips nation

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The Independent Online

The British economy will score a significant victory next month as football becomes an obsession during the World Cup.

A surge in retail sales, advertising and bookmakers' takings are forecast to deliver a £1.25bn economic boost over the summer. Should England win their first trophy for 40 years in Berlin, history suggests there will be a more sustained economic benefit.

Much of the retail sector is relying on the tournament to deliver a shot in the arm through sales of alcohol, convenience food, replica football shirts and televisions.

The £200m boost during Euro 2004 is tipped to be dwarfed if England reach the later stages as the bookmakers predict. The British Retail Consortium has predicted that World Cup-related purchases will increase consumer spending by an extra 50 per cent to £3bn during each month of the tournament.

The Centre for Economic and Business Research (CEBR) forecasts that the tournament will provide a short-term boost of £1.25bn, mainly from consumer spending and higher business spending on advertising. It estimates that an additional £750m will be spent regardless of how England fare in the tournament.

"The retail sector has been in decline since July 2005 and ... there has been no real sign of a permanent upturn yet. However, we see the World Cup as a real opportunity for the retail sector to change its fortunes," Natasha Burton, of the retail information supplier Footfall, said.

Analysis by Footfall of consumer behaviour during Euro 2004 showed increases in high street spending in the days before England's three group matches of between 3.6 and 10.8 per cent. Sales the day before England's opening match against France rose by 10.8 per cent, although there were week-on-week drops on the day of the match.

The brewing industry can reasonably expect to exceed the £165m increase in pub takings during the 2002 World Cup in Japan and Korea, when breakfast time kick-offs meant more restraint at the bar. The booziest game last time was a Saturday lunchtime kick-off against Denmark when eight million pub drinkers toasted an England victory by sinking £50m worth of alcohol, according to figures from the British Beer & Pub Association. The CEBR reckons total spend on alcohol in pubs, clubs and off licenses should England reach the semi-final will reach £285m, or a 1 per cent increase in the industry's annual revenues.

Sales of flat-screen high-definition televisions, which cost more than £1,000, have risen by 250 per cent in recent weeks. Sky television is dealing with a backlog of orders for its HDTV set-top boxes and cannot guarantee they will be fitted by the time the tournament starts on 9 June. Currys, the chain owned by DSG International, is selling one flat-screen TV every 15 seconds.

William Hill, the bookmaker, has claimed the World Cup will be the UK's biggest ever betting event, with a total of £1bn expected to be wagered on the tournament.

However, the World Cup economic dividend may appear to be something of a paradox to some employers. Levels of absenteeism are expected to rise by 20 per cent during group matches at a daily cost to employers of £100m, according to research by Active Health Partners.

"In the case of the 2005 Ashes, absenteeism rose 20 per cent at the start of the series and for the final Test match it increased by 30 per cent. We can safely assume that these levels will be matched ­ if not overtaken ­ during the World Cup," a spokesman said.

The CEBR reckons £300m extra will be spent in the advertising industry as tournament partners and associated sponsors capitalise on their branded World Cup campaigns. But a much less optimistic mood prevails among media buyers where some say the World Cup has lost its appeal to advertisers. Chris Hayward, the head of broadcast for Zenith Optimedia, sees no reason to alter his forecast of double digit percentage falls in June and July in a UK television advertising market valued at £3.4bn.

The ultimate World Cup victor can expect their nation's economy to grow by 0.7 per cent, the "Soccernomics 2006" report by ABN Amro predicted. "We are convinced that soccer has an impact on the economy," the report said. "The effects at macroeconomic level and on the financial markets are not so great that they can turn a recession into a boom, but they should not be underestimated." Since 1970, the report notes, there have been only two major exceptions to the winner-takes-all rule: in 1974 and 1978 when the German and Argentine economies respectively experienced a sharp downturn (in the latter case becoming a deep recession).

An England win may provide politicians with significant political capital, but Gordon Brown is being more circumspect about the tournament's impact on the nation's coffers.

A spokesman for the Chancellor said the tournament would not have an " especially large impact" on the economy. "The public finances forecast is consistent with the overall economic forecast, and while that obviously takes into account seasonal fluctuations, our past experience is that higher-than-expected consumption of some goods and services leads to lower-than-expected consumption of others," he said.

Although the chances of Germany winning the tournament on home soil appear slim according to football experts, the economic forecasters reckon that in one sense they cannot lose: the host nation stands to reap £300m from tourism.

Simon Shibli, from the Sport Industries Research Centre at Sheffield Hallam University, said: "Germany is not a prime tourist destination but it will become exactly that at the expense of more traditional holiday destinations such as Spain and Portugal."

How economy will get a kick

* With patriotism burning holes in our pockets, the World Cup is expected to double our consumer spending for each month of the tournament.

* We may fail to qualify for the second round, or go on to win the final, but we will still spend £720m regardless, on top of the predicted £1.25bn.

* Analysts are expecting a 7 per cent rise in the amount people spend on sports equipment, clothing and footwear in the coming year.

* The last three World Cup winners have seen an average 10 per cent boost to their economy.

* Battles among analysts are brewing over how many sickies we are likely to pull. Some expect absenteeism to rise by a fifth, others expect little impact.

* With many matches on a Saturday, the weekly surge in shopping for that day is likely to decrease.

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