Consumption around the EM Will football boost the economy?
Status: 11.06.2021 09:55 a.m.
Normally, major sporting events create a special boom in the economy. At the EM this year it will be a little different. From Notker Blechner, tagesschau.de Actually, the “Euro 2020” should stimulate Europe’s economy, especially tourism. For the first time, the European Football Championship will take place in several countries – so the organizers originally hoped that thousands of fans would travel across Europe, go out to eat, shop and stay in hotels. But because of the corona pandemic, this calculation no longer works. Most cities will have a limited number of viewers. Many fans refrain from traveling and prefer to stay at home in front of the television at home.
Only limited economic stimulus
The direct economic effects on the host countries of the EM are likely to be limited. The travel industry, gastronomy and hotel business are not expecting a large boost from foreign guests. Even in the only German European Championship host city Munich, the expectations are not too high. Especially since there was no special boom for the construction industry in the run-up to the tournament – unlike at previous events. Most of the stadiums have not been specially modernized for the European Championship, as is usually the case with major sporting events. The infrastructure in the host cities was also not extensively renovated. “Since the games are being played all over Europe, there was no need to invest heavily,” explains Gert Wagner from the German Institute for Economic Research (DIW) tagesschau.de .
No million investments in infrastructure and stadiums
It was different at the previous European Championships: For the Euro 2012 in Poland and Ukraine. Ukraine invested eleven percent of their gross domestic product and Poland seven percent in the expansion of the stadiums and infrastructure, as the Berenberg Bank has calculated. However, the hoped-for economic boom did not materialize afterwards – at least in Ukraine. The 2016 European Championships in France were more successful: hosting the tournament in their own country cost a good 200 million euros in public expenditure. This contrasted with 1.2 billion euros in revenue. According to an estimate by the European football association UEFA, half of these came from foreign visitors. Not included in the balance sheet, however, are the costs of 1.6 billion euros for the construction and modernization of the French stadiums. This time, the EM should bring the greatest impetus to domestic consumption. Many Germans are expected to spend more money on new televisions, beer, chips, grilled food and maybe a few fan items in June and July in order to watch the European Championship games in their own four walls or in the garden at home. “Basically, consumer goods companies that do a lot of advertising benefit, sporting goods outfitters, food manufacturers and of course beer brands that do particularly well when the weather is good. When there is a barbecue, more beer is drunk,” says capital market strategist Oliver Roth from banking house Oddo Seydler.
More business with TV sets?
According to a survey by the trade association HDE, 41 percent of electronics retailers expect higher sales. Because experience from past major sports events shows that “before and after the start of the tournament, particularly large TV sets are purchased”, according to the market watchers from Nuremberg-based GfK. Electronics retail chains such as MediaMarkt Saturn are already feeling “an increasing interest in large-format TV sets”. After the end of the corona lockdown, the Germans’ desire to consume is likely to reawaken anyway. During the pandemic, many German citizens had no way of spending their money on travel or expensive restaurant and concert visits.
Brewers increase their capacities
Other industries also believe in an EM effect. Every third grocer is hoping for more income from the European Championship, according to the HDE survey. The brewers in particular have increased their capacities and are hoping for good summer business. However, Corona continues to get in their way. Because public viewings, where the beer flows freely, will probably only take place on a small scale. So far, “our business has only been running with slowed-down foam,” explains Holger Eichele, General Manager of the German Brewers’ Association. The sporting goods manufacturers are traditionally considered to be the greatest beneficiaries of a European Football Championship. Adidas, Nike, Puma & Co have been preparing for months with extensive marketing and advertising campaigns for the sporting event of the year. The further the national team they have equipped goes, the better business with the jerseys is. Adidas and Nike deliver a duel here. The brand with the three stripes has three favorites for the title: Spain, Belgium and Germany. Nike can score with world champion and title contender France as well as with secret favorite England. Adidas also provides the official match ball, the Uniforia.
It depends on the cut
How big the consumption effect is in different countries ultimately depends on how well your own team performs. Should the kickers of the outgoing national coach Jogi Low manage a new edition of the “summer fairy tale” from 2006 or 2014, the consumer mood in Germany is likely to jump even stronger. In the betting offices, however, the Löw team is only considered an outsider this time. In the past, winning a World Cup or European Championship title not only boosted consumption, but also infected the stock markets. The stock market of the respective European or world champions usually developed better than the MSCI World Index after the tournaments. DIW economist Wagner, however, considers the psychological impulse to be the most important: “We will get a demonstration that we have the pandemic largely under control in Europe. That will be an important signal.”