The macroeconomic benefits of investment in Grass Roots Facilities

Transcription

1 1 The macroeconomic benefits of investment in Grass Roots Facilities An assessment of the economic impacts on the UK of delivering new and improved local sports facilities at the grass roots level Report for The Football Foundation October 2013 Centre for Economics and Business Research Ltd. Unit 1, 4 Bath Street, London EC1V 9DX t: f: w:

2 2 Disclaimer Whilst every effort has been made to ensure the accuracy of the material in this document, neither Centre for Economics and Business Research Ltd nor the report s authors will be liable for any loss or damages incurred through the use of the report. Authorship and acknowledgements This report has been produced by Cebr, an independent economics and business research consultancy established in The study was led by Shehan Mohamed, Cebr Senior Economist with direction provided by Oliver Hogan, Cebr Head of Microeconomics. This study has been commissioned by The Football Foundation the United Kingdom s largest sports charity, which is funded by the Premier League, The Football Association and the Department for Culture Media and Sport, via Sport England. London, October 2013

3 3 Contents Contents... 3 Executive Summary Introduction and background What are grass roots sports facilities? Economic conditions in the construction industry Methodology and assumptions Capturing investment in the grass roots facilities industry Embedding grass roots facilities investments within an economic impacts framework Input-output modelling and alternative multiplier concepts Grass root sports facilities: size, economic contribution and impacts Contribution of grass roots sports facilities to economic output Contribution of grass roots sports facilities to employment Conclusions Appendix A: Sample of actual project data... 31

4 4 Executive Summary Investment in construction drives economic growth and regeneration at the national and local level. The building and operation of grass roots sports facilities also stamps its own unique economic footprint in terms of growth, jobs and quality of life provided to the local community. The Football Foundation has asked the Centre for Economics and Business Research (Cebr) to quantify the total economic impacts of their investments in new and improved grass roots facilities. In order to achieve this, Cebr have used actual and projected data on the economic activities which are contracted to build and operate facilities. This report summarises the findings of our study, quantifying the total direct and multiplier impacts of constructing local grass roots sports facilities. Our study was undertaken at a time when conditions across the construction sector are very weak and uncertain due to significant business uncertainty and the UK returning into recession in the last quarter of Lack of construction activity has been the largest single downward contributor to overall GDP growth in the first half of As such, the key conclusions of the report also illustrate the strategic importance of investing in construction projects which have strong local economic impacts. Key Conclusions of the Report Cebr s investigations of the economic value of investment in grass roots sports facilities in the UK points to three broad conclusions: 1. Contribution to GDP: In 2011, The Foundation provided around 15m of funding towards 80 construction projects requiring a total investment of 46m. This total investment in construction is expected to generate 22m in GDP through direct impacts and an additional 31m through indirect (demand stimulus through supply chain) and induced (increased incomes which induces consumer spending) impacts. 2. Employment creation: In 2011, The Foundation funded projects which are expected to directly support a total of 4,992 jobs during the construction 1 (4,458 jobs) and operation (534 jobs) phase on a part-time or full-time basis 2. This equates to 632 Full-Time Equivalent (FTE) jobs, of which 344 are supported during the construction phase. For every million pounds invested in construction projects, 7.5 FTE construction jobs and 6.3 FTE jobs operational jobs are supported. In addition, to direct employment impacts, we have estimated that an extra 1.2 jobs are created for each job directly supported by investments. This means that in total, 1,378 FTE jobs are expected to be supported as a result of Foundation s investment in Local impacts: In 2011, around 7 out of 10 of construction jobs (73%) were sourced locally, benefitting at least 1,050 different local firms across the country 3. During the operation phase, volunteering activity is crucial for ensuring that facilities are adequately staffed. Once projects started in 2011 are completed, around 2,700 additional volunteers will be required to run facilities and deliver football development the value of this volunteering is estimated to be worth 9.5m in economic output. 1 A sample of 47 actual and projected cost breakdowns for construction projects funded by The Foundation and started in 2011 was used to calculate the direct employment effects of construction. 2 A sample of around 192 projects completed between 2001 and 2011 was used to estimate the direct employment effects during day-to-day operations 3 This is based on financial information provided by contractors from a sample of 11 projects funded by The Foundation and started by The Foundation in 2011

5 5 For every 100 volunteers recruited, 25 staff are able to be employed on either a part-time or full-time basis for a range of activities (e.g. site management, coaching, football development, cleaning, bar activities) 4. Furthermore, it is anticipated that an additional 3,200 volunteers per year will gain new qualifications as a result of investments made in These three conclusions are the final products of an advanced modelling programme which draws on economic and financial data from construction projects that are funded by The Football Foundation. Every pound spent on grass roots facilities generates 2.53 for the UK economy Based on the profile of economic activities commissioned during the construction and operation phases of grass roots sports facilities, Cebr have estimated an Output multiplier of 2.53 for the Grass roots sports facilities industry 5. This can be interpreted in simple terms as follows: for every 1 of output generated directly by contractors required for grass roots facility investments and operations, an additional 1.53 of economic output is generated in the wider economy through indirect (demand stimulus through supply chain) and induced (increased incomes which induces consumer spending) impacts. In comparison to other activities, investment in grass roots sports facilities appears to generate higher multiplier effects - we have identified an Output multiplier of 2.22 for the Arts, entertainment and recreation sector. Every pound awarded by the Foundation on grass roots facilities generates an additional 7.73 for the UK economy The Foundation typically contributes around 33p in every 1 invested in construction projects with the remainder generated through partnership funding. In other words, every 33p invested by The Foundation generates a total Output multiplier impact of This means that the 15m contributed by The Foundation towards construction projects started in 2011 generated a total of 116m in economic output. This implies that The Foundation s funding unlocks 7.73 for every 1 granted for the typical project. Regeneration impacts and better health outcomes go beyond the initial direct and multiplier impacts In addition to the increase in household incomes and employment supported by The Foundation s there are other economic benefits to consider. Improving upon and building new local facilities plays a part in increasing the attractiveness of an area to live in. Packaged with the right set of additional measures, e.g., better transport, housing, access to services, there is an opportunity to attract new workers and employers into under-employed areas. The regeneration impacts of such construction projects must therefore be acknowledged as they account for a large part of the permanent effect beyond the initial construction phase. 4 This is based on the average paid staff to volunteer ratio using data from the 2011 Football Foundation Annual Monitoring & Evaluation (M&E) Survey 5 This calculation is based on the Leontief Input-Output Approach uses 2009 Supply and Use tables published by the Office for National Statistics

6 6 The health benefits from better access to sports facilities can also be significant when translated into economic terms. National health promotion campaigns by Premier League and championship clubs demonstrate that football provides another way to reach men with unhealthy lifestyle behaviours who do not typically seek advice from a GP or health professional 6. Better physical education can support physical fitness and healthier lifestyles. This reduces the incidence of many chronic conditions which contributes to lower national healthcare treatment costs and higher labour productivity. Currently, only around 5% of adults get at least 30 minutes of moderate exercise (e.g. walking, cycling, gardening, housework and sports) on five or more days of the week 7. Around 26% of adults are obese whilst 63% are classified as being overweight or obese. We estimate that obesity currently costs the UK economy around 3bn per year in NHS treatment costs and 1bn per year in productivity losses 8. Amongst children aged between 2 and 15, only a quarter (27%) achieve at least 1 hour of moderate exercise each day. Football is the most popular sports activity amongst children aged between 11 and 15, and the second most popular sport for children under 10 after swimming 9. Investment in local facilities would improve access to sports and exercise for families with children, as well as reduce transport costs for those making longer distance trips. 6 Premier League Health A national programme of men s health promotion delivered in/by professional football clubs: Final report 2012, Leeds Metropolitan University 7 Statistics on obesity, physical activity and diet: England, 2012, NHS The Information Centre For Health And Social Care 8 Cebr report on Health pledges: Bupa Health and Wellbeing Study - An assessment of the financial savings to individuals, employers and the NHS 9 Statistics on obesity, physical activity and diet: England, 2012, NHS The Information Centre For Health And Social Care

7 7 1 Introduction and background This is a report by Centre for Economics and Business Research (Cebr) on the macroeconomic benefits of investment in grass roots facilities. The assessment is based on economic data collected during the construction and operational phases of sports facilities. The report was commissioned by The Football Foundation. 1.1 What are grass roots sports facilities? Grass roots sports facilities are built for the provision of sporting activity for amateur participants. As such they have a strong community focus as they provide opportunities for the general public in the local area to participate in sport. The Football Foundation - the UK s largest sports charity - has invested 343 million directly into grass roots facilities through the allocation of grant awards since This has resulted in over 1,700 newly built or improved facilities, which have been grouped within the following four projects types: AGPs (Artificial Grass Pitches) - AGPs are built using synthetic fibres, which are designed to look and perform like natural grass. Third generation AGPs use a rubber crumb infill instead of a sand-based method previously used. AGPs are able to offer a significant number of hours of sporting activity per week, especially when built in conjunction with floodlighting. This provides a high quality playing surface throughout the year, and allows for high levels of participation to occur. Changing rooms & grass pitches - Newly built or refurbished changing rooms provide a safe, secure and practical means to change before and after sporting activity. Foundation funded facilities must comply fully with the Building Regulations and the Equality Act. Often changing rooms form the functional section of a larger changing pavilion, which also includes an operational area that generally consists of a main entrance lobby, toilets, social space and kitchen. Key to the development of grass roots football is the design and construction of good quality grass pitches. The Foundation supports this through the award of grants to pitch works projects, which either results in newly built pitches or the improvement of existing grass pitches, generally through drainage works. Multi-facility projects - Projects funded by the Foundation which include AGPs, changing rooms and/or grass pitches are classified as multi-facility projects due to the combination of different types of grass roots facilities at the same site. Small scale projects - All Foundation funded grass roots facility projects which are under 100k in total project cost are classified as small scale projects within this report. The majority of these projects are refurbished changing rooms, small grass pitch works or maintenance equipment/fencing. In the next section, we provide analysis and commentary of current economic conditions in the construction sector.

8 8 1.2 Economic conditions in the construction industry Turbulent economic and financial conditions in the UK economy have disrupted construction output in recent years. The total volume of construction output in the first half of 2012 was around 14% lower than over the same period in Both commercial and housing construction projects have suffered from higher financing costs, increased material costs 11 and lower effective demand. In England, the number of housing starts in the twelve months to March 2012 was down by 6% compared to the same period a year earlier 12. This is mostly explained by a significant decrease in house building provided by local authorities after two years of record starts between 2010 and Housing starts today are still around 40% below levels seen in 2007 which is due to an absence of private sector activity since the end of the credit crunch. The commercial sector has seen a more pronounced decline in activity since 2007 compared to the housing sector. Total commercial construction activity was 28% lower in volume terms in the first half of 2012 compared to the same period in We expect commercial construction activity to be extremely weak over the next two years, as private sector investment is paralysed by lack of business confidence, weaker consumer demand and higher financing costs. Compared to 2007, the value of construction output of offices has fallen by 50% whilst output of shops (-35%), schools (- 37%), hospitals (-44%) and entertainment & recreation (-6%) have also decreased significantly. The construction sector has yet to recover since the end of the credit crunch. Indeed, the on-going Eurozone sovereign debt crisis has stunted investment into the sector and pushed up financing costs. Lack of construction activity has been the largest drag on total GDP growth in recent quarters, decreasing quarter-on-quarter UK GDP growth by 0.4% and 0.3% percentage points in Q and Q respectively. The implications of a weak construction activity have knock-on effects for employment in the sector. Figure 1 illustrates total volume of construction output and the average number of weekly hours worked by a typical construction worker. 10 Output in the Construction Industry, Office for National Statistics (July 2012) 11 Monthly Statistics of Building Materials and Components, Department for Business, Innovation and Skill (August 2012) 12 Department for Communities and Local Government (August 2012)

9 9 Figure 1: Volume of construction output (LHS) and actual weekly hours worked in construction (RHS) Q Q Q Q Q Q Q Q Q Volume of construction output (LHS) Average actual weekly hours per worker (RHS) 35.2 Source: Office for National Statistics, Cebr analysis After a brief recovery in 2010/11, volumes of construction output are now almost back at levels last seen in Today, the construction pipeline is diminishing with volumes of new construction work falling by 12% year-on-year in Q This reduces demand for construction employment and weekly hours worked. Total numbers employed in construction across the UK fell to 2,165,000 in Q from 2,188,000 in Q representing 24,000 net job losses over this period. The number of actual weekly hours worked in construction is relatively unchanged from a year ago, although the average construction worker s working week is three hours shorter today than compared to the peak period in Q Looking ahead, we expect conditions to be challenging in the sector as both private and public sector investments into the industry are constrained by low levels of business confidence and government spending cuts respectively.

10 10 2 Methodology and assumptions This section of the report sets out the methods and assumptions used to determine an appropriate structure for the grass roots facilities investment industry, the topic of section 2.1. We proceed in section 2.2 to describe the manner in which we embedded this industry within the economic framework underlying Cebr s macroeconomic impact models. Section 2.3 outlines the methodologies on which these impact models are based. 2.1 Capturing investment in the grass roots facilities industry In order to model the overall macroeconomic impact of grass roots sports facilities, Cebr constructed a bespoke investment model with several parts. Figure 2 provides a flow chart representation of our broad modelling approach. Figure 2: Cebr s broad modelling approach Football Foundation s funding 3. Induced impacts 3. Combined direct and indirect impacts result in increase of household incomes through increased employment, profits etc. This induces higher consumer spending and produces a supply chain response from producers selling goods and services who in turn increase demands in their supply chain and so on. Total Investment in construction Contractor Subcontractors 2. Indirect Impacts Partnership funding 1. Contractors and subcontractors receive direct demand stimulus from funding 1. Direct Impacts 2. Contractor and subcontractors demand products/services from their supply chains to increase their supply. Producers in the supply chain increase demand in their supply chains and so on. Direct Impacts + Indirect Impacts + Induced Impacts = Total Impacts Source: Cebr analysis

11 11 In order to quantify the total economic impact of investment in grass roots sports facilities, we have first had to identify the direct impacts of capital spending on construction projects. In order to achieve this, we have drawn on financial information from 47 out of the 80 projects that The Foundation and partners have invested in which started construction during This financial information includes data on the various economic activities undertaken by contractors and commissioned from subcontractors in order to build facilities. The nature of these economic activities have been categorised in order to calculate indirect, induced and therefore total economic impacts from construction of facilities. In addition, we have drawn on annual Monitoring & Evaluation (M&E) survey data from The Foundation in order to calculate the operational impacts of the built facilities. In the remainder of this chapter, we explain our methodology and assumptions used to calculate direct, indirect, induced and total economic impacts of the construction and operation of grass roots sports facilities. Investment analysis The Football Foundation s investment activities encompass around sixteen different economic activities related to construction and professional services. In 2011, a total of 45.9m of capital spending was allocated to construction projects Table 1 illustrates the range of economic activities which benefited from this direct investment. Our study draws on a total of 80 construction projects started in 2011 as a basis for calculating the direct, indirect and induced impacts of The Foundation s activities. Table 1: Industries stimulated in the different stages of development of grass roots sports facilities Development Stage Development and Consent General Construction Specialist Construction Source: The Football Foundation, Cebr analysis Industry sectors to which capital expenditure flows Accounting and tax consultancy Architectural and technical consultancy Legal services Drainage Electrical and mechanical installations External works Fencing Floor and wall covering Joinery installation Landscaping Painting, Plumbing and Roofing Site Preparation AGPs (carpet and sub-base) Floodlighting Grass pitch works Performance testing The increase in capital expenditures as a result of The Foundation s investment activities directly stimulates demand for the economic activities outlined above. The bulk of The Foundation s investment activities are in the construction industry.

12 12 As well as these components of capital expenditure, the operating expenditures (opex) required to keep sports facilities up and running will stimulate productive activities. These activities will further induce overall macroeconomic benefits. These industries in which economic activity is stimulated are presented in Table 2. Table 2: Industries stimulated during the operation of grass roots sports facilities Development Stage Operations and Maintenance Industry sectors to which capital expenditure flows Operations of sports facilities Public houses and bars Retail sale of sports equipment Source: The Football Foundation, Cebr analysis In 2011, a total of 80 construction projects were started which are forecast to generate gross operating expenditures of 3.7m per year between 2012 and This estimate is based on the average annual operating cost to capital expenditure ratio, which was calculated as 7.7%. This figure was derived from a sample of 26 out of 80 projects started in 2011, for which both capital spending and operational spending data is available. The costs of grass roots facilities investments The Football Foundation helped fund around 46m in capital spending on construction projects in Of the 46m, a total of 15m was provided through grants allocated by The Foundation with the remainder provided through partnership funding. Table 3 illustrates how the capital spending was allocated between the different types of investments made. Table 3: Capital expenditures associated with grass roots sports facilities started in 2011, 000s Investment Total investment Total grant provided by FF Number of investments Average grant by FF per project AGP 5,200 1, Changing rooms and Grass pitches 20,688 6, Multi 19,208 6, Small scale and other Total 45,950 15, Source: The Football Foundation, Cebr analysis The average grant value provided by The Foundation was 188,000 in The highest grants are provided for multi-facility projects, which had an average value of 433,000. The table below illustrates the distribution of the size of investments which are funded by The Foundation.

13 13 Table 4: Capital expenditures associated with grass roots sports facilities started in 2011, by investment size Source: The Football Foundation, Cebr analysis Investment size per project Number of investments Under 20k 7 20k - 50k 9 50k - 100k 7 Over 100k 57 Total 80 Over 70% of construction projects started in 2011 were worth more than 100k in investment size. In terms of the regional location of total annual capital spending, the South East region received the largest amount of investment ( 8.4m). Table 5: Capital expenditures associated with grass roots sports facilities started in 2011, by region Investment Total investment Total regional construction employment spent per regional construction job North East 3,654 95, East Midlands 4, , East 6, , West Midlands 5, , South East 8, , South West 4, , Yorkshire 3, , London 4, , North West 3, , Total 45,950 1,803, Source: The Football Foundation, Annual Population Survey, Cebr analysis The North East region had the highest amount invested relative to total regional employment in construction in A total of was spent per regional construction job in the North East whilst the average was This indicates that construction employment in the North East was more dependent on The Foundation s investment activities than other regions in The Foundation s investments are directed towards a range of organisations which encompass football clubs, local authorities and schools.

14 14 Table 6: Capital expenditures associated with grass roots sports facilities started in 2011, by organisation Organisation Number of investments Total investment, 000s Average grant by FF per project Football club 25 6, Local authority 31 25, Source: The Football Foundation, Cebr analysis School 15 11, Other 9 2, Total 80 45, Local authorities received the largest amount of investment for construction projects ( 25.2m) in Local authorities also received the largest average grant from The Foundation ( 256,000), followed by schools ( 245,000) and then football clubs ( 126,000). 2.2 Embedding grass roots facilities investments within an economic impacts framework This subsection describes the manner in which we embedded the grass roots sports facilities investment industry within the economic framework underlying Cebr s macroeconomic impact models. Demand stimulus created by investment Investment in grass roots sports facilities creates a final demand stimulus for the products and services required to realise that investment. We have categorised capital expenditures typically made during the construction phase based on financial information provided by The Foundation from a total of 47 out of the 80 projects funded and started in A total of 11 projects were used as a basis to provide the actual costs incurred by contractors during the construction phase, whilst the remaining projects supplied the projected costs submitted by contractors at the grant application stage. The methodology used to calculate the typical capital spending profile for distinct investment types was as follows:- 1. Obtained sample of 47 actual and projected cost breakdowns for construction projects funded by The Foundation and started in This included information on the individual contractors and sub-contractors used and proportions of their labour which were locally sourced Locally sourced labour was defined as employees recruited in the same or adjoining local authority as the location of the funded site.

15 15 2. Assigned Standard Industry Classifications (SIC) codes to cost categories. Each discrete economic activity identified during the construction phase was assigned an industry code based on UK Standard Industry Classifications (UK SIC 2007) developed by the Office for National Statistics. This exercise captures the nature of the activities commissioned and informs calculation of multiplier impacts based on supply chain characteristics of each subcontractor. 3. Applied capital spending profiles to total expenditure on 80 construction projects funded and started in Unique capital spending profiles of economic activities were created respectively for AGPs, changing rooms & grass pitches, multi-facility projects and small scale & other projects. These capital spending profiles were applied to the total amount of funds spent on each distinct investment type to give total demand stimulus on each economic activity as a result of The Foundation s funding. Table 7 illustrates the profile of economic activities that benefit from increased demand stimulus as a result of direct investment generated by The Foundation s funding activities 14. Table 7: Demand stimulus from increased capital expenditures associated with grass roots sports facilities started in 2011, by organisation SIC Code Product/service category Investment value ( 000s) SIC Code Product/service category Investment value ( 000s) Site Preparation 4, Floodlighting 1,165 Section M Professional fees 4, /9 AGP 1, /9 AGP carpet 3, Contingency 1, /9 Drainage 3, /9 Other 1, Electrical 3, Mechanical installation Joinery 3, /9 Landscaping External works 2, /9 Grass pitch works /9 AGP Sub-base 2, Sports equipment Roofing 2, Land purchase General construction 1, Materials /9 Fencing 1, Maintenance Finishing 1, /1 Painting Floors and Walls 1, Equipment Plumbing 1, Performance testing 62 Source: The Football Foundation, Cebr analysis 14 These estimates are exclusive of Value Added Tax (VAT).

16 16 We have identified 28 discrete economic activities which benefit from increased demand stimulus. Each of these economic activities has been attributed a 3-digit Standard Industry Classification (SIC) code for the purposes of calculating the indirect and induced multiplier impacts during the modelling process. In the next sections, we describe the economic activities stimulated as a result of investment in two of the Foundation s main investments Artificial Grass Pitches (AGPs) and Changing Rooms & Grass Pitches. Demand stimulus created by investment - Artificial Grass Pitches In 2011, a total of 5.2m was invested in Artificial Grass Pitch (AGP) construction projects in Figure 3 illustrates the distribution of economic activities which benefit during construction. Figure 3: Capital expenditures associated with AGPs started in 2011, pounds External works 3% Contingency 3% Professional fees 5% Landscaping 2% Drainage 3% Sports equipment Maintenance 2% 1% AGP Sub-base 27% Floodlighting 8% Site Preparation 8% Fencing 11% AGP carpet 25% Source: The Football Foundation, Cebr analysis Around half (52%) of all capital costs are spent on specialised construction activities involving building of the AGP sub-base and installation of the carpet. An additional quarter (27%) of costs are incurred on floodlighting, preparation and fencing of the site. Demand stimulus created by investment - Changing Rooms and Grass Pitches In 2011, a total of 20.1m was invested in Changing Rooms and Grass Pitch construction projects in Figure 4 illustrates the distribution of economic activities which benefit during construction.

17 17 Figure 4: Capital expenditures associated with Changing Rooms and Grass Pitches started in 2011, pounds Contingency 4% Finishing 4% Floors and Walls 6% Mechanical installation 3% Roofing 5% Plumbing 6% OtherFencing 2% 2% Grass pitch works 2% General construction 17% Site Preparation 10% Professional fees 8% Drainage 7% External works 8% Joinery 8% Electrical 8% Source: The Football Foundation, Cebr analysis Construction projects for Changing Rooms and Grass Pitches involve more economic activities than the typical AGP project. Around half (48%) of total capital spending is on plumbing, drainage, external works, roofing, joinery and electrical & mechanical installation. An additional quarter (27%) is spent on site preparation and general construction activities. In the next section, we quantify the direct employment impacts of The Foundation s investment activities during both the construction phase and the day-to-day operation of the facilities once they are completed. Please note that Chapter 3 quantifies the indirect and induced multiplier effects of The Foundation s investments in addition to the direct impacts outlined in the next section.

18 18 Direct construction and operational employment impacts of investment activities Cebr have calculated estimates of direct employment impacts from construction and operation of grass roots sports facilities started in This is based on construction employment 15 data from actual projects commenced in 2011 and operational employment 16 data drawn from a sample of established facilities built between 2001 and Our findings show that a total of 4,992 jobs would be directly supported during the construction phase as a result of the investments made in This corresponds to 97 jobs supported per 1m spent on construction although these jobs would be supported on a part-time rather than a full-time basis. Based on national-level relationships between total amount spent on construction and the number of Full-Time Equivalent (FTE) jobs required to sustain this level of activity, we estimate that a total of 7.5 FTE jobs are directly supported during the construction phase per 1m spent. This means that in 2011, a total of 344 FTE jobs would be supported during the construction phase as a result of The Foundation s investments. Table 8 illustrates the direct employment impacts associated with both the construction and operation phase of facilities. Table 8: Direct employment impacts associated with construction and operation phase from investments started in 2011 Employment impact Source: The Football Foundation, Cebr analysis Direct jobs (mostly part-time) Jobs created per M Total created in 2011 Direct Full-Time Equivalent jobs Jobs created per M Total created in 2011 Construction phase 97 4, Day-to-day operations Total 109 4, In order to calculate the direct employment impacts associated with the operation phase, we have drawn on annual Monitoring and Evaluation (M&E) Survey data from The Football Foundation which provides information on the number of part-time and full-time workers employed per site. Based on this data, we have estimated that a total of 534 jobs would be directly supported during the operational phase. This corresponds to 12 jobs supported during the operation phase per 1m spent on initial construction costs, which would be composed of both part-time and full-time employment. Translating this into Full Time Equivalent (FTE) jobs, yields a total of 6.3 FTE jobs supported during the operation phase per m spent. This means that in 2011, a total of 288 FTE jobs would be supported during the operation phase as a result of The Foundation s investments. 15 A sample of 11 construction projects started in 2011 was used to estimate the direct employment effects during the construction phase 16 A sample of around 192 projects completed between 2001 and 2011 was used to estimate the direct employment effects during day-to-day operations Centre for Economics and Business Research Ltd. Unit 1, 4 Bath Street, London EC1V 9DX t: f: w:

19 19 Table 9 illustrates the typical mix of full-time and part-time employment supported for projects which require paid employment. Around two-thirds (68%) of funded sites employ individuals directly on either a full-time or part-time basis during the operation phase. Table 9: Direct employment impacts associated with operation phase, for sites which require paid employment Employment impact Full-time staff employed per project Part-time staff per project Total staff per project Site management Site maintenance Football Development Cleaning staff Bar staff Paid coaches Other Average (combination of above) Source: The Football Foundation, Cebr analysis For sites which require individuals to be paid in order to run the facility, a total of 8 staff workers are usually employed. Around 2 staff members are employed on a full-time basis whilst 6 are employed on a part-time basis. Direct local employment impacts of investment activities during the construction phase The investments of The Foundation stimulate local economic activities during the construction phase of projects. This in turn increases levels of employment at the local level and provides jobs for residents in the local community. Figure 5 illustrates a map which shows all of The Foundation s investments in 2011.

20 20 Figure 5: The Foundation s investments in 2011 Source: The Football Foundation, Cebr analysis Our analysis shows that The Foundation invests in local areas which had an average local unemployment rate of 7.8% in This is below the average national unemployment rate 8.2% in The highest unemployment rates in areas which received investment were in the towns and cities of Middlesbrough (16.1%), Leicester (14.1%), Birmingham (13.6%) and Sunderland (13.1%) Multi-facility projects were built in Middlesbrough and Birmingham, changing rooms and grass pitches were built in Leicester whilst a site in Sunderland received funding for an AGP.

21 21 Based on contractors submissions for 11 projects which had been completed in 2011, we have estimated the proportion of local labour that is typically sourced and the typical number of subcontractors commissioned. Please see Appendix A for a list of the 11 projects which have been used to derive these estimates. Table 10 illustrates the total number of local Full-Time Equivalent jobs 18 that are directly created as a result of each type of facility investment made in Table 10: Local direct FTE employment impacts associated with construction phase from investments started in 2011, by investment type Employment impact Artificial Grass Pitch (AGPs) Changing Rooms and Grass Pitches Total Direct FTE Jobs Jobs created per M Source: The Football Foundation, Cebr analysis Total created in 2011 Total Direct local FTE jobs % Local employment The average proportion of labour sourced locally for funded projects in 2011 was 73%. Small scale (100%) and Changing Rooms and Grass Pitch (97%) projects have the highest proportion of labour sourced locally. A total of 251 local FTE jobs were created during the construction phase in 2011 as a result of The Foundation s investment activities. On average, a total of 18 different subcontractors were used for each construction project. Based on the proportion of these firms which are local, we estimate that investments made by The Foundation in 2011 benefited at least 1,050 individual local firms. Value of volunteering during the operation of facilities Total created in % % 150 Multi-facility % 81 Small scale and Other % 7 Total % 251 Operating expenditure benefits Once facilities are successfully completed and ready to operate, a significant number of volunteer staff are required to run the facility and deliver football development. The average number of volunteers recruited for a typical facility funded by The Foundation is 34. Table 11 illustrates the average number of volunteers required for each investment type. 18 Local jobs are defined as part-time or full-time employment created in the same or neighbouring local authority as the funded site.

22 22 Table 11: Average number of volunteers for a facility, by investment type Volunteers recruited Average number of volunteer coaches Average general volunteers Average total number of volunteers Artificial Grass Pitch (AGPs) Changing Rooms and Grass Pitches Multi Small scale Total Source: The Football Foundation, Cebr analysis Recruiting volunteers enables the low-cost running of facilities and drives the income-generating operations that are undertaken on a daily basis. This allows more funds to be spent on operational expenditures which are required for the day-to-day running of the facility. Their role therefore makes the operation of grass roots sports facilities financially viable and unlocks both indirect and induced multipliers that result from increased operating expenditures (see Chapter 3 for indirect and induced impacts). Indirect impacts of operating expenditure relate to the increased demand stimulus for economic activities which supply products and services required for the operation of sports facilities. Induced impacts of operating expenditures relate to the effects of increased consumer spending as a result of increased income received by paid staff at facilities. Essentially, each volunteer provides a financial subsidy which is used to fund the operating expenditures and the salaries of paid staff. Assuming that a volunteer works for 5 hours per week on average, we estimate that each volunteer provides a financial subsidy worth 3,500 per year 19. The 80 investments made in 2011 are therefore expected to require the support of an additional 2,700 volunteers per year. We therefore estimate that the 45.9m worth of investments made in 2011 by The Foundation will be supported by volunteering activities that are worth 9.5m per year in terms of economic output to the economy. Direct employment benefits As discussed, the recruitment of volunteer staff enables employees on the wage bill to be compensated sufficiently so that they can be employed on full-time or part-time basis (e.g. for site management, football development, maintenance, cleaning and/or bar activities). Based on the average ratio of paid staff to recruited volunteers across operated facilities (1:4), we estimate that for every 100 volunteers recruited, 25 individuals are able to be offered paid employment (on either a part-time or full-time basis) on-site as a result of the project becoming financially viable through income generation at low cost. 19 Salary data from the Office for National Statistics estimate the average annual wage of a part-time worker to be 11,200. The national-level average number of hours worked part-time per week is 16.

23 23 The majority of volunteering benefits relate to the direct income-generating and operational expenditures that are unlocked through their participation. However, there is also an opportunity for individuals to gain skills and expertise through completing training courses. In 2010/11, around twothirds of sites held a total of 2,424 courses which were completed by 25,999 individuals. Based on investments made by the Football Foundation in 2011, we estimate that the completed facilities may help an additional 3,200 volunteers gain new qualifications every year 20. Income-generating activities of facilities The completed facilities funded by The Foundation generate income from the activities held on-site. This income finances the operating expenditures of the site, which drive further indirect and induced benefits associated with increased demand for products/services required during the operation of sports facilities and other supporting economic activities (public houses, bars and retail sale of sports equipment). The operating income also finances the staff costs associated with hiring management, maintenance, bar, cleaning, football development and coaching staff. Table 12 shows that around 6.2 pence is earned in annual income for every 1 spent on construction of facilities. This estimate is based on operational income data provided through the annual Monitoring and Evaluation (M&E) Survey conducted by The Foundation. Table 12: Average annual income per spent on construction and total average annual income from investments made in 2011, by investment type Income generated Average annual income generated per spent on construction, pence Average estimated annual income from investments in 2011, M Artificial Grass Pitch (AGPs) 15.1p 0.9m Changing Rooms and Grass Pitches 2.5p 0.7m Multi 7.8p 1.7m Total 6.2p 3.3m Source: The Football Foundation, Cebr analysis We estimate that 45.9m worth of construction projects funded in 2011 would therefore yield an average annual income of around 3.3m, which would facilitate the operating expenditures incurred when running the constructed facilities. Revenue streams are typically generated through pitch hires for league matches, coaching programmes and training sessions. In addition, income streams are generated through player/team subscriptions, membership fees and bar income. Facilities are used by a range of groups, including football teams, soccer schools, coaches, youth clubs, leagues and summer camps. 20 This is based on Monitoring & Evaluation data held by The Football Foundation which suggest around two-thirds of sites help an average of 60 volunteers receive new qualifications per year at each site.

24 Input-output modelling and alternative multiplier concepts Having assigned a classification against the industries that will grow to provide for grass roots facilities development and operation within the supply-and-use framework, we were able to establish the size of the economic contributions made by this industry. We estimate these contributions using standard metrics relating to gross value added (GVA 21 ) and percentages of UK GDP, and absolute and percentage shares of UK employment. To measure broader economic contributions that can be expected to occur through the multiplier process, we used the approaches of a number of well-known authorities in the area. The appropriateness of these alternatives depends on how the prevailing macroeconomic circumstances and policies are to be interpreted. The alternative approaches and the relevant economic circumstances are outlined as follows. Leontief matrix multipliers for the domestic economy Multipliers show the ratio of an induced change in national income to an initial change in the level of final demand spending, where the multiplier effect denotes the phenomenon whereby some initial increase (or decrease) in the rate of spending will bring about a more than proportionate increase (or decrease) in national income. The Keynesian approach barely requires a mention but is very much grounded in macroeconomic analysis, offering little capability to analyse impacts of entities that are smaller than the whole economy. Input-output analysis, due largely to the work of Wassily Leontief 22, while macroeconomic in the sense that it involves analysing the economy as a whole, owes its foundations and techniques to the microeconomic analysis of production and consumption. 23 According to ten Raa (2005), some people argue that input-output analysis is at the interface of both, defining it as the study of industries or sectors of the economy. Figure 6 provides a screenshot of Cebr s Leontief Input-Output Model during the development stage. 21 GVA or gross value added is a measure of the value from production in the national accounts and can be thought of as the value of industrial output less intermediate consumption. That is, the value of what is produced less the value of the intermediate goods and services used as inputs to produce it. GVA is also commonly known as income from production and is distributed in three directions to employees, to shareholders and to government. GVA is linked as a measurement to GDP both being a measure of economic output. That relationship is (GVA + Taxes on products - Subsidies on products = GDP). Because taxes and subsidies on individual product categories are only available at the whole economy level (rather than at the sectoral or regional level), GVA tends to be used for measuring things like gross regional domestic product and other measures of economic output of entities that are smaller than the whole economy. 22 See, for example, Leontief, Wassily W. Input-Output Economics. 2nd ed., New York: Oxford University Press, See ten Raa, Thijs (2005), The Economics of Input-Output Analysis, Cambridge University Press.

25 25 Figure 6: Screenshot of Cebr Leontief Input-Output Model Source: Cebr analysis The well-known Leontief inverse matrix, which shows the inter-industry dependencies of an economy, is the basis for producing so-called ordinary (or traditional) input-output multipliers. These are some of the most important tools for measuring the total impact on output, employment and income when there is a change in final demand. The Leontief inverse matrix can also be described as the output requirements matrix for final demand, that is, it shows the input requirements from the other sectors of the economy per unit of output produced in the sector under examination in response to a final demand stimulus. The matrix can be used to produce two types of multiplier the Type I multiplier incorporating direct and indirect (supply chain) impacts and the Type II multiplier incorporating induced (through higher incomes and resulting greater consumption) impacts as well.

26 26 3 Grass root sports facilities: size, economic contribution and impacts This section sets out the results of our analysis. Section 3.1 considers the contribution of grass roots sports facilities to economic output. Direct and multiplier effects are presented. Section 3.2 considers the direct and multiplier impacts of grass roots sports facilities on employment. 3.1 Contribution of grass roots sports facilities to economic output Direct impacts The Football Foundation facilitated investments in construction projects worth a total of 45.9m in This is estimated to lead to 21.1m being generated in direct Gross Value Added (GVA) impacts during the construction and operational phase 24. This calculation is based upon the typical profits and wages generated by the industries receiving the direct demand stimulus of expenditure on construction. We have used UK-based Supply and Use tables to achieve this calculation. This assumes that the supply chain characteristics of a firm receiving funds for construction broadly follow relationships witnessed at the national level. Given that our findings show that around 73% of the direct employment is sourced locally, we can assume that the lion s share of the GVA increase would also be experienced locally. Multiplier impacts Our findings show that the domestic Output multiplier (Leontief matrix approach) is equal to This can be interpreted in simple terms as follows: for every 1 of output generated directly by contractors required for grass roots facility investments and operations, an additional 1.53 of economic output is generated in the wider economy through indirect and induced impacts 25. The decomposition of these multiplier impacts are illustrated and explained further in Figure 7 below, using the value of 2.53 for the estimated Output multiplier based on 2009 Supply and Use data. 24 GVA is equal to Gross Domestic Product less taxes and subsidies on production. We estimate a direct GDP contribution of 21.7m 25 In comparison, we have estimated the aggregate UK Construction industry Output multiplier to be 2.60 based on 2009 Supply and Use data.