England's summer off could cost UK economy £1bn

A summer marked by a sharp downturn in ad revenues, major sponsorship deals, brand tie-ins, TV rights, kit sales and marketing promotions across high street retailers and supermarkets can now be expected.

This follows England's 2-3 defeat to Croatia in the team's final group game at Wembley last night.

The UK advertising industry alone was estimated to have spent over £300m during last year's World Cup.

The British Retail Consortium said England's participation in the 2006 World Cup in Germany earned the country around £1bn.

The team's shirt sponsor Umbro, currently being acquired by Nike for £285m, is set to lose millions of pounds from the loss in sales of replica England football kits.

Umbro issued a profits warning this morning after admitting it would not be able to meet its profit targets for the year.

In a statement, Umbro said it was braced for a "substantial reduction in expected sales volumes" following the match result.

Nike's attraction to Umbro stems from its lucrative kit deal with the FA, and although the takeover has been welcomed by the governing body, poor sales of Umbro's replica shirts this year have already forced the company to revise its profits forecast from £30m to £22m. Shares in Umbro were down 4.5p or 2.6%.

The loss will also hit retailer Sports Direct, which owns 29.9% of Umbro, and is a major seller of England kits.

Shares in the sports retailer fell by more than 18% this morning, as it warned trading would be hit by England's failure.

Other major companies set to lose out include Setanta Sports and ITV, which have recently signed £150m deals for overseas TV rights.

The FA's sponsors, which include Nationwide, Carlsberg, E.on and McDonald's, will also lose out. Although English football's governing body said qualification failure would not affect its contracts.

However, the FA estimates it will miss out on £10m of potential income in being unable to sell licensing and merchandise rights for next year's tournament.

England's loss will further impact on the UK economy through the absence of all home nations from Euro 2008, which starts in Austria and Switzerland in June 2008.

England were gifted a second chance at qualification at the weekend when Israel got a shock result against group rivals Russia to open the door for Steve McClaren's team.

A draw against Croatia at Wembley would have been enough to secure qualification, but England let in two early goals to the visitors through major defensive errors, then drew level, to be denied by a third Croatian goal less than 15 minutes from time.

Alex Fynn, the former director at Saatchi and Saatchi and a football industry consultant, told The Daily Telegraph: "The knock-on for the whole game is very significant.

"Maybe not as much in the past, because the Premier League is so strong, but there's no doubt [England's absence] can have a damaging effect for the whole of English football's economy."

In related news, the UK Takeover Panel is to examine whether Sports Direct and rival sports retailer JJB are working to thwart Nike's takeover of Umbro. Together, the two own 38% of the England shirt maker.

According to reports, the UK Takeover Panel is examining whether the two are acting as a "concert party". The Daily Telegraph said that with Nike's offer document due to be posted to Umbro shareholders later this week, speculation about the retailers' motives is increasing.

If the Takeover Panel feels they are working together, the panel could force the retailers to reduce their combined holding to less than 29.9% or launch a full bid.

This article was first published on brandrepublic.com