Premier League clubs recorded the largest aggregate pre-tax loss in the league’s history because of the pandemic, increasing to just under £1 billion (2018/19: £0.2 billion) as the immediate revenue shortfall coupled with an inflexible short-term cost base hit the bottom line.
Clubs in the Premier League have only recorded pre-tax
profits four times in two decades, all since 2013. On an operating level, clubs had moved
towards profitability under 2-18/19 when costs grew faster than revenues.
The Covid-19 pandemic forced the Premier League clubs to
defer or return revenue from broadcasters and sponsors.
Premier League clubs’ combined revenues for 2019/20 have
fallen for the first time, to £4.5 billion, down 13% from 2018/19 (£5.2
billion). Due to the relatively
fixed nature of Premier League club costs, the decline in revenue had a
significant impact on operating profits, falling by 95% to £42m (2018/19: £0.8
billion).
Clubs’ combined wage expenditure increased marginally by 3%
to a record high £3.3 billion in 2019/20.
The combined wages-to-revenue ratio for Premier League clubs rose to a
record high of 72% as a result of the revenue decline.
First ever revenue fall
Premier League clubs generated £4.5 billion of revenue
during the 2019/20 financial year, according to analysis from Deloitte’s Sports
Business Group, a decline of 13% compared to 2018/19 (£5.2 billion). This is
the first time that Premier League clubs have cumulatively reported a
year-on-year fall in revenue.
Under normal circumstances, clubs have a financial year-end
that aligns with their domestic season. However, the disruption to the 2019/20
football season has resulted in club revenues for that season being spread
across the two financial years ending in the summers of 2020 and 2021.
As a result, clubs have seen some of their revenue for the
2019/20 season being deferred into the 2020/21 financial year as matches were
delayed from spring into summer of 2020, beyond their 2019/20 year-end and
other revenue, primarily matchday revenue and broadcast rebates, permanently
lost.
Overall matchday and broadcast revenue decreased by 13% and 24% respectively compared to the prior year. In terms of broadcast revenue deferred from the 2019/20 financial year into 2020/21, while this will provide a boost to 2020/21 revenues, the gains will be outweighed by the near total absence of matchday revenues for that season.
Dan Jones, partner and head of the Sports Business Group at
Deloitte, commented: “The decrease in revenue in the 2019/20 season is,
unsurprisingly, down to the global economic and social disruption caused by the
COVID-19 pandemic and will continue to have a heavy impact on the 2020/21
season’s financial results when available.
“The absence of fans, postponement of matches and rebates to
broadcasters had a significant impact on the revenue clubs have been able to
generate. Nonetheless, whilst this has been the most challenging period for all
concerned in the football industry, Premier League clubs showed impressive
resilience in mitigating the financial impact of the COVID-19 pandemic. By
completing the 2019/20 season in full, live football provided a great boost to
the public and valuable content for broadcasters.”
Will low wage
inflation last?
The analysis reveals that Premier League clubs’ aggregate
wages-to-revenue ratio increased to a record high of 72% in 2019/20, as a
result of the decrease in year-on-year revenue.
Tim Bridge, director in the Sports Business Group at
Deloitte, said: “Despite the record high wages-to-revenue ratio, Premier League
clubs’ combined wage expenditure increased by just 3%, the lowest percentage
increase in wages since the 2004/05 season.”
Bridge said it was hard to assess whether low wage inflation
would be lasting: “In this extraordinary year it is difficult to read too much
in to whether this marks a shift in clubs’ approach to wage spending, or
one-off elements such as the absence of end-of-season bonuses, which will have
been deferred to the next financial year, or the impact of temporary wage cuts
or interest in years to come to understand whether this financial shock will
come to be seen as having caused a change in approach and greater control over
wage expenditure.”
Dan Jones added: “The
players who are in demand will still do very well. People who own and make the decisions in
football clubs want to win matches and therefore they want the best players
they can possibly get, and they know they are in competition for these players.”
With the decrease in revenue and a general inability to
reduce costs that clubs had committed to incur, Premier League clubs made a
collective pre-tax loss of almost £1 billion, (2018/19: £0.2 billion loss)
which is the largest pre-tax loss in Premier League history. Less than a
quarter of the Premier League clubs reported a pre-tax profit and those that
did had generally extended their financial year-ends to become a 13-month
accounting period, thus bringing in another month of the delayed season’s
matches and reducing the revenue deferred to the next financial year. Everton made the biggest loss at £139.9m,
followed by Manchester City at £125.1m.
The trough of the dip
Jones added: “The full financial impact of the pandemic on
the Premier League will depend on the timing of the return of fans to stadia in
significant numbers and the ability of clubs to maintain and develop their
commercial relationships, in particular at a time when many other industries
are suffering. Matchday operations are a cornerstone of a club’s business model
and fans’ absence will be more fully reflected in the financial results of the
2020/21 financial year, covering a larger period of the pandemic.
“Nonetheless, and with the recent announcement of a renewal
of the Premier League’s domestic broadcast rights on similar terms to those
currently in place, once fans are able to return in full, hopefully during the
2021/22 season, Premier League clubs have the potential to again return to
record revenue levels. Our expectation
at the moment is that this will be the trough of this particular dip.”
The underlying issues are discussed further in my new book Political Football published by Agenda: https://www.agendapub.com/books/124/political-football.
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