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The price of failure

Besides the humiliation and the disappointment there is a tangible cost to England's failure to qualify for Euro 2008; the Football Association are now set to miss out on as much as £24million in lost income.

And the FA will not be the only losers because with no home nation competing in Austria and Switzerland next summer the UK economy could lose as much as £0.6billion.

Ordinarily during a World Cup or European Championships taking a stroll down any high street in any English town would result in you being met with a myriad of official, and not-so-official, merchandise and memorabilia.

The FA's commercial department has worked hard to capitalise on the enormous popularity of English football and England's superstar footballers.

As a result they have more than 40 licensing deals with retailers like Tesco and companies like Kellogg's all of whom would have ramped-up their promotional activities during Euro 2008 in order to have their products and services associated with the England team; that won't be happening next summer and the FA will certainly not be raking in an extra £8million as had been estimated.

Then there's the matter of prize money. UEFA are due to hand out at least £4million to each of the 16 finalists at the European Championships. That amount would be further bolstered depending on win bonuses in group games, qualification to the knock-out rounds and so on. Ultimately if England were to win all their Euro 2008 games and emerge victorious from the final the FA would be handed a cheque for £16million.

The morning after the calamitous 3-2 defeat to Croatia which sealed England's fate retailers and leisure groups up and down the UK, and England particularly, were beginning to come to terms with the knock-on effect of England's failure.

For example Sports Direct, the sports retailer owned by Newcastle United's billionaire owner Mike Ashley, told the stock market before 9am that it was unlikely to meet its profit expectations for 2008.

As a result Sports Direct's shares fell 16% on the FTSE 250, shares in Umbro, England's shirt manufacturer and sponsor, fell by 2.5%, while JJB, the sports retailer previously owned by Wigan chairman Dave Whelan, saw its shares fall by 3.5%.

Elsewhere the British Retail Consortium estimated that sales would be down by £600million in 2008. The prediction is based on the thinking being that spending on beer, food, flags, and flat screen TVs etc will be significantly impacted as the general public fail to get swept away by the clamour for such consumables which usually accompanies major sporting events like the European Championships and World Cups.

In a valiant effort to put a positive spin on bad news during the press conference announcing Steve McClaren's sacking David Gill, Manchester United chief executive and member of the FA board, said that the revenues lost to the FA because of non-qualification would be around £5million.

This figure relates to the basic guaranteed income offered by UEFA for simply playing in the bare minimum three groups games. The rationale at the FA being that anything after that is not guaranteed, therefore not assumed in their forecasts and as such, technically, not lost.

For the FA the long-term effect of failing to reach the European Championships is in an intangible but all too real concern. In an industry obsessed by image and 'brand value' failure of this kind is sure to have negative impact.

Luckily for the FA their domestic television rights were renegotiated earlier this year. A joint £425million deal between pay-TV operator Setanta and terrestrial broadcaster ITV, which represents a 42% increase on the previous agreement, will cover the qualification games for the 2010 World Cup and Euro 2012.

Therefore, providing results in these competitions improve by the time the next broadcast deals come to be negotiated England's standing should have recovered. But the situation is not quite so rosy when it comes to sponsorship.

Current sponsorship deals with the likes of Carlsberg, Umbro and Nationwide, which are cumulatively worth in the region of £100million, do not expire until after the 2010 World Cup, so that income is guaranteed. The problem will come when these sponsors are approached and asked if they would like to renew their deals.

Sponsors want to be associated with the best, they want the reflected glory that comes with having their logo plastered next to star players and winning teams and they are prepared to pay top dollar for the privilege.

Unfortunately for the FA, conversations about renegotiating sponsorship deals are likely to begin in the early part of next year, probably in the spring, just when England's failure to reach the European Championships will once again hit home as the thoughts of the qualified nations, and their sponsors, turn to Austria and Switzerland.

Whether you regard such matters as spurious or not, the fact of the matter is that England's failure to qualify for their first major tournament since the World Cup in 1994 will have detrimental effect on the appeal of the England brand and therefore on the FA's ability to match the value of sponsorship existing deals.

The real tragedy of McClaren's failure to guide England to Euro 2008 is not that there won't be as many gaudy flags and t-shirts sold next year, or that sales of new TVs will not meet retailers expectations, it's not even that England's supposed 'golden generation' have failed live up to their considerable hype, it is that the FA's loss in potential earnings could have a detrimental impact on grassroots development.

  • Any thoughts? Then you can email Phil Holland.