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The Coronavirus Pandemic: Its economic effect on sport in Cyprus

By Constantinos Masonos, General Director of Apollon Limassol Football and Athletic Club, Cyprus The Coronavirus (COVID-19) pandemic does not only pose a threat to human lives, but has also hugely impacted the world economy, leaving businesses around the world counting the costs. In particular, the sports industry, one of the fastest growing industries worldwide, has come to a halt with the suspension of already running competitions, causing a domino effect for when future competitions will take place. In Cyprus, the government acted quite proactively by imposing strict social measures in the battle to fight the spread of the pandemic, including a lockdown of all non-essential businesses. On the other hand, there are limited economic measures that can be taken to avoid the financial aftermath of the current crisis. An IMF (International Monetary Fund) projection shows that the Cypriot economy will shrink by 6.5% this year and make a comeback in 2021 with a growth of 5.6%, while local economists’ projections show the economy shrinking by a whopping 13%, in a worst case scenario and depending on how long the economy will be in lockdown. Cyprus, deeply hit by the 2012 Eurozone crisis, with a GDP of €21 billion, has already borrowed €1.75 billion from international markets and a further €1.25 billion from local banks by issuing 12-month Treasury Bills to increase liquidity and support its economy during the lockdown. The COVID-19 pandemic has also struck the sports sector in Cyprus to the core, a sector that, according to EU data, contributes a sizeable share of 1.85% in the total economy and accounts for approximately 2% of total employment in Cyprus. Included in the measures, which were announced on 16 March 2020, was the closing of all athletic facilities, private and public, and restrictions on individual or group training, including sports teams. The majority of Cyprus sports federations had already responded to the coronavirus threat by postponing their leagues but, after the announcement of the above governmental measures, they proceeded to the cancellation of all their leagues, with the exception of the soccer federation. While the Cyprus soccer league does not attract international interest or big sponsors, Cypriots are a soccer loving nation. Professional soccer team budgets have increased significantly in the past decade not only due to an increase in the traditional income streams (sponsorships, matchday revenue and broadcasting rights), but mostly because of prize money earned through their participation in the group stages of the UEFA Champions and Europa Leagues. According to the Cyprus soccer federation the coronavirus crisis will create an estimate loss of a few million euros for soccer clubs. That means participation in European competitions is the only option for soccer clubs that want to compete with a high budget and highlights the importance of current discussions between clubs, the federation and the government focusing on whether it would be wise to cancel the league and give the ticket to European competitions according to current league standings or let the league continue during the summer, in scorching temperatures, with also a significant financial cost for the clubs. The decision will also greatly affect the players, who are now inactive for more than a month and will have to enter into discussions with their clubs in order to decide together how their wages will be adjusted to the new reality. Amateur sport in Cyprus relies heavily on not-for-profit sports clubs, which allow citizens to enjoy sport and physical activity. Their not-for-profit nature means they exist because of the support of volunteers and donors and are expected, therefore, to also suffer a great financial hit because of the coronavirus crisis, bringing some of them to the verge of bankruptcy, causing a long-term impact on the economy and society. The main issue that both professional and amateur clubs report is the loss of revenue due to the inability to provide almost any of the club services, especially at a time of the year when there are no official club competitions and clubs usually organize tournaments, competitions, events or seminars to raise money and rent out their facilities to third parties, who organize other events. There is also a significant loss in terms of regular income from memberships or subscriptions. The ban on training has brought all grassroots level competitions to a halt, causing financial havoc to many sports clubs that depend on academy subscriptions to finance their club running expenses. Small or bigger businesses, which are directly or indirectly related to sport, such as fitness clubs and gyms or sports facilities are currently on lockdown, while their fixed costs keep piling up, which can soon lead the financially weakest to bankruptcy. It is inevitable that some of the jobs in the sports sector will be lost. Coaches, instructors, trainers, administrative employees, competition officials and sports journalists have already seen their incomes decreasing, which is fully dependent on training and competitions taking place. Individual athletes have lost their ability to train and compete and that has huge implications for their income. Not only do they lose direct income but also lose their opportunity to compete and increase their status that would help them attract sponsors and public funding. Fortunately, there are signs that the world is taking the first steps towards gradually lifting restrictions and taking control of the havoc caused by COVID-19. Helping the sports sector stand up on its feet again is crucial and can contribute to returning to what was considered a normal way of life before the COVID-19 hit the world. Sport has the mechanisms to contribute to people’s well-being, socialization and education, helping alter the physical and psychological health impact suffered as a result of the pandemic. Let us hope, therefore, that things return to some kind of normality soon in order to arrest the social and financial effects that the current crisis is wreaking on sport! Constantinos Masonos may be contacted by e-mail at ‘This email address is being protected from spambots. You need JavaScript enabled to view it.

 
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The editors of  the Journal Sports Law & Taxation are Professor Ian Blackshaw and Dr Rijkele Betten, with specialist contributions from the world's leading practitioners and academics in the sports law and taxation fields.

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Prof. Dr. Ian S. Blackshaw

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Prof. Guglielmo Maisto
Maisto e Associati, Milano

Dr. Dick Molenaar
All Arts Tax Advisors, Rotterdam

 

Mr. Kevin Offer
Hardwick & Morris LLP, London

Mr. Mario Tenore
Maisto e Associati, Milano

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