The financial fallout of axing Commonwealth Games

By Dr Abdel K Halabi

The cancellation of the Commonwealth Games has come as a huge shock to athletes and sports fans and has reverberated around Australia, particularly to those in regional Victoria. Views have ranged from harsh criticism to solid agreement with the Victorian Government's decision to walk away from hosting the 2026 event.

In a statement released on the day of the Victorian Government's announcement, the Commonwealth Games Federation (CGF) stated it was hugely disappointed "for the Commonwealth Sport Movement, for athletes around the Commonwealth and the Organising Committee".

The Commonwealth Games Federation is the international organisation responsible for the direction and control of the Commonwealth Games and is the governing body of the Commonwealth Games Associations (CGA), headquartered in London.

The CGF would also be hugely disappointed with the cancellation because of the financial implications on the organisation and its operations.

When the CGF awarded the 2026 Commonwealth Games to Victoria in April 2022, the then chief operating officer stated that "The increase in reserves over the last few years, together with the award of the 2026 Games to Victoria, Australia, has secured the financial sustainability of the CGF for a number of years".

Before this, Calgary, Edmonton, Kuala Lumpur, Liverpool, Cardiff, Sydney, Perth, and Adelaide, as well as other cities in India and Sri Lanka, are said to have enquired about hosting the 2026 games but did not put in a bid largely due to cost concerns.

The CGF is a company limited by guarantee and has significantly improved its financial position in the last few years. In March 2018, for instance, its cash position was £4.9 million ($9.4 million), which had grown to £11.8 million ($22.6 million) in March 2022.

In the last two years, the CGF has returned its highest yearly surpluses of £2.3 million (for 2021) and £1.5 million (2022). Their reserves of £6.9 million are currently at their peak.

The improved financial position is largely attributed to revenues from hosting the Commonwealth Games and revenue brought in for the Games by the commercial arm CGF Partnerships (CGFP), which is 40 per cent owned by the UK business SPORTFIVE.

The sum raised through this partnership in 2022 was over £21.5 million, up significantly from £5.6 million in 2021. The 2022 annual report is dated until the end of March, a timeframe that does not capture the full impact of the Birmingham Games, which ran from July 28 to August 8 in 2022. The CGFP revenue would likely be higher during the staging of the actual games, and this will be proven in the 2023 annual report.

The 2026 Commonwealth Games in regional Victoria certainly would represent great marketing opportunities for CGFP and, ultimately, revenue to the CGF.

CGF's annual reports also showed that Birmingham paid CGF £25 million for the right to host the 2022 Commonwealth Games. This host fee revenue was recognised between the execution of the Host City Contract until the Host Games were held.

In Birmingham's case, the CGF received this revenue between 2018 and 2022 in roughly equal instalments. The 2018 annual report shows an amount of £1.2 million from the Birmingham Organising Committee for host fees – as part payment.

The latest CGF annual report (dated to March 31, 2022, and released in December 2022) was closed after Victoria was awarded the 2026 games. Therefore, there is no evidence of revenue being received from the Victorian Government for hosting fees or the total amount agreed.

Hosting any major sporting event such as the Commonwealth Games is incredibly costly with, in many instances, the burden falling on the government of the time. The 2022 Birmingham Games, for example, was said to have cost £788 million ($1.5 billion), with the UK government contributing three-quarters of the total cost.

This was the most expensive sporting event in the UK since the 2012 London Olympics.

It is not known how much it will cost the Victorian Government to cancel the games, keeping in mind the contract signed. However, the price will likely be small compared to the now $7 billion price tag that the Victorian Government and ultimately Victorian taxpayers would have had to pay.

Dr Abdel K Halabi is an Associate Professor in Accounting. He is a Fellow of the Chartered Accountants of Australia and New Zealand (CAANZ) and a Certified Practising Accountant with CPA Australia.  He is co-editor of Sporting Traditions the journal of the Australian Society for Sports History.

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