North American cities can be cautiously optimistic about hosting 2026 World Cup

09 July 2018 Consulting.us

Owing to utilization of largely in-place infrastructure, North America’s hosting of the 2026 FIFA World Cup is expected to avoid the cost-overruns and financial boondoggles of some previous tournaments. A report from The Boston Consulting Group expects the tournament to generate about $5 billion in short term economic activity for the region.

Last month in Moscow, the United Bid of the US, Canada, and Mexico beat out frontrunner Morocco to secure hosting duties for the 2026 FIFA World Cup. With games likely split between 10 cities in the US, 3 in Canada, and 3 in Mexico, the 2026 edition of the incredibly popular soccer tournament will be the first one hosted between three countries. The 2026 tournament will also be the first in which 48 teams qualify for the tournament – hoping to avoid scenarios like this year, where teams like the US, Italy, and the Netherlands failed to qualify. More games also means more ticket money, more media dollars, and more merchandise purchases.

As such, 2026’s tournament requires even greater facility access than previous editions, so it’s less surprising that an entire continent won the bid. North America offers something that a lot of previous hosts – including South Korea, Russia, and Brazil – didn’t have in place: up-and-ready stadiums and infrastructure. The US, Mexican, and Canadian cities that are likely to host games all have adequate football stadiums and infrastructure in place to handle the World Cup. While some tweaking and expansions will occur, it won’t require the huge amount of investment that went into other countries’ preparations – thus, hopefully avoiding a financial boondoggle like in Brazil.North American cities can be cautiously optimistic about hosting 2026 World CupThe South American country ended up spending $3.6 billion on building stadiums, many of which today stand disused or vastly underused. Some of the stadiums were built in obscure places, like Manaus in the Amazon, and are now virtually abandoned. Much of the World Cup spending – which amounted to $15 billion in total – did little to boost Brazil’s long-term prosperity, and the country entered a recession the same year. Add in the country’s humiliating defeat at the hands of Germany in the semi-finals, and the 2014 World Cup is an experience most Brazilians would rather forget.

North America’s World Cup, however, is projected to be different. Indeed, the US Soccer bid book says that “no major public expenditures [are] required to stage a successful and memorable competition.” In this manner, the North American partners are hoping to emulate the experience of the 1994 World Cup in the US, where only $5 million was spent on stadiums. Though expenditures will be much larger than the 1994 figure, the basic premise of utilizing capable pre-existing (mostly NFL) football stadiums remains the same.

In the run-up to the successful United bid, strategy consulting firm The Boston Consulting Group (BCG) reported that a World Cup hosted in North America could generate $5 billion in short-term economic activity, including about 40,000 jobs. The BCG report also projects that individual host cities will see a net benefit of $90-$480 million in economic activity after accounting for public costs. BCG projects an overall net benefit of $3-$4 billion for the region.

The consulting firm’s report said that a key advantage of North America’s bid was that the three countries were relying on pre-built infrastructure, significantly reducing costs and allowing for the large projected net economic benefit.

Aside from the short-term economic benefits in 2026, BCG also predicts that hosting the World Cup will bring significant long-term benefits. Global media exposure would purportedly boost the profile of host cities, increasing tourism in the long term.

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PwC: Macroeconomic, labor force, and environmental challenges ahead

15 April 2019 Consulting.us

The world is facing risks from a host of factors: climate change is set to create long-term issues if not dealt with in a timely manner, while aging populations will impact 40 of the world’s larger economies going forward, resulting in economic and social strains. Trade disputes between the US and other economies continue, while the US also continues to borrow heavily.  

The mini-boom noted between 2016 and 2018 has ended, with 2019 set for slower global growth as the world’s second largest economy scales back expectations. US fiscal stimulus is set to fade, with a resultant decrease in growth rate, while higher interest rates – even with the Fed slowing increases – are likely to impact consumer spending.

Economic projections are routinely made by the big consulting firms, supplementing insights from government agencies and university researchers. The latest PwC "Global Economy Watch" report considers key possible changes to the global economy on the basis of projections for the year ahead.

While Trump has held off on new tariffs in the US's spat with China, he may still deploy them if nothing can be agreed upon between the world’s largest economies. PwC expects businesses to remain in a cloud of uncertainty for 2019 in regards to tariffs, with China only one battleground for future protectionism.Large global shifts as critical issues surfaceWhile the US is seeking to lower its global trade imbalance, the government continues to spend considerably more than it takes in through tax receipts. Analysis shows that the large tax cut is likely to see US government debt surpass $1 trillion annually this year, a figure last seen post-crisis in 2012. The figure will continue to grow as the deficit runs more than 5% of GDP over the coming three years. The figure is well above that of the EU28, whose deficit is around a fifth of that of the US. 

Global issues

The US is likely to face a variety of long-term threats to prosperity, according to the report. Climate change is a key area of concern, cited as one of the world’s biggest risks that could lead to profound social instability, according a recent World Economic Forum report. Devastating wildfires in California caused $400 billion in damages last year – a significant percentage of the state's GDP. 2018 was one of the world’s four hottest on record since records began in 1880, with temperatures close to 1C above long-term trends.

While a warming world is set to create considerable burdens for young people today, the older generation continues to age, with their dependence on the young set to rise significantly over the coming decade in terms of accelerated healthcare and social security spending. The firm’s analysis shows that 40 of the world’s economies will see their workforce shrink. Former Soviet bloc countries are set to have the most significant decreases in working age populations: Ukraine tops the list, followed by Bulgaria, Romania, and Lithuania. The Netherlands and Belgium however, could begin to see their workforces contract going into 2019. A declining workforce can be problematic, particularly if the workforce is also aging, as it requires that lower output is filled by higher productivity to keep economic parity.

The firm notes that the UK is set to lose it status as the fifth-largest global economy in 2019, as India – with the world’s highest population, one of the highest GDP growth figures, and one of the youngest working age populations – surpasses the UK economy. France, too, is likely to pass the UK this year, as Brexit uncertainties and a strong euro push the French economy slightly above that of Britain's.