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RBS reduces sporting sponsorship

Mihir Bose | 17:15 UK time, Wednesday, 25 February 2009

The impact of RBS' decision to cut its sponsorship of sport by half by next year should not be underestimated.

In the last decade RBS has used sport to reach areas of the world it had never reached before, and project itself as much more a world bank than the parochial British bank it was perceived to be.

The bank's investment in sport has been perhaps the most significant example of how the financial services have bankrolled sport in recent years. And it is easy to see how this business philosophy would have found Formula One so attractive.

Williams team testing, Jerez

Bernie Ecclestone has been pushing the sport into new markets and seeking to build its reach beyond the traditional sporting enclaves. So sponsorship of the Williams team chimed nicely with RBS' ambition.

But with the downturn changing everything, RBS and Williams have been in talks since October.

Both sides are keen to make out what they have agreed is now an orderly withdrawal and Sir Frank Williams responded to the BBC in characteristically bullish mood, insisting the team will survive.

But as Nigel Currie, director of Brand Rapport, put it to me, this is a major blow for Williams, and indeed Formula One and sport in general.

Just like the financial industry, the years of expansion are now catching up with F1, and other sports too.

RBS's other global ambassadors are already feeling the heat. It is believed the bank has lavished £200m on sponsorship, from Andy Murray, through to Sir Jackie Stewart, Zara Phillips, Jack Nicklaus and Sachin Tendulkar.

Tendulkar, for example, was given a lucrative contract only a few months ago, with the recent India-England Test series played for the RBS Cup. RBS employs some 10,000 people in India. There will be cutbacks there and, like all sponsorship activity, the sporting investment in India will also now be reviewed.

The reaction from those global ambassadors has been mixed. Murray, who has had RBS support since he was 13, recognises the bank is in trouble and that he has to take a pay cut. But Stewart expects the bank to honour its reputed £4m-a-year sponsorship deal. Expect hard talks in the week and months ahead.

Luke Fitzgerald, Ireland

The one sponsorship RBS is keen to continue is Six Nations rugby, which it renewed last autumn until 2013 for £20m. For the bank, this fits in with its desire to now revert to concentrating on its core banking business in the UK and Ireland.

Nevertheless, cost cutting at the bank is now the prime focus of its Strategic Review. This will see a 25% reduction in sponsorship and related costs in 2009 and around 50% by 2010. Non-contractual costs in F1 have already been reduced by over 50%. And it has cancelled trackside advertising for 2010. In all RBS sponsorships, hospitality costs in 2009 have been reduced by around 90%.

The message could not be clearer.

Sports like football may still be able to do lucrative deals with television companies, but in the current climate, the days of businesses throwing money at sport are at an end.

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