New Year’s Eve Fireworks: A Spectacular Tradition with a Hefty Price Tag

The Economics of Bringing in the New Year with a Bang

As the clock counts down to midnight tomorrow, people around the world will gather to watch spectacular fireworks displays light up the night sky. From Sydney to New York City, these vibrant and colourful displays are an extravagant way to bring in the new year. However, putting on fireworks shows like these is no small feat, and the costs can run into the millions. But when large parts of the world are going through turbulent times and a cost of living crisis, how are these costs justified? 

Using London as an example, I am going to do a deep dive into the costs and revenues involved in putting on a spectacular show, and ask whether it’s worth the hefty price tag.

In London, the tradition of having an extravagant fireworks display to mark the start of the new year began in 1999, to bring in the new millennium (along with an even bigger project - the millennium dome - costing ~$1B). Since then, the cost of London’s famous fireworks display has risen steadily. The tradition had become so popular by 2013, that almost 500k people tried to attend. From then on, it became a ticketed event. Nowadays, there are 100k tickets available, at a cost of £15 each.

Now this may sound like a lot of money for an 11 minute firework display, but the ~£1.5M+ from ticket sales barely touches the sides when it comes to the costs involved in putting on the show.

So what’s actually involved? Why do London’s New Years Eve fireworks cost so much? And who pays for it? Here’s a breakdown.

Let’s start with breaking down that ticket revenue. These tickets are not exempt from VAT, and so 100k tickets bought at £15 each by the general public quickly goes from £1.5M to £1.25M, after HMRC get their cut of the sales. Add to that a likely platform fee for ticket sales of ~10%, and a standard credit card processing fee of ~3%, and this diminishes even further, to ~£1.09M. This is before paying for a single firework, security fence, or security guard to make the event a success.

So what about those costs? The government’s approach here is to contract out the production to a third-party. The approved figure for this in 2022/3 is ~£3,935,000. In addition the government will spend ~£70k on administering the contract and funds, as well as ~£80k on marketing. This brings the total to an eye watering £4,085,000 in total. This is without thinking about additional policing or any other costs that fall outside of the production costs. 

This is all funded by the Greater London Authority, a cultural body responsible for distributing funding for arts and culture throughout the capital city. According to the application for funding, it’s expected that costs outside of the production will be “broadly neutral” - people will be celebrating New Year in any case, whether that is in central London or elsewhere, the policing and other costs are likely to be the same when considered in aggregate. In fact, by creating a focal point for celebrations, it may make it even easier for emergency services to plan and staff for New Year’s Eve.

So why do the government pay so much to put on the New Year’s Eve Fireworks? And is it worth it?

The main justification for putting on such an extravagant show is the increased level of economic activity that occurs in the days surrounding a big New Year’s Eve event. Crowds come from all over the country (and the world) to see the spectacle in person. This immediately boosts the hospitality sector as around 70% of guests come from outside of London, spending an average of ~4.4 days in the capital, and spending ~£112 per visitor. The total immediate boost to the economy of this is thus estimated to be well over £10M from ticket holders alone, and this is not including those that come to London to soak up the atmosphere, without having bought a ticket. 

Not only that, but the fireworks are also a huge advertisement for London in general, leading to a halo effect of increased tourism throughout the year as people are reminded of this great tourist city. 

Quantifying this halo factor is much more difficult, but you can easily see how the £3M net spend by the government may not only be justified, but in fact be a great investment. The event is televised around the world and viewed by ~12M people live and many many more people around the world will see clips of our celebrations from their home countries.

Other countries have become even more accustomed to spending huge sums on firework displays than we have. Australia has potentially one of the most impressive displays, and ROI to match. Each year, Sydney spends around £5.5M, and as one of the first cities to officially enter the new year, is viewed by over 1B people around the world. The position of the fireworks display in Sydney also allows for an enormous in person audience, attracting ~1.6M people to line the shore of the Sydney Harbour. The Australian government estimates that the new year fireworks display leads to in excess of £105M in immediate increased levels of spending in the local economy, and with an even bigger reach internationally than any of its counterparts, acts as an advertisement for Australia that economists say is a critical tool for the marketing of its entire tourism industry. That’s 8.5 tonnes of fireworks well spent.

To close out, here are a selection of other world famous firework displays, and what they spend to bring the new year in with a bang.

• Abu Dhabi - £16,000,000

• Kuwait City - £12,000,000

• Hong Kong - £8,500,000

• NYC - £5,000,000

• Dubai - £5,000,000

• Edinburgh - £1,200,000

That’s all for now! So happy new year to you, and I’ll see you in 2023 when I will be posting once per week with analysis and insights into the latest topics in Business, Technology, and Investing. If you haven’t already - please consider subscribing below!

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