Sports Face Massive Drop in Sponsorship As Banks Struggle

All the major sports have been warned that they face a massive decline in sponsorship revenues, with other backers expected to follow the lead of RBS in slashing their budgets.

Tennis, golf, sailing and other sports that rely disproportionately on banks and financial services hoping to reach well-heeled fans to fund their events, are expected to particularly suffer as a result.

RBS, the embattled banking group that today announced the biggest loss in British corporate history of more than £24bn, has promised to halve its sports sponsorship spending by next year, reducing its investment by more than £100m.

High profile endorsements with Andy Murray, Sir Jackie Stewart, Zara Phillips, Jack Nicklaus and Luke Donald are among those that will be under review, while sponsorship deals with golf and cricket could also be scrapped.

Murray, now under the aegis of David Beckham's agent 19 Management, has indicated his willingness to renegotiate his £6m deal, but it is likely that other personal endorsements will be scrapped altogether.

Its £10m-a-year commitment to formula one's Williams team, which runs until 2010, will be the most high profile sponsorship to go, but RBS director of communications, Andrew McLaughlin, said that all of its other properties would also be up for review.

RBS, which in common with other major banks with global ambitions spent heavily on sports sponsorship in recent years in a bid to win customers and boost brand recognition, will cut its overall expenditure by 25% in 2009 and a further 25% in 2010.

Only its £20m headline sponsorship of the Six Nations is safe, after it renewed its four-year deal last year. It argued that negotiations over the renewal began last April, before the full extent of the economic collapse and the bank's subsequent travails became clear. The news was quietly slipped out over Christmas in an effort to avoid attracting public opprobrium.

RBS, mindful of the likely effect on the public of seeing bankers and clients consuming champagne at sporting events, had already resolved to slash its corporate hospitality budget by 90%.

Industry experts warned today that the dramatic reduction in investment by RBS would be followed by cuts elsewhere and would have a knock-on effect on the value of almost all sponsorships.

"I think it will have an effect. Rights holders will be looking at 25% downturn in terms of the value they can expect," said Nigel Currie, a director at sponsorship consultancy BrandRapport. "Maybe not at the very, very top of the market, but certainly at the medium level and below, rights holders face a drop in everything because there just won't be the demand for it."

The financial services companies, utilities groups and telecoms firms that have driven the growth of the global sports sponsorship market will all be cutting their investment as expansion and the battle for new customers gives way to consolidation and a focus on retaining existing ones.

The impact is likely to be even greater because many banks have already committed to large projects that they cannot back out of, so will be reluctant to invest any more elsewhere.

Lloyds TSB has committed £40m to being a "tier one" sponsor of London 2012. And Barclays is reviewing all its sponsorship activity, including the £66m deal with the Premier League that runs out at the end of 2010.

The wide-ranging review will also take in its sponsorship of the Scottish Open and Singapore Open in golf, the Barclays Churchill Cup in rugby union and the Barclays Dubai Tennis Tournament.

RBS is expected to refocus its sponsorship portfolio around domestic sport, with more emphasis on properties such as the Six Nations that can help maintain its profile with UK customers, and projects that have community and grassroots spin-offs that can help rebuild its battered image.

But US community sports programs, such as its First Tee golf program targeted at young people with learning disabilities and a scheme devoted to developing local baseball teams, are unlikely to survive the cull.

Confirmation of RBS's reduction in its sponsorship budget will come as a further blow to the England and Wales Cricket Board, which faces the challenge of renegotiating with its three main sponsors in the space of a year.

Vodafone has already confirmed that it will drop its £4m-a-year sponsorship at the end of the season, while nPower's £15m deal runs out at the end of this year and RBS-owned NatWest is currently deciding whether to renew its £10m contract that runs until 2010.

But Currie added that some of the personal endorsement deals that might appear most under threat, such the RBS deal with Nicklaus and HSBC's contract with Tiger Woods, were likely to be retained because they were such a key factor in winning and retaining business.

"If you can offer your biggest clients a round of golf with Tiger Woods, that's something money can't buy and it could be worth millions of pounds," he said.