Tessa Jowell, Olympics minister, came under fire in November for saying the UK would probably not have bid for the 2012 games “had we known what we know now” about the economic crisis.
Four months on, that sentiment applies to some companies that in better times poured millions of pounds into sponsoring a host of sports events and teams. Many sports now face an uphill struggle as companies desperate to cut costs pull out of sponsorship.
As a result, UK sporting bodies are contemplating a wholesale re-evaluation of their finances. Banking and the car sectors, among the hardest hit by the recession, provided European sports with more than a third of sponsorship deals last year.
Corporate withdrawals from sponsorship have hit Formula One teams particularly hard – most notably the Williams team, which was the main casualty of Royal Bank of Scotland’s decision to pare back its sponsorship programme.
F1’s sponsorship crisis has forced teams to redraw the sport’s regulations in order to cut costs. But F1 is not alone. Horseracing, heavily reliant on sponsorship and still without a headline sponsor for June’s Epsom Derby, has been living with such worries long before the global financial crisis and began examining how to rebrand a year ago.
“No change is not an option,” says Nic Coward, chief executive of the British Horseracing Authority. “This is about how each sport responds to what is an incredibly dynamic and fast-changing marketplace.”
At every turn sports funding is under pressure. Government funding is focused on London 2012. The deals for 2012 have also consumed many of the sponsorship pounds that might have been available to others.
Football too has its concerns. June will be a testing month for clubs as fans weigh up the cost of renewing season tickets. While the Premier League secured a slight increase for domestic television screening rights, the Football Association is in discussions with ITV and Setanta about possible contract renegotiations. There are also a host of Premier League clubs seeking shirt sponsorship deals.
On top of the loss of corporates backers that cannot afford sponsorships comes the reluctance of companies that might otherwise have the funds to do deals but for fear of a backlash against perceived spending excess.
RBS was forced to explain its decision in January to renew sponsorship of Six Nations rugby, at a cost of about £20m. Such criticism is echoed in the US where banks’ spending on stadium naming rights has been attacked in Congress.
The backlash also is having a sizeable impact on corporate hospitality, an integral part of any sponsorship. “Hospitality was a key activity and support element of most major sponsorship programmes, but has been hard hit,” says Nigel Currie, director of sports marketing agency BrandRapport.
“Financial institutions do not want to see photos or images of their staff drinking champagne and enjoying the high life at the top sporting events.“
Brigid Simmonds, chief executive of Business in Sport and Leisure, expects big events will escape real hardship from sponsorship decline, but not those with less of a profile.
“A lot of sports have long-term sponsorship contracts and are global brands, like Wimbledon. Cycling is becoming hugely popular. But sports like sailing are definitely down on sponsorship this year,” she says.
But sports are recalculating their sums. John Pereira, commercial director of the England and Wales Cricket Board, says he is confident of announcing a sponsor for the England cricket team to replace Vodafone before the Ashes this summer. But he adds: “Cricket is going to have to be a bit more realistic and when it comes to renewals we are going to have to take a more realistic sum than in the past.”
This is the first recession since sponsorship became a core part of marketing, says Mr Currie. “The weak will not survive and rights holders will need to focus much more on what sponsors want and need. Any marketing decision is going to be under more scrutiny.”
