- England’s World Cup campaign could give a major boost to the British economy.
- That’s because when the team is playing, Brits spend on food, drinks and electronic goods.
- UK growth has been sclerotic since the Brexit vote in June 2016, and the World Cup could help it get back on track.
- “Without wishing to tempt fate, England’s recent sporting success on the football field (and cricket pitch) has probably added to that feel-good factor among England-supporting consumers,” Bank of England chief economist Andy Haldane said in a speech this week.
It’s coming home.
Three words that since England’s impressive victory over Panama last weekend have filled the streets of the UK, appeared in thousands of tweets and Facebook statuses, as people all over the country start to genuinely believe that 2018 could by the year the Three Lions break their 52-year World Cup losing streak.
Obviously, England winning the World Cup would be a brilliant achievement in isolation, putting to bed decades of jokes and generally imbuing Britain with a sense of sporting pride not seen since the 2012 Olympics.
There’s another reason, however, to hope that Gareth Southgate’s boys bring back the trophy — the economy.
In the two years since Britain voted to leave the European Union, the country’s economy has undoubtedly suffered. First, the pound dropped sharply, pushing inflation up. In tandem with stagnant wage growth, this created a scenario where British workers were seeing their take home pay decreasing.
That lowered the amount Brits were willing to spend, denting both consumer confidence and retail sales. As sales fell, the wider economy stuttered, and growth stalled.
Growth slowed so much that initial estimates for the first quarter of 2018 showed the UK economy increasing in size by just 0.1% — a practically glacial pace.
As it turns out, things weren’t quite that bad, with data released on Friday showing that growth was actually 0.2% during the first three months of the year — despite a major slowdown for the several weeks in which snow blighted the UK.
Things could improve in the second and third quarter of the year, and amazingly the World Cup should be at least partially the reason why.
The improving economic picture is one reason that three members of the Bank of England’s Monetary Policy Committee — the body responsible for setting interest rates in the UK — voted to raise rates at its June meeting last week.
Andy Haldane, one of those three, put at least part of his vote down to what’s going on in the World Cup in a speech on Thursday.
“Without wishing to tempt fate, England’s recent sporting success on the football field (and cricket pitch) has probably added to that feel-good factor among England-supporting consumers,” Haldane told the Academy of Social Sciences.
“The ‘smile count’ on my recent visits to Wales and Scotland was also as high as I can remember, although I suspect that may have been the weather rather than the football.”
The argument is simple, when England play well in the World Cup, England supporters are happier and are more inclined to spend on non-essential items. Given that England makes up 85% of the UK’s population, this is bound to have a positive economic impact.
Furthermore, when the World Cup in general is happening, Brits are more likely to host parties and barbecues, spending significantly more on groceries than they otherwise would do. People are, of course, more likely to go to the pub and buy drinks. Britain is generally a consumer powered economy, so when people are buying, growth accelerates.
A survey from the Bank of England earlier in the week seemed to confirm this thinking.
“Among the factors likely to affect consumer sales volumes over the next 12 months, the World Cup was expected to give a positive sales boost, for example in sales of electronics and alcoholic drinks,” the bank’s monthly agents’ survey said.
In theory, the World Cup boost to the economy should continue regardless of whether or not England progress further, but likely at a much diminished rate.
England may have lost its game against Belgium on Thursday, but the side still progressed to the last 16 of the competition, and will play Colombia on Tuesday with a place in the quarter finals at stake.
If the team wins that game, Sweden or Switzerland, and a big boost to growth, awaits.