Northamptonshire Borough Council face further loss as investments in sport fail to pay off

In the light of the announcement that Northamptonshire Borough Council could be facing a multi-million pound loss on its loan to Northampton Town Football Club. Despite the club seemingly appearing to fight off the threat of liquidation, we look at the case for public funding in British sport.

When asked if taxpayers should fund events, with the British Grand Prix given as an example, the majority said not. Arguments included that, “making cuts to welfare and providing support for an F1 event at the same time probably isn’t a very easy sell”, “public funders should be spent on things that are needed like education and police” and that “these events are private events and therefore should be privately funded.”

But Mark Glen, who attended both the 2012 London Olympic Games and 2014 Commonwealth Games in Glasgow, asks, “why certain events get funded when others don’t is as good a question as any.”

In recent months, Northampton Town FC have been scrutinised over the financial practices and sustainability of the club off the pitch with the local council thanking the club’s staff for going up two months without being paid. Regardless of this, Northampton Borough Council’s reasoning behind the loan to the club in the region of £10 million has raised eyebrows.

Northamptonshire has been no stranger to the risky sporting investment. In 2009, Northamptonshire County Council loaned Silverstone circuit in excess of £13 million to fund improvements and renovations required to host the British Grand Prix, something that has had its long-term future labelled as ‘under threat’ by the circuit owners.

Both investments have drawn criticism, not least due to the fact that both Northampton Town and Silverstone are private companies. Northampton Town FC, who can see up to 7,000 fans at each game, were loaned the money to improve their stadium. Whilst Silverstone, a multi-million pound facility with an international reputation, was given its loan in order to pay for improvements demanded by the FIA, the governing body of Formula One, in order to continue hosting the British Grand Prix which had been given to Donington Park in Leicestershire before their own financial problems stopped development.

But despite their statuses, why were neither able to fund the improvements themselves? Also, why would council’s risk such an investment, if there’s evidence that the clubs didn’t have the financial capacity to pay it back?

The profitability of Silverstone in particular is especially concerning. Despite charging around £300 for each of the 150,000 strong crowd who attends a grand prix weekend each year, it struggles to justify hosting the event. Paying rental costs on its own facility, repayment of the bank loans, as well as the £16milion plus that is paid to the FIA to host the grand prix each year take a huge chunk of this before taking its running costs into account.

So what’s the solution? The amount loaned by the councils may look like a lot, but when put alongside the vast sums of money put forward by governments in other countries to host the event, it’s a different story. The Bahraini government ($150million), Russian government ($260million) and Chinese government ($450million) all invested in the construction of their tracks before any upkeep or running costs are taken into account, and see hosting the international event as good PR and tourism for their economies. With those figures in mind, it could be seen as fairly good value for money. However, closer to home, with the recession in Europe in mind, France and Germany have both abandoned plans to host a Grand Prix, with Italy considering following suit, all deeming it poor value for money. Even closer to home, however, the Welsh government has pledged to provide financial support to ensure that the World Rally Championship event takes place in Wales for at least the next three years.

Perhaps more eye opening comparison is the £372 million of public money used to fund the 2014 Commonwealth Games in Glasgow, or the staggering £9 billion estimated to have been invested in the 2012 Olympic Games in London. Mark Glen, 26 from Glasgow, attended the games, suggesting, “there’s the theory that the Olympics and Commonwealth Games cover a wide variety of sports which attract a wide variety of people and these sorts of things usually a have a regeneration project build in for the city or country.”

Simon Hughes, 26 from Grantham and follower of the British Touring Car Championship doesn’t agree. “Sports that are supported by the taxpayer are ones that are available to people of all ages. Motorsport is very expensive and the money could be better spent getting youngsters to do cheaper, more accessible sports that will help to keep them fit and healthy”.

So do the Northamptonshire investments yield any value for money for the taxpayer and can they be seen as ‘regeneration projects’?

Whilst the nature of the loan may not show any direct results, Northampton Town FC’s presence at its current level brought an average of 4,000 people into the town for each home game in the 2013-14 season. Perhaps more evidently, Silverstone’s own investments bring over 100,000 fans from over the world into the country for the Grand Prix weekend, with a further 425million watching across the world on TV, with further fans flocking to Northamptonshire and Buckinghamshire throughout the year for other hosted events including the Moto GP, World Superbikes and British Touring Cars. Furthermore, improvements have been made to the road network around the track, particularly the A43 around Northampton and Towcester, in order to ease congestion at events but can be seen as a general benefit to all road users at Silverstone’s expense.

So are these examples of risks that simply haven’t paid off?

Northampton Town FC’s loan was given in order to help the club move forward, but whether or not it has shown any improvement to the club or area appears fairly irrelevant in the face of the club’s potential liquidation. Silverstone meanwhile, will continue in one guise or another and has already hosted five Grand Prix under the new contract thanks to the improvements.

Mark concludes by asking, “whilst the Grand Prix is perhaps considered niche. If we don’t support these events how can we expect them to prosper?”

by Tom McBeth, November 2015

        

 

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