The Political Economy of Football V2

In football money often talks, i.e. success on the pitch is almost invariably reserved for clubs that have spent the most on wages and transfer fees. However, the authoritative Swiss Ramble considers might be interesting to see which clubs have performed the best (and indeed worst) relative to their budget. Looking at wages per point, the clubs with best value for money were Brighton £2.1m, West Ham £2.3m, Newcastle United £2.4m and Burnley £2.5m. Brentford are also likely to be one of the best even after their wages increased in the PL. In contrast,   Man United £5.6m, Everton £4.7m and Chelsea £4.5m by far the worst. Another way of ranking clubs’ performance is wages per league position.     On this basis, the same clubs do best: Brentford, Brighton, West Ham and Newcastle, though worth noting Tottenham Hostpur’s impressive performance in 5th place. The three relegated clubs look bad on this metric, but this also highlights underperformance by Leeds and particu...

The Swiss Ramble continues his analysis of the impact of Covid on the top six and also looks at three other Premier League clubs. Arsenal posted a huge £181m pre-tax loss, though this was inflated by interest payable including a once-off £32m refinancing fee, as around £200m external bonds were redeemed and replaced by a loan from Stan Kroenke. Net cash outflow of £148m was funded by reduction in cash balance. Chelsea’s enormous £294m operating loss was partially offset by £171m profit from player sales, but they still made £120m pre-tax loss. However, net cash outflow was restricted to £20m, mainly due to relatively low net player purchases plus £50m share capital from Roman Abramovich. Liverpool’s £114m operating loss was largely offset by £66m profit from player sales, so their pre-tax loss was “only” £51m. After spending £145m on net player purchases and £41m on infrastructure (training ground), the cash loss was mainly funded by £77m external loans. Manchester City’s signi...

The authoritative Swiss Ramble takes a look at how Covid affected football club finances. For the purpose of illustrating the effect of the pandemic, I have looked at the Big Six Premier League clubs, comparing the numbers for the last two sets of published accounts (2019/20 and 2020/21) with those reported for the preceding two seasons (2017/18 and 2018/19). All the Big Six lost money in the last two years with four clubs posting losses over £100m: Arsenal £181m, Tottenham Hotspur £148m, Chelsea £120m and Manchester City £120m. This was very different from the preceding 2 years when 5 clubs were profitable. The deterioration was quite significant, e.g. Liverpool £218m. The main reason that a football club fails is a problem with cash flow. It does not matter how large your revenue is (or your profits are), if you do not have the cash to pay your players, suppliers or indeed the taxman, then you will find yourself in trouble. The Big Six generated 5.3 bn revenue in last two yea...

The new owners of Chelsea are raising £800m of debt.   The financing arrangements consist of a roughly £300m revolving credit facility and a £500m term loan. The term loan would form part of the £1.75bn new owners commitment to Chelsea, while the revolving credit facility is for working capital. The club is not expected to bear any of the interest expense associated with the debt and all proceeds will go into the business.

Although long suffering Birmingham City fans have been heartened by the prospect of new owners, many uncertainties surround the completion of the deal. Birmingham Sports Holdings (BSH) has owned 75 per cent of the club since 2016, with a British Virgin Islands-registered company called Oriental Rainbow Investments owning 21.64 per cent. According to the official paperwork, BSH’s majority owner is a Chinese businessman named Paul Suen, while Oriental Rainbow’s beneficial owner is Vong Pech, a Chinese-Cambodian businessman. Very little is known about either of them, and neither has been seen much at St Andrew’s. The Athletic , however, understands that the Lopez and Richardson offer breaks down into an up-front payment of £25million to acquire the 21.64 per cent, full operational control of the club and Birmingham City Stadium Limited, the company that owns and operates the stadium.   The remaining payment will then come when BSH hands over its shares. Their most recent se...

Before going on a well-earned vacation, the authoritative Swiss Ramble reviews the finances of FC Barcelona. FC Barcelona have announced the signing of Rapinha from #LUFC for €58m, while a deal to acquire Robert Lewandowski from Bayern Munich for €50m is agreed in principle. The question is how can they possibly afford these players, given their well-documented financial problems? Even though Laporta claimed, “This will all take place under the criteria of financial sustainability and prudence”, it does feel like this approach of “short-term gain, long-term pain” means that Barca have learned precious few lessons from the mistakes of the past. Only last month president Joan Laporta compared the club to a patient who “was practically dead in financial terms”, while the vice-president for finance Eduard Romeu said that €500m was needed “to save the club”. This was not surprising, given the magnitude of thefinancial issues. Although things have moved on since the most recent accou...

The authoritative Swiss Ramble reviews the latest accounts of West Bromwich Albion. The club swung from £23m pre-tax loss to a small £0.1m profit, as revenue almost doubled from £54m to £107m following promotion to the Premier League, though profit on player sales fell £25m to £4m and operating expenses rose £4m (4%) in the top flight.   WBA were one of only five Premier League clubs to report a pre-tax profit in 2020/21. Before last season’s small surplus the Baggies had posted three consecutive losses, amounting to £37m. However, traditionally West Brom have been quite prudent financially, making money every season from 2010 to 2017. Indeed, they had the seventh highest profits in PL in last 10 years. Revenue Main driver of the£53m revenue increase was broadcasting, up £56m from £41m to £97m, due to the more lucrative Premier League TV deal, though commercial also grew £2m (21%) to £10m. This offset the COVID driven reduction in gate receipts, down £4.8m (98%) to just ...

Football finance guru Kieran Maguire has criticised West Bromwich Albion's handling of its finances after it was revealed that Gouchan Lai borrowed nearly £5m from the club which he has not paid back:  https://www.footballinsider247.com/west-brom-lambasted-by-kieran-maguire-after-appalling-reveal/

FC Barcelona has agreed to sell a 10 per cent stake in its media rights for a 25-year period to US investment group Sixth Street, in a deal that will deliver more than €200m to shore up the club's troubled finances.   The club may consider selling another 15 per cent later in the summer to bring the stake to 25 per cent. Barcelona's finances have been affected by a pile up of short-term debt obligations.  The club opted to sell its own media rights rather than take part in La Liga's deal with private equity group CVC Capital Partners. For Sixth Street, the deal comes after it agreed to a separate investment in Real Madrid.  The Boston-based fund will pay €360m to partner with Real Madrid on refurbishing the Bernabéu stadium and a live events package over a 20-year period. Barcelona has permission from the club's general assembly to sell 49 per cent of its merchandising and sponsorship business.

The authoritative Swiss Ramble analyses the 2020/21 accounts of Huddersfield Town. Since these accounts, it has been reported that former owner Dean Hoyle has almost completed a takeover of the club by acquiring the 75% controlling stake he sold to Phil Hodgkinson in 2019. As Hoyle had kept 25%, he would have full ownership if the deal is finalised.     Hodgkinson’s main company had been placed into administration in November 2021, so there was concern that this would cause problems for the club. The club swung from a £8.5m pre-tax loss to £2.6m profit, despite revenue falling £8m (16%) from £53m to £45m, exacerbated by decreases in profit on player sales (from £18m to £10m) and player loans (from £5.7m to £0.6m). This was thanks to a huge £33m (38%) cut in expenses. Huddersfield were one of only four clubs to post a pre-tax profit in the 2020/21 Championship, though their £2.6m was outpaced by two clubs relegated from the Premier League the prior season: Norwich ...