UK: BUSINESS NEEDS STRIKERS. - If Newcastle United scores the winning goal it's 'here we go' for the local economy. So how close is the relationship between such sporting success and regional prosperity?

by Rhymer Rigby.
Last Updated: 31 Aug 2010

If Newcastle United scores the winning goal it's 'here we go' for the local economy. So how close is the relationship between such sporting success and regional prosperity?

Stolen footballs are not normally the stuff of national newspaper articles. Not unless they happen to belong to the oversize bronze of Jackie Milburn which graces Newcastle upon Tyne's main shopping drag. This particular piece of larceny made it into several broadsheets. Few cities erect larger-than-life likenesses of famous footballers, but then few cities are as obsessed by football as Newcastle. Over the past few years the 'Magpies '(so called for their black and white stripes) have stormed up the premier league and, at the time of writing, occupy the number one spot. To gauge the extent of the football fervour you need only wander around the the city centre immediately after a match. If the 'toon army' has prevailed, Geordie bonhomie is everywhere; if not, a black mood hangs over the town like the proverbial fog on the Tyne.

Sporting prowess, particularly footballing success, has long been a source of civic pride. Many of the UK's provincial cities - most famously Manchester and Liverpool - are virtually synonymous with their football teams. And few would deny that, in any of these places, when the home side wins, the strength of local feeling is visible for all to see. Football is also big business: premier league game attendances are often near the 40,000 mark, Sky pays a fortune for the television rights, and then there are the spin-offs, such as the team kit and other memorabilia.

Thus, a successful football side should contribute towards a healthy local economy. The converse should also be true. If the local economy is buoyant then people will spend more on leisure, the club's receipts will rise, the club can afford better players, and the team improves. Moreover, in cities where a team enjoys strong grass-roots support, a good record should contribute significantly to the local feel-good factor. Is it reasonable then, to assume that a top team and a prosperous economy are connected, or even that they go hand in hand, feeding off each other in some sort of virtuous circle? Should a company seeking to relocate look not only at rent, infrastructure, and quality of workforce, but also examine the local football team's performance?

Looking at the North East, it is tempting to say yes. Fifteen years ago the economy looked as though it could fall no further. Of all the areas affected by the decline of heavy industry, the North East was hit the hardest. At its economic nadir in the early 1980s the area was beginning to resemble the American 'rust belt' where, in cities like Detroit, people and commerce simply decamped to the suburbs leaving little more than dereliction in their wake. Unemployment stood at nearly 20%. Alistair Balls, chairman of the Tyne and Wear Development Corporation says, 'There had been a complete haemorrhaging of social confidence and, most seriously of all, there was a lack of economic confidence from any of the parties that contribute to a successful economy. The industries here felt it was the wrong place to be.' The football team, while perhaps not in such terminal shape as the economy, suffered from a similar malaise. It was run by a consortium of local professionals, who, while they certainly wished their charge no ill, lacked the vision and, more importantly, the financial strength to snap Newcastle United out of its lengthy languor.

Over the last decade, both town and team have changed beyond all recognition. The town centre, long shabby, is rediscovering its former elegance and exudes a resurgent civic pride. The river frontage, much of which was a post-industrial wasteland, now sports landscaped promenades and business parks. Numerous companies - most conspicuously the 'Japanese transplants' such as Nissan - have chosen the area as their European base. And, of course, Newcastle United, under the chairmanship of Sir John Hall, are favourites to win the premiership. 'There's probably a correlation between football success and economic success, though economic success must precede sporting success. You've got to have wealth creation to generate the kind of funds that Sir John put into the club,' says Tony Dennett of KPMG (Newcastle), adding that some 20 miles to the south the same sort of thing seems to be happening in Middlesborough.

Before jumping to conclusions, it is worth looking at other areas where football has either been very successful or is deeply ingrained in the local psyche. Manchester and Liverpool qualify as such areas: a bad year for these teams is a year when they're not in the top three. Yet neither of these areas has experienced the kind of economic volte-face that the North East has. In both cities, however, the tradition of footballing excellence has deep roots. 'Manchester United's success is based on its great reputation, rather than the local economy. But I do think that Manchester United's reputation around the country and in Europe can only have a positive effect, by raising the profile of the city,' says Ian Kerr, policy manager at Manchester Chamber of Commerce and Industry.

What then of Norwich, whose 'Canaries' briefly made bids for glory in the late 1980s and again in the 1992-93 season? Norwich City, like Newcastle United has had a rather chequered record over the past few decades. But Norwich and Newcastle are as different as, well, coal and Colemans. While this change in the team's fortunes made many Norwich supporters very happy, there was hardly the groundswell of local feeling which is evident in Newcastle. Norwich is a prosperous East Anglian city with a large middle-class population: football is not part of the regional identity in the way that it is on Tyneside. Still, local interest is sufficient for the Norwich and Peterborough Building Society to have sponsored the team for the past four seasons. 'One of the reasons (for sponsorship) was to raise our profile in East Anglia and Norwich. Our surveys show that it's certainly worked. We also have a box and entertain clients at every match; it's good fun and good for our business contacts,' says Norwich and Peterborough's director of operations, Martyn Willgress.

London boasts the largest number of football teams of any UK city. But, while football is undoubtedly enjoyed by millions of Londoners, the capital is far too cosmopolitan and diverse a place to nail all its colours to one mast. Sporting allegiances are just another patch in London's sprawling socio-economic quilt.

What sets the North East apart? Newcastle has a number of attributes which differentiate it from other British cities. One of these is its relative isolation, both geographic and cultural. To the north there are the bleak Northumbrian moors. To the south there are towns, but none of comparable importance - and then Yorkshire. The local ITV franchise, Tyne Tees, is one of the smallest in the UK. Factors such as these have resulted in a sense of regional identity unsurpassed in England. A practical demonstration of this apartness is that firms will often test new market products in the region as the risk of significant 'leakage' to the UK as a whole is comparatively low.

Newcastle has a large working-class population and - hackneyed or not - football is still a sport which draws most of its support from the ranks of the working class. As Hall says, 'It reflects a lot of people's dreams and ambitions.' Similarly Balls sees sport as a cohesive force in a city which still has many divisions: 'There's been enormous economic change which has not been matched by social change for obvious reasons. This region still has a major problem in that there are fewer people staying on (at school) after 16 than in any other region and it has to be a cultural factor. There is a very heavy flywheel socially and there's difficulty catching up. I think that for everybody in the community to feel that they're winners is important and in a funny kind of way football helps that.' Across the Tyne lies Gateshead, birthplace of Gazza, and a town whose relationship to Newcastle mirrors London's north-south divide. Here is the Metro Centre, Europe's largest covered shopping mall. In the 1980s Hall, the man behind Newcastle United's sporting success looked out across a vast empty site which had been used as a fly ash tip and saw a new concept in leisure shopping. Balls recalls driving across the site: 'Sir John said to me, "Where we're driving now will be just as important to the economy of the North East as Northumberland Street (Newcastle's main shopping street)."

You either had to say this guy's cracked or let's help him.' Having secured some financial backing and the site, Hall sold out to the Church Commissioners, who paid him a great deal. The Commissioners didn't do nearly as well out of it, because, somewhat ironically, a relaxation in the Sunday trading laws took longer than they thought it would. But Hall had made a name for himself, and when the Newcastle fans, sick of the club's seemingly endless streak of mediocrity, began clamouring for a saviour, Hall stepped in, soon becoming far more involved than he had originally planned. He took full control in mid-1992. What he has done with the club since then has elevated him to the status of a demigod in Newcastle. But buying a football club is often seen as a rich man's conceit - the ultimate in fantasy football. And the list of tycoons who've burnt their fingers would seem to support this. Unsurprisingly, Hall differs: 'Football's a business. What you've got to do is make it last - that means getting the base right. We've spent £28 million on a stadium and £50 million on a soccer academy. We expect a return.' Regional sporting success isn't the most important reason for a com pany to choose one place over another, nor should it be. Indeed, it may often be a company's decision. But not always. And if a company is seeking to move to an area where sport is important, it would do well to spend some time looking at the state of play. For although the benefits of a winning side may be difficult to explain to your accountant, in terms of a feel-good factor they may be invaluable. 'When England won the FA cup in 1966 it was widely credited with boosting the nation's morale.

I'm sure the same holds true for any town or region with a winning team,' says Steve Double of the FA. Hall puts it more simply: 'If your team wins on Saturday, you go to work happy on Monday.'

Newcastle v Manchester - Kick-starts from opposing angles

Both Newcastle and Manchester experienced something of a football/economic Wirtschaftswunder in the early 1990s, with a demonstrable link between the state of play and the state of the economy.

In Newcastle,economic success predated sporting success. This was to be expected. The club was relatively poor and needed a cash injection and it was after the economic upswing that Sir John Hall provided this. While the team's performance has been stellar, however, the economy has slipped a little of late. If the past is anything to go on, Hall's dreams of bringing home the silverware may yet come to nowt.

The Mancunian synergy worked the other way round. From 12th place in the late 1980s, the team rose to two successive league wins in '93 and '94. Doubtless inspired by their heroes' bliistering performance, the workforce followed suit: unemployment is now below the national average.The past two years have been quieter with the team in second place and relatively low stable unemployment.

A small improvement in either may be all that stands between United and a return to the glory years.

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