Anthony Hilton: Events are too reliant on corporate money

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You can tell by the appalling weather in London — if you were not already aware — that Wimbledon will soon be upon us.

We have had the Chelsea Flower Show and the FA Cup Final, the tennis at Queen’s takes place this week as does Royal Ascot, the Test matches are under way, people are skiving off early to get down to Glyndebourne, and the Henley Regatta will wrap up the sporting and cultural month.

Nor can you go abroad to escape — the European Football Championship is in full swing in France.

Just to bring a touch of class to the proceedings, Investec — the investment bank that originated in South Africa — announced this week that it is to continue its support of the Opera Holland Park season. Corporate hospitality, one might easily conclude, has never had it so good.

Or perhaps it has. One of the intriguing things about the Chelsea Flower Show gala evening last month was how uncrowded it felt.

Partly, this was because the evening was quite mild so the entire gathering did not have to huddle for warmth in the central marquee, as so often happens.

But one was also left with the feeling that companies that have for years made it one of their biggest nights for entertaining clients, decided this year to scale things back.

This has happened before. Whenever there is an economic downturn, businesses get nervous about being seen to entertain too lavishly, partly because they want to save money but equally because it is deemed not good form for the executives to be seen on Twitter or elsewhere entertaining clients and quaffing champagne after a hard day at the office, where they have been making staff redundant.

RBS is only the most famous recent example. After it was bailed out by the taxpayer at a cost of billions of pounds, it famously decided to maintain its sponsorship of Wimbledon, but was so alarmed by the thought of such champagne pictures that its hospitality almost disappeared. 

However, it is rather different this time because the companies that have scaled back on Chelsea — and have completely cut some of their lower-profile activities — say they are doing it not because cash is tight but because they are worried they might fall foul of the Bribery Act, a measure which, although passed a few years ago, is only now really beginning to come into full effect.

It was presumably never the intention of the Act to stop all firms treating their clients and potential clients to an expensive day out at a major social event but it was clearly its intention to put limits on what might be offered.

Such hospitality should not be so lavish that it might influence clients to make a decision they might otherwise not have done.

This is, of course, a problem because the whole point of hospitality is to influence behaviour — not directly to get a client to put his or her signature on a contract perhaps, but certainly to build up a personal rapport, which with gradual cultivating could make it easier to persuade the client to sign up at some time in the future.

It is not about getting a client to accept an overpriced deal — which is not to say that never happens — but rather about reminding the client that the host might like to pitch for a contract if there is one in the offing.

It is not necessarily about business today but if at some point in the future an opportunity arises, “I hope you will think of us…”

It is a fine line. American companies, if they invite people to a private viewing at, say, the Royal Academy Summer Exhibition, usually ask the guests to sign a disclaimer that puts a price on the hospitality offered — often several hundred pounds if spouses are also asked along — and requires them to confirm that their employer knows they are there.

Signing is easy enough but it does take the romance out of it a bit.

Of course, some companies are entertaining more or less as they always have done; others — generally those who say they have asked their lawyers for guidance — are scaling things back.

And almost all seem reluctant to talk publicly about it. There is enough unease about the potential impact of the Bribery Act, however, to give one the sense that perhaps we are at the beginning of a shift in corporate culture.

Nothing is likely to happen quickly but over the coming years we could easily see a shift away from a heavy corporate presence at these events.

That will no doubt disappoint executives and their clients — and journalists, who tend to benefit more than most from such largesse.

But it will also have huge implications for the events themselves. They have become massively dependent on corporate money and, in many cases, have scaled up their activities to levels that could not be supported without it.

So they face a potential hit to revenues, not because they won’t be able to sell all their tickets but rather because ordinary members of the public — much as they might relish the opportunity to attend — would generally not be able to afford the inflated prices.

The law of unintended consequences strikes again.

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June 16, 2016 |
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