Championship is still a money pit

The Championship loss before tax has actually widened since fans returned to the stadium, rising from £217m in 2020/21 to £300m in 2022/23.

Looking at the last decade, it is clear that this division bleeds money with total losses of £2.6 bln, including £1.5 bln in last five years alone.  To highlight the overall deterioration, operating losses were £2.8 bln in the last five years, compared to “only” £1.9 bln in the preceding 5-year period. Put another way, this was equivalent to £4.7 bln in the last decade, which is not exactly small change.

Of course, many football clubs aim to offset operating losses with player trading, but there is little sign of any comfort here, as profits from player sales have fallen off a cliff in the Championship, decreasing from the record £322m in 2020/21 to just £113m in 2021/22 and £181m in 2022/23.

Only two Championship clubs made more than £20m from player sales in 2022/23, namely Watford £59m and Middlesbrough £22m, while no fewer than 15 clubs had a gain of less than £5m.

If we adjust for the effect of COVID, Championship revenue has basically been flat for the last seven years, after shooting up from £547m to £718m in 2016/17, mainly thanks to the new broadcasting deal.

Incredibly, the Championship has the fifth highest attendances in the world, only behind the Premier League, Bundesliga, La Liga and Serie A. Some will point out that it contains 24 clubs, while others have far fewer, but that is still a notable achievement.

Changing revenue sources

As is the case with the Premier League, commercial is becoming increasingly important in the Championship, rising by more than a third (£50m) from £145m to £195m in 2022/23.

This is a new record, surpassing the previous peak of £184m in 2018/19, which is particularly impressive, given that earlier years included commercial powerhouses, especially Leeds United, who have the three highest commercial revenues for a club in England’s second tier, including the incredible £34m in 2018/19.   To further illustrate the growth, commercial revenue is up 69% from just £115m in 2013/14, driven by new sponsorships, more retail sales, higher catering income and better use of the stadium for non-football events.

As a result, commercial had its highest ever share of total Championship revenue in 2022/23 with 27%, up from the previous season’s 23%. Broadcasting remained the most important revenue stream with 54%, though this was down from 59%, while match day slightly increased from 18% to 19%.

The movement in the last ten years is a story of match day’s share falling from 24% to 19%, offset by increases in both broadcasting, up from 51% to 54%, and commercial, up from 25% to 27%.

Championship wages fell £17m (2%) from £701m to £684m, continuing the steady downward trend from the £774m peak in 2017/18. That means that wages have decreased by £90m (12%) in five years.    The Championship wages to turnover ratio improved from 108% from 94% in 2022/23, which is the lowest since 2016/17. This ratio was consistently above 100% in the intervening five years, peaking at 125% in 2020/21, due to the revenue reduction arising from COVID.

Interest and febt

The Championship’s net interest payable increased by £10m (47%) from £23m to £33m. This was a new high for this division, overtaking the £25m two years ago.  However, this is still very low, as most debt is provided interest-free by owners. That said, three clubs had £6-7m in 2022/23, namely Watford, Burnley and Norwich City.

Gross financial debt in the Championship increased by 5% to £1.5 bln in 2023, though this was still lower than the record £1.7 bln two years ago, having steadily risen from £937m in 2018.  Six clubs owed more than £100m in 2023, while the 2021 peak was driven by especially high debt at Stoke City £212m, Bournemouth £165m and Blackburn Rovers £152m. 

However, Championship debt levels would have been more than twice as high if the owners had not converted £1.5 bln of their loans into equity and wrote-off £185m of debt in the last ten years.    Four clubs had owner debt over £100m in 2023: Middlesbrough £149m, Birmingham city £137m, Blackburn Rovers £123m and Stoke City £122m.  The highest amounts owed to third parties were Burnley £102m, Watford £64m, Sheffield United £53m and Norwich City £48m. These four clubs accounted for nearly three-quarters of the total.

The largest net spend on players in 2022/23 was Burnley with £62m, though their accounting close meant that this covered two summer transfer windows, while the highest net sales were at Watford with £65m.  However, these two clubs were very much outliers, as all the others were in a relatively narrow band of £8m net spend and £13m net sales. Basically, it looks like most clubs in the Championship try to break-even in their player trading.

The need for owners to put their hands in their pockets at Championship clubs is highlighted by them providing a hefty £3.1 bln of funding in the last 10 years, comprising £2.2 bln loans and £860m capital injections. The loans are then usually converted to equity at a later date.  This is not too far short of the £4.5 bln financing provided by Premier League owners in the same period, so anyone looking to acquire a Championship club as a potential cheap route to the top flight should take into consideration the need to cover ongoing losses.

There remains a significant gap between England’s two top tiers, e.g. the Premier League’s £6.1 bln revenue is more than eight times as much as the Championship’s £730m, so it is perhaps understandable that clubs spend big in an attempt to reach “the Promised Land”.

This “speculate to accumulate” approach has led to significant operating losses in the Championship, which is still very much the case, though there are some signs that clubs are being a little more responsible with transfer spend and wages.