Will Euro 2016 impact the euro?
Major sporting events are always big business – pulling in visitors from all over the globe, stimulating local economies, and leading to the creation of new jobs and infrastructure. But is the forthcoming UEFA Euro 2016 likely to have an impact that spreads to the currency of the Eurozone itself? To put it another way: how will the Euros affect the euro?
Looking at the past, it's clear that sports events and their outcomes can indeed have knock-on effects on share prices, consumer confidence and ultimately exchange rates. These effects aren't always consistent or predictable, though: the 2012 London Olympics, for example, had a fairly negligible effect on the pound, and the Polish zloty suffered in 2012 despite the country co-hosting that year's UEFA Cup – even after fans boosted the Polish economy by an estimated £261 million during the tournament.
However, two years later the Brazilian real gained 5.5 percent against the dollar as the World Cup got underway - although the currency's value began to deteriorate shortly afterward. In 2010, the South African rand rallied shortly after tickets for its own World Cup went on sale. During the week of the final, foreign inflows into the South African economy reached a two-year high as investors poured money into the country's bonds and equities – and all this despite the South African team's early exit from the tournament. But the impact of sporting victories on a country's economy is interesting too.
According to research published by IG.com in 2014, winning the Ashes causes a rise of nearly ten per cent on average for a country's stock market in the six months following a victory. An English victory in Australia was associated with even higher average FTSE 100 gains of 17 percent, while an Australian win on home turf was linked with a nine percent gain on the ASX. (Happily enough, a defeat had no appreciable effect on the stock markets of either side).
Looking at the effect of sports events on the strength of a currency is one thing – but does it work the other way around? Financial analyst Nick Elliott believes so. In a thesis produced for Duke University in Durham, North Carolina, he explored the impact foreign exchange has on the performance of sports teams in international competition.
Analysing several decades' worth of data from the NHL and international soccer (including the UEFA Champions League), Elliott concluded that "an increase in the value of a team’s native currency has a significant, positive effect on that team’s international performance". Using the Real Effective Exchange Rate (REER) of 20 countries involved in the Champions League, he found a correlation between the strength of a team's home currency and its chance of winning a match.
There are many factors in play - but the short of it is that a stronger currency equals more purchasing power on the global transfer market. That the richest teams can afford the best players won't be news to anybody - but it's interesting to see the significant role foreign exchange plays in determining who the richest teams are in any international event.
What does all this mean for the effects of Euro 2016 on the euro? Past data suggests that any currency gains associated with sporting events tend to be temporary, and fairly short-lived at that. Although the tournament will almost certainly lead to more euros being purchased and more foreign money pouring into the Eurozone, it remains to be seen whether this will significantly affect the currency on the whole. While host country France will undoubtedly get a boost, it seems doubtful that the impact will be felt across all 19 member states.
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More than half of FTSE 100 execs suffer pay cuts, freezes
Pay increases for many executives at the largest UK firms have been put on hold since the start of the pandemic with more than half of the FTSE 100 CEOs having had their salaries frozen in 2021, according to new research from PwC.
The research, based on PwC’s analysis of the first 50 FTSE 100 firms to publish their 2021 annual remuneration reports, reveals that 53% of CEOs and 52% of CFOs have had their pay reviews put on hold, compared to 35% and 30%, respectively, last year, pointing to the pandemic as the main reason.
According to Phillippa O’Connor, reward and employment leader at PwC, the current environment and impact of the pandemic has clearly led shareholders to sharpen their pencils when reviewing executive pay levels this year.
“It is clear from the pay outcomes we have seen to date in the FTSE 100 that companies have exercised restraint when it comes to both determining outcomes for the 2020 performance year and settling pay on a forward-looking basis for 2021,” says O’Conoor.
Bonuses, grants and pensions also affected
But that’s not all. Around a third (31%) of companies either waived, cancelled or reduced their 2020 annual bonuses, with the average payout dropping from just uhnder £1.1m to £843,000.
When it comes 2021 long-term incentive plan (LTIP) grants, these have also been revised in light of the economic impact of the pandemic with 45% of firms making some adjustment to their award, including retaining discretion to adjust outcomes at vesting in respect of windfall gains, reducing grant size, delaying the grant, and even canceling the award altogether.
The study shows that pension levels for incumbent CEOs remain at 15% of their salary, falling to 10% for new hires, bringing them in line with the wider workforce. Eight out of 10 FTSE 100 companies will have aligned incumbent pension levels with those for the wider workforce by the end of 2022.
O’Connor warns that moving forward into AGM season, there is likely to be added scrutiny around any pay rises that are greater than those for the wider workforce and on incentive outcomes that are “either not aligned with business performance or do not take into account the company’s approach towards matters such as diviends and government support”.
What announcements did UK's big firms make?
Back in April 2020, as the pandemic was just getting started, a number of UK companies, mainly insurance and banking stepped forward to review remuneration packages in response to the economic implications of the COVID-19 crisis.
British insurance giant Aviva announced that basic pay increases for its executive directors and the Aviva leadership team would be paused, while the executive directors of Prudential offered that their salaries be reduced and RSA confirmed its exec directors and executive committee would not be receiving cash bonuses for the current year.
The same was true in banking and finance with TSB announcing that its 10-strong executive committee would give up their bonuses in 2020, while Barclays said its chief executive, finance director and chairman would each give a third of their fixed pay for the next six months to charities. Lloyds cancelled its bonus payments and pay reviews in 2020
Other big UK firms including Ryanair, Taylor Wimpey and Rentokil all committed to reducing their executives pay packages.