Did ambitious overreach undermine Leicester?

Usually, when a club is relegated, its fans can point to a lack of ambition or interest from their owners and management. The opposite is true at Leicester.

They have aspired to challenge the “Big Six”, disrupt the established elite of English football, and eventually close the gap and claim a seat alongside them at the top table. By and large, they have done that. They have claimed two top-five finishes and became one of only seven clubs to actually lift the Premier League trophy.

Now they are the second former champions to be relegated after Blackburn Rovers in 1998-99 and one of the most expensively assembled squads ever to drop through the trap door. 

Leicester have always been an ambitious club under the ownership of King Power and the Srivaddhanaprabha family. They have invested heavily in the club, and continue to do so, but in recent years, that has accelerated.

The overreach is shown by the increased expenditure on contracts for new and existing players, taking the wage bill up to the seventh-highest in the league. That expenditure includes Brendan Rodgers, who they made the highest-paid manager in the club’s history.

There has been huge expenditure on the new training ground at Seagrave and the King Power Stadium project, with loans secured against future Premier League television money to pay for them. That money will no longer arrive in the same volume but the bills still have to be paid.

To obtain regular European football and the extra revenue that offers, you have to increase expenditure, but without guaranteed extra revenue, how can you afford the extra expenditure? There is no wriggle room for failure.

Leicester became overstretched and had to pump the breaks on their expenditure, mainly with one eye on UEFA’s new financial sustainability regulations, which their 85 per cent expenditure-to-revenue ratio wouldn’t meet. They were already on UEFA’s Watch List.

The owners are committed to preserving the late-chairman Khun Vichai’s vision for Leicester, despite this huge setback.  They plan to push on with the development of the East Stand and the surrounding area to boost the club’s matchday revenue. King Power will also continue to provide financial support, covering the club’s operations through a loan facility the club can draw upon if required.

The budget for Leicester’s playing squad will have to be dramatically cut down as profit and sustainability rules in the Championship allow only £39m losses over three years rather than the £105m in the Premier League, although top-flight losses will be factored into the calculations if Leicester remain in the Championship over the next three years.

Relegation clauses in players’ contracts will help reduce the expenditure as some will have to take pay cuts, while others could leave if release clauses are triggered by other clubs, ensuring Leicester don’t carry too many big wage earners in the Championship.

However, Leicester are still likely to have the biggest budget in the division next season. Their expenditure will be dictated by the amount raised through sales but there will be money made available to spend to get back into the Premier League.