The credit crunch is affecting the UK Sports scene

January 22nd, 2009 by admin | Filed under Employment, Recession, UK Banks, UK Small Business, UK employment.

Signs that the gravy ridden sponsorship train may be leaving the station were very much in evidence in the United Kingdom yesterday. First of all when the news, albeit expected, hit that the insurance giant American International Group (AIG) will be unable to renew its shirt sponsorship deal with Manchester United world club soccer champions. The sponsorship deal is due to be renewed in May of 2010. The cash strapped group will have no option but to pull out of the arrangement. Not only that, they are also trying to reduce any costs that the can in the current sponsorship deal.

The current four-year $100 million deal provided AIG with tremendous exposure not only in the UK but throughout the World, and the disappearance of their logo from the manly chests of United’s global superstars may yet cost them business, and a lot of it. When you consider that AIG is currently being milk fed by the US Federal Banks to the tune of around $150 billion, then a four year sponsorship deal costing a mere $100 and over four years still seems like a worthwhile investment.

Yet it may herald a turning point for the golden years of sports sponsorship may be over, if only temporarily. UK soccer clubs, from the largest to the smallest depend on sponsorship for around one third of their income, and Manchester United with some of the highest paid soccer superstars in the World on their books will certainly miss that AIG income if they do not replace them.

It is possible to say that all of the Premier League has become slaves to sponsorship, with the financial downturn seeing more and more fans finding it difficult to justify as well as to raise the ticket money to attend league games. With Premier League sponsors Barclay complaining of a severe case of burst balls, it is difficult to imagine them being able to continue their sponsorship activities for the coming season.

Meanwhile Manchester United, who till now have always managed to fill Old Trafford to its 74,000 capacity for every game, as well as having a global following that is the envy of every other club in the World, have been no slouches in their moves at finding a replacement sponsor, and are prepared to go truly international to look for them

AIG are obviously keen to get off the hook, and if a sponsor can be found for season 2009/2010 they would be prepares to forego the privilege of sponsoring for that season.

Apparently very interested are the financial services and real estate Indian based company Sahara who already claim to have received an “elaborate” sponsorship proposal from the club.

Money rich Sahara, who currently act as sponsors the Indian cricket team and are no strangers to sports sponsorship. Other possible suitors for the Manchester United sponsorship deal being suggested are Saudi Telecom, British insurance company Prudential among others.

Not only Soccer has been hit by the sponsorship drain. Even more glamorous and hungry for cash Formula One motor racing has also been hard hit, with sponsors dropping like flies.

The exaltation surrounding the UK’s hosting of the 2012 is becoming increasingly short lived as the credit crunch also appears to be taking its toll on financing even the most basic aspects of staging the games.

Olympics minister Tessa Jowell has been forced to go way over budget by releasing £460m to enable construction of the Olympic Village and media centre to go ahead. It was hoped that a sponsor could be found to finance this stage of the building, but when none was forthcoming, the Olympic committee were forced to dig deep so that building could go ahead.

Fears are that future building projects will also suffer the same fate, and that the Olympic fund will go well over the 9.3 billion pound budget as sponsorships and future property deals are very thin on the ground.