How are the clubs that backed the ESL faring?

The Swiss Ramble has been busy in his Zurich fastness over the weekend diving into his data base to review the finances of the clubs that backed the European Super League.

A year ago 12 clubs announced a European Super League (ESL) before fan protests led to a humiliating climbdown that happened  just days later. However, the factors that drove the 12 clubs to this deeply unpopular move largely remain. It’s still all about money: a combination of fear and greed.

[I would add that we may get an ESL by other means through changes to the Champions League, although Uefa seems to be backing down on giving automatic places to clubs with high Uefa coefficients, i.e., historic ‘big’ clubs that have faltered recently like Manchester United].

There is little doubt that many of the 12 Super League clubs continue to face serious financial problems. To some extent, this helps explain why the “dirty dozen” would seek more revenue, but that certainly does not excuse their horribly ill-conceived plan.

It is clear that Super League clubs face tough financial challenges, but it’s largely their own fault. They have enjoyed substantial advantages over others, but decided to go for even more money, rather than address structural issues, their motto seemingly being “greed is good”.

The financial gap between the ESL clubs and others in their domestic leagues is already enormous. For example, average revenue for the “Big Three” in Spain of £467m is six times as much as others’ £73m, while it’s four times as much in Italy and “only” three times as much in England.

So how have the finances developed at the ESL clubs during the last 12 months? Given the impact of the COVID pandemic, you would expect that matters have not improved – and that is indeed the case. Even where things look better in 2021, this is largely due to technical reasons.

Covid related losses

Pre-tax losses for the 12 ESL clubs shot up in the last two years, adding up a to a horrific £2.2 bln. In this period, four clubs lost more than a quarter of a billion pounds (FC Barcelona £604m, Inter£297m, Juventus £256m and Milan £250m) and only one made a (tiny) profit.

Excluding profits on player sales (and interest payable), operating losses are enormous, amounting to £4.5 bln since 2012, including £2.8 bln in the last two years alone. COVID has obviously bitten hard here, but clubs have consistently lost money on their recurring business.

COVID has depressed the transfer market with profit on player sales for ESL clubs slumping to £348m in 2021, less than half £761m average over previous three years. This has also been a factor in the deteriorating bottom line, as player trading has often offset operating losses.

In the last five years some of the ESL members have generated very large profits from player sales, especially Juventus £488m and Chelsea £413m, while it has also been an important element for the three leading Spanish clubs: Real Madrid £361m, FC Barcelona £359m and Atleti £275m.

Nevertheless, revenue earned by ESL clubs is still very impressive Man City £571m, Real Madrid £567m and FC Barcelona £515m), followed by Man United £494m and Liverpool £487m.

Following years of growth, commercial revenue dropped £132m (6%) to £2.1 bln in 2021, due to lower merchandising and some sponsorship adjustments, though five clubs still generated more than £200m: Real Madrid £285m, Man City £273m, FC Barcelona £245m, Man United  £232m and Liverpool £211m.

Wages rise

Despite the pressures on revenue, wages at the ESL clubs continued to rise, up £247m (8%) in 2021 to £3.4 bln. The highest wage bills are in Spain and England: FC Barcelona £383m, Man City £355m, Chelsea £333m, Real Madrid £329m, Man United  £323m and Liverpool £314m.

The wages to turnover ratio has risen to 69% from 58% before the pandemic. This is not too bad, but there is a wide range among the 12 with Atleti 80% being the worst, followed by Inter 79% and Milan 78%. Tottenham Hotspur are at the other end of the spectrum with 57%.

The debt pile

Cost growth has been funded by £5.4 bln of financial debt (bank loans, owner loans, bonds). It might surprise some to see that the English clubs owe the most with Chelsea £1.5 bln, Spurs £854m and Man Utd £530m, followed by Real Madrid £515m and FC Barcelona £472m.

[I would add that many businesses outside football carry high debt burdens.  For example, I know that many farm businesses carry high debt loads in relation to turnover.  The key question is whether you can service the debt.  Many individuals have high debt loads in the form of mortgages].

However, many clubs have kept debt at similar levels with only a few seeing major growth. In the last five years the largest increases was at Spurs £729m (to fund new stadium) followed by Barca £451m, Real Madrid £439m and Chelsea £374m.

Some clubs have required substantial funding from their owners to cover losses with an average of half a billion over the last three years. The highest funding in the last decade came at Inter £834m, Milan £771m and Chelsea £701m. Almost all of Man City’s £684m funding came before 2016.