The Political Economy of Football V2

Arsenal made a loss of £52m in 2022/23, up from £45m the previous year.  Football finance guru Kieran Maguire dissects the consequences but emphasises that the Gooners are in no danger of financial fair play snactions:  https://inews.co.uk/sport/football/arsenal-52m-loss-ffp-transfers-smith-rowe-2930209

Football finance guru Kieran Maguire reports ' To get to the "promised land"of the EFL cost Sutton United £477k, in their first season in League Two they lost £278k and in their second season they decided to become less transparent & not publish an income statement but lost a further £950k.' They are at risk of relegation. I have nothing against Sutton United, but I wonder how much room there is for another London club in the EFL. But then it's possible that Bromley or Barnet could come up this season (although Barnet have had a setback over permission for a new ground close to their old one).

The Premier League will hold face-to-face talks with 777 Partners as part of the final decision-making process in Everton’s proposed takeover. An agreement to meet has been struck between the league and the Miami-based group, who have been waiting for approval since last September to purchase Farhad Moshiri’s 94 per cent stake in Everton. The discussions come a fortnight after the league, as part of its owners’ and directors’ test, asked 777 to submit further information about the company’s source of funding and its ability to fund the club over a three-year period. Much of the focus in recent days has fallen on Everton’s Profitability and Sustainability issues, with the club having a ten-point penalty reduced to six after an appeal. A second charge relating to a breach of Premier League spending rules remains outstanding, with a hearing set to take place in the coming weeks. However, clarity on the ownership of Everton is also crucial, with 777 having so far loan...

Reading have been deducted another two points and their owner Mr Dai faces a six figure fine:  https://www.efl.com/news/2024/february/27/efl-statement-reading-fc-and-mr-dai-yongge/ Nevertheless, there are limits to what the EFL can do on behalf of fans which is why a regulator with powers to deal with rogue owners is needed.

Don’t imagine that American globalisers and fans of some form of super league have gone away or given up the chance of remoulding European football, even if fans in the Bundesliga have fought back successfully. European football needs more matches with drama and competitive tension to keep fans interested and attract new audiences to the sport, according to the chief of the US investment group that has backed top Spanish clubs Real Madrid and FC Barcelona. Alan Waxman, a former Goldman Sachs partner and co-founder of Sixth Street, which manages more than $75bn in assets, said the sport needed to innovate in order to appeal to a wider audience. “There are more and more forms of entertainment that people, especially younger demographics, can consume,” he told the Financial Times .   “If you don’t create more drama . . . you can start to lose the core and once that starts, it’s hard to get people back in. That’s why the best businesses innovate before that happens,” he assured the...

Everton's point deduction has been reduced from ten to six points, but the second charge of breaching financial regulations remains in place:  https://www.theguardian.com/football/2024/feb/26/everton-boosted-after-premier-league-deduction-reduced-from-10-to-six-points Fans remain unhappy with the process and the outcome, although they move up to 15th in the Premier League:  https://www.bbc.co.uk/sport/football/teams/everton

The class of '92 club, Salford City, are looking for new investment to fund their ambition to become a Championship club:  https://www.bbc.co.uk/sport/football/68401320   As Macbeth says in the Scottish Play: ' I have no spur to prick the sides of my intent, but only vaulting ambition, which o'erleaps itself and falls on th' other..' It seems to me that this project has never quite taken off in the way that was hoped while Manchester United is now getting a reboot after years of disillusionment for fans.

QPR moved out of the relegation places at the weekend, but there was real sadness at the passing of their legendary player Stan Bowles.   Sincere condolences to everyone who knew him, he was a true bright light in football. QPR’s pre-tax loss reduced from £24.7m to £20.3m, as revenue rose £1.2m (5%) from £22.1m to £23.3m and profit from player sales increased from £0.2m to £1.0m. The main reason for the revenue growth was commercial, which increased £1.4m (19%) from £7.3m to £8.7m, while gate receipts were slightly up, rising £0.1m (2%) to £5.7m. However, broadcasting fell £0.3m (4%) to £8.8m. QPR’s £20.3m loss is still one of the worst of the nine clubs that have published 2022/23 accounts to date, only surpassed by Norwich City £27.2m and Bristol City £22.2m. That said, very few clubs manage to make money in this very challenging division with only Watford in the black so far last season. Although QPR increased their profit from player sales from £0.2m to £1.0m, this w...

A last minute Liverpool goal saw Chelsea go down 1-0 in the League Cup final to boost Jurgen Klopp’s farewell tour.  Cheap shots have been aimed at the club overnight such as ‘billion dollar bottlers’.   But could they have a strategy that will deliver in the medium term? Chelsea’s modelling based on underlying performance factors suggests they should be fifth in the Premier League, rather than tenth, a thesis backed up by similar projections at rival clubs and viewed internally as being good progress, given Chelsea finished 12th last season and have the top flight’s second-youngest squad.    Of course, in the meantime, it is the table that matters. Perceptions of the Americans have been negative since their £4.25 billion takeover of Chelsea in May 2022. First impressions are at the root. Boehly installed himself as interim sporting director and oversaw two hyperactive transfer windows, where a net £470 million was lavished on players as diverse as the veter...

I have nothing in particular against Manchester United, my response would be the same in relation any top club  (I support a League One team and a third tier non-league outfit]. I don’t think taxpayer money should be used to build or rebuild stadiums. I pay a substantial five figure sum in tax each year and I would be happy for some of it to go to grass roots sports, particularly to help youngsters to enjoy football and other sports. While much of Sir Jim Ratcliffe’s round of media interviews on Wednesday, after his acquisition of 27.7 per cent of Manchester United was finally confirmed, may have excited United fans, there were more than a few elements that caused surprise. Among lines about “knocking Manchester City and Liverpool off their perch” and nice stories about chumming around with Sir Alex Ferguson, his comments on women’s team made them sound like an afterthought, merely offering that “if it’s a team wearing a Manchester United ba...

The owner of King's Lynn muses on the financial challenges of competing in the National League, bearing in mind the recent collapse of Torquay Unitted and the roubles at Rochdale:  https://www.edp24.co.uk/sport/24139819.kings-lynn-owner-finances-fans-sports-minister/ The problem is that it's not really the job of government, i.e., the taxpayer, to bail out failing football clubs nor will the regulator be able to do that.

Newly-minted United shareholder Sir Jim Ratcliffe finally broke cover this week to outline his vision for the club after buying a minority stake. In an hour-long meeting with journalists, including Scoreboard, in London he talked through the bidding process that resulted in his $1.65bn investment, his immediate priorities, and his long-term aspirations. First on the agenda, fix the club’s shoddy recruitment strategy. United have spent big under the Glazers, but expensive signings have often disappointed. To do that, Ratcliffe wants to bring in top executives, and upgrade the club’s often-criticised culture. New chief executive Omar Berrada was the first in what will be a series of big hires. “We need to populate all the key roles with people who are best in class, 10 out of 10s”, said the chemicals billionaire. The message was that United’s off-field success as a commercial entity needs to be matched by challenging for trophies. “This is going to be a very sports-led club. It’s a...

Last Thursday, West Bromwich Albion announced that Florida-based businessman Shilen Patel has agreed to buy them from current owner Guochuan Lai. This news was joyfully greeted by the Championship club’s fans as Lai’s clueless spell in charge has seen two relegations, albeit with one promotion in between, and a massive deterioration in the club’s finances. So much so that a once well-run club was heading towards bankruptcy. Perhaps the best evidence of this narrowly avoided crash can be seen in the return on investment Lai is getting. The Chinese businessman paid about £200million for what was a Premier League club in 2016. Patel is paying him only £10m guaranteed – £2.5m on completion, £2.5m in August and £5.5m in August 2025. There is the possibility of bonus payments if West Brom are promoted. Go up this season, and they are currently fifth, and Patel will pay Lai an extra £18m. Promotion next season would trigger a £10m payment, £5m the following sea...

Rochdale is having a pantomime by-election while its football club faces going out of business. Liquidation s the fate Rochdale face, according to their board, if the club’s 650 small shareholders do not vote the club out of fan ownership by agreeing to issue nine million new shares at an extraordinary general meeting on March 7. These new shares, 90 per cent of the club, will be available to purchase by a new owner for 22p each, which would immediately put £2m into the club. The club’s current directors took over in June 2021, picking up the pieces after Rochdale were relegated from League One. With their finances already stretched by the pandemic, the board was immediately forced to defend Rochdale from a hostile takeover. They won that war but were relegated from League Two last season, ending a 102-year stay in the EFL. But Rochdale are not a basket case. Their debts total about £1m and most of that is to the chairman. They also own their stadium, which is w...

Former Football League club Torquay United are to be placed into administration as their owner can no longer fund the club:  https://torquayunited.com/club-statement-12/ The statement says:  ' The financing of football in this country is precarious and can only thrive in the lower divisions where there is either a close collaborative relationship with the local authority, it is a trophy asset or is backed by substantial local individuals and businesses. I believe that it needs a fundamental overhaul of its financing structure, rights distribution in the lower leagues and recognition that many clubs represent a fundamental part of the local community and its visitor attractions. Ambitious Clubs should in my opinion be given special status in their push to bring in investment, develop facilities, bring spend and employment to the local economy.' Osborne has made several mistakes since taking charge in 2016, but he has lent the club £5m to keep them afloat. He is unlikely to get ...

Matthew Benham has appointed Rothschild to oversee the potential sale of Brentford in a deal that is expected to value the Premier League club at about £500 million. Insiders insist that Benham, the British businessman credited with the transformation of the club since taking control in 2012, would ideally like to remain the majority owner while attracting fresh investment.  But that position could change if Rothschild finds an appropriate buyer, with Sky News reporting that Benham, 55, would then agree to relinquish control and seek to remain involved as a minority shareholder. Rothschild is expected to launch the process imminently, with interest likely to come from US investors attracted by the chance to gain a relatively inexpensive foothold in the Premier League, compared with clubs such as Chelsea and Manchester United, not to mention a smart new stadium. A Brentford spokesperson said: “Given the recent rise and growth of our club and the changing shareholder lands...

Sir Jim Ratcliffe says he wants Manchester United to fight for Premier League titles within three years, as he laid out his vision to rebuild one of the world’s most popular football teams. Speaking to journalists at Ineos’s headquarters in west London on Wednesday, the British chemicals billionaire called for “patience” from fans and warned that transforming the club would take time. However, he acknowledged that supporters had already endured more than a decade of “complete misery”. “It’s not a light switch, it’s not one of these things that changes overnight,” said Ratcliffe, who completed a deal to buy 27 per cent of the club on Tuesday. “The fans would run out of patience if it was a 10-year plan, but it’s certainly a three-year plan to get there.” The 71-year-old has set his sights on winning the Premier League and the Champions League, and knocking local rivals Liverpool and Manchester City “off their perch”. To achieve those goals, the top priority in the short term was imp...

The German football league (the Bundesliga) has called off talks over a potential investment from private equity after mass protests from fans, the third time it has failed in its efforts to bring in outside capital.    This means Germany has kept to its Sonderweg. The notion of a Verein or association is deeply embedded in German culture and it is possible to characterise Germany as an ‘associative state’.   Leaving aside a couple of company owned teams such as Bayer Leverkusen, football clubs in Germany were Eintrager Verein   (e.V.) or member associations.    In 1998 the German football association adopted the 50+1 rule which has been much admired by reformers in Britain.   This allows the club to become a commercially run entity (such as a limited liability company) and distribute profits to its investors. At the same time 50 per cent plus one of the voting shares must remain in the hands of the e.V., so that ultimately the members’ associ...

It is a general characteristic of public policy debate in Britain to see Germany as an example from which lessons can be drawn.   This is understandable given the success of the German economy and the way in which, for example, developed systems of training that have produced high levels of skill. Modell Deutschland had to deal with the challenges of unification, Europeanisation and the Eurozone crisis, unprecedented levels of immigration by refugees, globalisation and the rise of far right parties and at times it has looked fragile.  Nevertheless, it has largely survived and Germany was widely praised for its response to Covid-19 while the German economy and German soccer made a relatively rapid recovery which has now subsided whilst the traffic light coalition government is seen as divided and weak. Replicating the 50+1 rule in England (confining outside investors to a minority stake in most clubs) attracts considerable support, but its translation to a different envi...

Now that Sir Jim Ratcliffe’s stake in Manchester United is finally confirmed it is clear that he is going to be an active investor giving the club a much needed renewed sense of purpose and direction. All of Ratcliffe’s businesses, including a fleet of tankers that ferry natural gas across the Atlantic, indicate that he is willing to commit large sums of capital to produce long-term returns rather than to turn a quick penny. By Ineos’ standards Manchester United is a small business, but no one in Ratcliffe’s circle is under any illusion about the time required to restore the club to its glory days. The brutal history of the union battles he eventually won after purchasing the Grangemouth refineries from BP in 2005 show that he is no stranger to adversity. Given Ratcliffe’s penchant for frugality in his business pursuits, he must be eyeing United’s transfer record, wage bill and overall headcount with a quizzical eye.   Everything about Ratcliffe suggests he will operate with ...

Watford have had 13 coaches in five seasons, unless I’ve lost count, which doesn’t exactly inspire confidence in the club’s executive leadership. Watford swung from a pre-tax £16m loss to a £24m profit in 2022/23, despite revenue dropping by £62m (48%) from £128m to £66m following relegation to the Championship. Operationally, this was largely offset by the club cutting expenses by £58m (38%) from £152m to £94m, but another big reason for the improvement in the bottom line was a significant increase in profit on player sales from £15m to £59m. Excluding player trading, Watford still made a substantial £28m operating loss, which was actually £4m worse than the previous season. The main driver of Watford’s £62m revenue decrease was broadcasting, which nearly halved in the Championship, falling £37m from £85m to £48m. Commercial income was also slashed by £26m (71%) from £36m to £10m.   However, match day was flat at £6.8m, while player loans actually increased from £0.5m to £...

Josh Wander, the co-founder of 777 Partners, was at Goodison Park on Monday to watch Everton’s match against Crystal Palace as more concerns emerged over the proposed takeover of the club by the American investment company. 777 Re, the Bermuda-based reinsurance arm of the company, has had its credit rating downgraded for the second time in three months. It comes after The Times revealed last week that the Premier League had asked 777 to provide further information on how it intends to fund Everton for the next three years should its takeover proceed. Sources close to 777 insist that the action by the respected credit ratings agency AM Best has no effect on the company’s footballing operations, nor the takeover of Everton. The takeover is still being scrutinised by the Premier League nearly six months after it was launched, which appears to suggest the league has some serious misgivings. As well as Wander, 777’s sporting director Johannes Spors, chief of st...

‘You can’t win anything with kids is one of the most infamous statements in English football:  https://www.goal.com/en-gb/news/you-cant-win-anything-with-kids-alan-hansen-infamous-man-utd-rant-aftermath/1gn0os7ix8fp418q3pequhf9j0 Can Sunderland show that relying on youth is the way to secure promotion?   It is interesting that a booster article came out in the Financial Times on the day that they sacked unpopular coach Michael Beale after 12 games:  https://www.bbc.co.uk/sport/football/68340952 Sunderland are now 10th in the Championship after recent defeats by Huddersfield and Birmingham.  At 26, Kyril Louis-Dreyfus is the youngest person ever to own an English football club. So it seems fitting that this scion of the agricultural trading dynasty is betting on youth to bring Sunderland back to the promised land of the Premier League.  “My family’s been around sports for a very long time,” he told the Financial Times . His late father Robert once owne...

Brentford once again posted a pre-tax profit, though this fell from £30m to £9m, despite revenue rising £26m (18%) from £141m to a club record £167m. Profit from player sales also rose £1.0m from £4.6m to £5.6m.   However, this growth was offset by operating expenses shooting up £49m (42%) from £117m to £166m, while net interest swung from £0.2m receivable to £0.8m payable. The main driver of Brentford’s £26m revenue increase was broadcasting, which rose £20m (18%) from £115m to £135m, though there was also good growth in commercial, up £4m (29%) from £16m to £20m, and match day, up £1m (8%) from £10m to £11m. Despite the reduction, Brentford’s £9m pre-tax profit is the second best financial performance to date in the Premier League in 2022/23, only surpassed by Manchester City’s huge £80m surplus.   This is clearly another very impressive performance, as the other clubs that have so far published accounts for last season all lost money: Newcastle United £73m, Manches...

Nottingham Forest have confounded the prophets of doom on the pitch, as shown by yesterday’s win over West Ham, but updating their stadium and training ground is a more complicated and challenging story. Inside the office of Tom Cartledge, Nottingham Forest’s chairman, there is a collection of closely guarded designs showing how, one day, he sees the new-look City Ground. He calls it the “master plan” and, for those aware of the long and complex history, it is the first glimpse into a brave new world.  That is said with a measure of restraint when, even now, there are still obstacles to negotiate. It is one of the reasons why Evangelos Marinakis, the club’s owner, appointed Cartledge in August: to navigate through the issues, to help create something exciting and long-lasting and, ultimately, change the skyline on their stretch of the River Trent. Work has started Take a walk across Trent Bridge and, if you look across the water, you will see that work is underway. One...

Kylan Mbappé has told PSG he will leave in the summer, probably for Real Madrid. His looming departure comes at a critical time for PSG, which was valued at more than €4bn when US investment firm Arctos Partners agreed to buy up to 12.5 per cent of the club late last year. It is also seeking a new home stadium after failing to convince Anne Hidalgo, the mayor of Paris, to sell it the Parc des Princes, which it rents from Paris City Council. His departure will also be a blow to Ligue 1, by potentially denting the value of broadcast rights for France’s top football league just as negotiations are under way for the 2024 to 2029 period. Private equity firm CVC invested in a newly formed commercial unit in 2022 to market the broadcast rights. French clubs have struggled to keep pace with their rivals in terms of finances. Clubs in Ligue 1 generated total revenues of more than €2bn in 2021-22, according to consultancy Deloitte, well behind the €6.4bn made by Premier League clubs in Bri...

Brentford FC has achieved a record turnover of £166.5m, showcasing their financial stability in English football. The club emphasizes player retention and revenue growth to ensure long-term sustainability. In the ever-evolving landscape of English football, Brentford FC has emerged as a beacon of financial stability and growth. The West London club announced their financial results for the year ending June 2023, recording a club-record turnover of £166.5m, an operating profit before player trading of £4.4m, and a profit before taxation of £9.2m. Under the stewardship of owner Matthew Benham, Brentford FC has consistently demonstrated a shrewd approach to financial management. The club's latest financial results reveal a mix of player sales and contingent triggers in contracts, with a clear emphasis on retaining players and investing in the squad. The Gtech Community Stadium, the club's home ground, underwent a revaluation, resulting in an increase in asset value of £27.0m...

The takeover of West Bromwich Albion by Florida-based businessman Shilen Patel is a step closer after the Championship club’s current owner Guochuan Lai agreed a deal to repay a loan he secured on shares in West Brom’s parent company. Lai borrowed £2million from a company controlled by local entrepreneur Alex Hearn in 2021. Repayment was scheduled for last week but the Chinese businessman failed to settle the debt, which meant Hearn was entitled to claim at least 2.35 per cent of West Bromwich Albion Holdings. The outstanding amount had already grown to more than £4million and a default interest rate had just kicked in, which had the potential to see the debt grow quickly, potentially giving Hearn the right to claim a larger stake in the club. As a result, he had been in talks about joining Cheshire-based lawyer Chris Farnell’s bid for the club as a minority partner.   However, with the Patel bid now in the lead, Hearn has decided to let Lai repay him in three instalments over...