Could England’s success spur an economic surge?
As England’s football team has continued its progress towards “bringing it home”, it stirred speculation that this could even boost the UK economy.
Remember back in the summer of 2018 when England was for a time progressing through the World Cup?
Mark Carney, then Governor of the Bank of England said that England’s progress was an “unadulterated absolute good” for the economy.
Previously, the Bank of England’s Deputy Governor Andy Haldane gave two reasons why he thought the economy might be doing better than expected: summer sunshine, plus England’s World Cup achievements.
Considering the situation in July 2021, which is complicated because some lockdown restrictions remain in place, some retail activity and consumption may be lost (more likely postponed) as a result of people spectating rather than shopping.
However, consumption of other items may rise – food and drink.
The Euros have probably already led to a large increase in spending on betting; comparing the 2014 and 2018 World Cups, UK estimates are that online betting increased from £1bn in 2014 to £2.5bn.
It remains to be seen how the gains from such increased gambling will be distributed between the punters and bookies (“problem” or addictive gambling in general remains a big challenge for UK public policy).
One very interesting economic theory is about how English progress in the Euros could even lead to increased investment (and hence drive future growth).
The 1930s economist John Maynard Keynes argued a lot of investment was determined by emotions and gut instincts – confidence about the future.
The suggestion might be that footballing victories could fuel “animal spirits” in England and increase a hitherto very low UK investment rate.
Well, maybe – though UK industrial investment has been relatively low for a very long time, and there must be a range of factors which explain this.
How might the performance of the national team impact on productivity?
In the short run the effect could even be negative – too much distraction from work.
However, there is also the long-term possibility that in the warm glow of any Euros win, work effort and productivity rise.
Hence there is an optimistic scenario whereby a mood of greater English self-confidence helps to boost the economy and perhaps even gives the Prime Minister some more room to navigate removing the remaining lockdown restrictions whilst charting the trading relationship with the EU.
History, however, suggests we should be cautious. England reached the semi-finals of the World Cup in 1990 and in that year the economy grew by only 0.7%.
England may have beaten Germany in 1966 but that did not stop German economic productivity subsequently surpassing UK levels in the mid 1960s.
Consideration of the quarterly GDP growth figures for the UK in 1965 and 1966 shows little evidence that football victories led to a growth upsurge (growth was a bit better in 1967 and 1968; year on year growth in 1966 had been only 1.5%, but it seems a bit of a long shot to attribute that to the football result).
And a year after the 1966 World Cup victory came one of the major economic reversals of the post-War period: Sterling underwent a major devaluation.
In conclusion, expect both the UK and Northern Ireland economies to grow very rapidly this year (perhaps in the range 5 to 7%).
But this will be largely a post-Covid rebound and not because of soccer performance.
– Dr Esmond Birnie is an ex-UUP MLA, former chief economist of PWC in Northern Ireland, and current senior economist at Ulster University’s Business School
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