Can new stadiums stimulate local growth? (1) Birmingham

Under the American franchise system, politicians are eager to attract sports stadiums to their cities.  They offer tax breaks, transport links and even help with construction costs.   American investors in UK football are familiar with the idea of persuading politicians that their stadium plans can bring public benefits.   Politicians are often susceptible to 'grand projects' and sport can be glamorous and associated with concepts such as inclusion, well-being and fitness.

There is a large literature on the economic benefits or otherwise of stadium construction.   It is well summarised by Victor Matheson in a 2019 article: 'The case in favor of subsidizing large sports facilities is much harder to make than the one against. The peer-reviewed literature typically finds little or no evidence that the construction of new professional sports facilities results in significant increases in any type of measurable economic activity including personal income, wages, employment, tax revenues, or tourist spending.'

'In addition, the privately funded consulting reports that frequently accompany stadium proposals, and which invariably tout large economic benefits from subsidized stadiums and arenas, have been shown to suffer from significant theoretical flaws that make their conclusions suspect at best, and simply false at worst. In fact, some academic economists suggest, only partially in jest, that if one wants to know what the true economic impact of a stadium project will be, simply take whatever number the consultants project and then move the decimal point one place to the left.' 

In the UK, new stadiums are seen to boost a team by increasing match day revenues, giving them an edge over their rivals.   Arsenal suffered a reduction in the playing budget to move to the Emirates.   The Tottenham Hotspur stadium is seen as a leading example of its kind but so far has not done much for the club on the pitch.

It is also argued that a new stadium can boost an economically and socially deprived area, although this generally requires some supporting public expenditure.

“City regeneration is hard work however you do it,” Jason Prior, chief executive of infrastructure consultancy Aecom’s buildings and places team, who worked on the long-term regeneration of the Eastlands district around what is now Manchester City’s Etihad stadium told the Financial Times. “Sports is a way of doing it . . . but these are not overnight solutions.” He adds: “You have to stick at it. When you’re turning round often quite deep-seated economic failure or really poorly served communities, these are 20-year plans.”

Since taking control of Birmingham City in 2023, Wagner’s hedge fund Knighthead Capital has bought up more than 60 acres of land around St Andrew’s stadium — the club’s home since 1906 and just a mile from the city centre. In common with many other club owners, Wagner wants to build a new stadium that would double capacity to 60,000. But Knighthead’s proposals also include a £3bn investment in retail, commercial and residential space billed as a new sport and entertainment district — in an area that is one of the poorest in the country.

Wagner has been making his economic pitch to the government in the hope of securing backing for a £200mn-£300mn tram line extension between the city centre and St Andrew’s in June’s spending review. The tram link — leading out to the city’s international airport — has been under discussion for several years. But Wagner, the city council and the region’s metro mayor all believe that the new infrastructure, combined with the stadium investment, could reinvent a whole area of the centre of the city. Wagner argues projects like this could help unleash foreign investment into the UK.

Based in New York, Knighthead is an investment firm that specialises in managing insurance-related assets, distressed credit and real estate finance. The firm’s vision for Birmingham, the UK’s second-largest city, is a mixture of sport and real estate.

“We’re creating a venue that draws visitors to the West Midlands to create economic activity on a regular basis,” Wagner told the Pink ‘Un. “With the office and residential development components, we’re creating a hub of future economic activity that we think will last at least a decade or more, meaning that development will occur in and around that region.” To expand the club’s global appeal, Knighthead also brought in former NFL star Tom Brady as an adviser and minority shareholder at Birmingham City.

The football stadium is the linchpin. Clubs are building new stadiums or refurbishing existing homes to target fans with the money to splash on high-end hospitality. They are also competing to host the world’s most famous singers and bands to squeeze additional revenue out of their infrastructure. The money helps clubs to buy top players and pay their multimillion-pound salaries. But Wagner and the other wealthy owners buying into England’s favourite sport want to convince the government that new stadiums can also be the catalyst for broader urban regeneration and economic growth.

Clubs such as Birmingham City have increasingly become fixtures at property conferences at home and abroad, as they seek to drum up support from both public and private investors.

Subsequent articles will look at Liverpool and Manchester.