Blues have the ambition, but also the investment and a plan

The huge outlay in the transfer market last summer ny Birmingham City was quite striking, as they really did splash the cash following relegation, as they tried to boost their chances of an immediate return to the Championship.  The accounts noted that Birmingham had £21m net spend in 2024/25, which was a pretty clear statement of intent from the owners.

To further illustrate their lofty ambitions for the club, their £25m gross spend was more than all the other clubs in League One put together (according to Transfermarkt).

The catalyst for the club’s improved outlook is the change in ownership in July 2023, when Tom Wagner’s Knighthead Capital Management took over from the deeply unpopular Birmingham Sports Holdings Ltd (BSHL).

This was greeted with delight (and some relief) by Blues fans, who had suffered many trials and tribulations ever since Carson Yeung took full control of the club in 2009. After being arrested on charges of money laundering, the Hong Kong businessman resigned, but the club remained in the hands of Chinese owners.

The new owners also brought on board Tom Brady, the legendary NFL quarterback, though his investment is not too large, given that minority investors only hold a negligible 2.3% of the club in total.

The club described the 2023/24 season as “a transitional year for the football club”, which was a fairly kind way of describing Birmingham’s relegation to the third tier for the first time in nearly three decades.

The club went through four permanent managers, having first taken the decision to dismiss John Eustace, even though he had guided the Blues into the play-off positions (and saved the club from relegation in 2022/23).

Birmingham’s pre-tax loss reduced from £25.3m to £16.1m, which the club said represented a “significant decrease” of 36%.  Revenue rose £9.9m (50%) from £19.7m to £29.6m, while profit from player sales shot up from £2.1m to £15.4m, but this was partially offset by a £12.7m (27%) rise in operating expenses from £47.0m to £59.7m with net interest payable more than doubling from £1.0m to £2.3m.

The main driver of the revenue increase was commercial, which virtually doubled from £7.0m to £13.8m, though there was also decent growth in match receipts, up £2.4m (64%) from £3.7m to £6.1m. Broadcasting also rose £0.6m (6%) from £9.1m to £9.7m.

Birmingham’s bottom line was boosted by a significant increase in profit from player sales, which were up from £2.1m to £15.4m.

Birmingham have traditionally not made much money from player trading, though they have generated £59m in the last five years. This included £26.5m in 2020/21 (Jude Bellingham to Borussia Dortmund) and £11.5m in 2019/20 (Che Adams to Southampton).This season will be smaller, though it does include the sales of Jordan James to Rennes, Koji Miyoshi to Bochum, Siriki Dembélé to Oxford United and Juninho Bacuna to Al-Wehda.

Birmingham have consistently lost money, only reporting a profit once in the last ten years – and that was just £1.3m back in 2014/15. Since then, the club has accumulated £158m of losses, with the worst result being a £37.4m deficit in 2017/18.

The losses would have been even higher without the club booking £17m profit from the sale of the St Andrew’s stadium (£23m proceeds less £6m book value) in 2018/19, when Birmingham used some fancy financial footwork in order to try to meet FFP targets.

Birmingham’s revenue has been turbocharged by the arrival of the new owners, so last season’s £29.6m revenue was £6.3m (27%) more than the £23.3m generated before the pandemic struck.

Normally, a club’s revenue would reduce following relegation from the Championship to League One, but whispers suggest that Birmingham still earned an impressive £25-30m last season. This would be one of the highest ever in the third tier, but still less than Sunderland’s £59m in 2018/19, which included a hefty parachute payment after two consecutive relegations.

Wagner is keen to ensure that Birmingham will be able to compete without one hand tied behind the back by growing the club’s revenue, “Parachute payment clubs have a roughly one-in-four chance of getting promoted. Non-parachute clubs have a one in 16 chance. So if we can achieve parachute level revenues, we’re four times more likely to get promoted.”

Birmingham’s match day income increased by £2.4m (64%) from £3.7m to £6.1m, which was the highest since 2011/12, driven by the re-opening of the lower tiers in both the Tilton Road stand and the Kop stand.

As a result of the stadium refurbishment, Birmingham’s average attendance in 2023/24 increased from 16,758 to 21,180, the club’s second highest in the Championship.

This further improved in the triumphant League One season to 26,283, which was even more than the 25,567 crowds that they attracted the last time that they were in the Premier League in 2010/11.  Birmingham’s 26,283 attendance last season was the highest in League One by some distance, comfortably ahead of Bolton Wanderers 21,325, Huddersfield Town 18,817 and Charlton Athletic 15,255.

New stadium

The club has a grand vision after acquiring a 48-acre site, which was formerly used as a go-karting track at Birmingham Wheels, followed by another 12 acres of land adjacent to the Wheels site.  The plan is to develop a “vibrant” Sports Quarter, which would be home to a world-class, multi-use stadium and training facilities for all Birmingham City teams, plus extensive commercial and community facilities.

This is a long-term project with Birmingham unlikely to move to the Wheels site before the 2029/30 season. It will also be very expensive with the cost estimated as £2-3 bln, though the new stadium would deliver much higher revenue through more corporate seats and better hospitality options. The stadium will have a capacity of 62,000, making it the largest in the Midlands, while placing it in the top ten in England.

As with all such projects, the surrounding infrastructure will be critical, so Wagner has met with Rachel Reeves, the Chancellor, to discuss the government funding the upgrade of transport links at a cost of up to £300m.

The new owners have already delivered the largest commercial deal in the club’s history with naming rights for all its major sites. As a result, the stadium has been renamed St. Andrew’s @ Knighthead Park, while the training ground is now known as The Knighthead Training and Academy Grounds.

Wages

Birmingham’s wage bill rose £6.9m (28%) from £28.9m to £35.8m, the highest since £38.6m in 2017/18, thus reversing a trend where this had fallen three years in a row. This presumably included the cost of all the changes in management.

Comparing wages with the final league position, Birmingham were the worst performers in the Championship last season. Adjusting for promotion bonuses, Blues were ranked sixth in wages, while they finished a lowly 22nd in the league, so they under-performed by 16 places.

Birmingham are likely to have had the highest wage bill by far in League One, possibly as much as double their nearest rivals. Although many high earners left last summer, the new recruits would have been persuaded to sign by relatively high salaries, while the club would have paid a sizeable promotion bonus.

Birmingham’s other expenses rose £3.5m (26%) from £13.4m to £16.9m, the club’s highest ever, partly due to the impact of inflation on various services, especially utilities. This cost category is often ignored, but has shot up £7.3m (76%) in just two years.

Until Wagner arrived, Birmingham had really slammed the brakes on their transfer spending with an outlay of only £10m in the three seasons up to 2022/23.

Birmingham’s owners have provided £210m funding in the last decade, including £107m in the last three seasons alone, which is big money by almost anyone’s standards.   In fact, only two clubs in the Championship received more money from their owners in the last three years than Birmingham, namely Leeds United £180m and Leicester City £129m – and they needed more funding for much of this period to cover the greater requirements in the Premier League.

Although relegation is rarely a good thing, it did have a silver lining for Birmingham, as it has allowed the club to go through an impressive transformation.   There is no doubting Wagner’s ambition, which is ultimately to take the club back to the Premier League. The new ownership group has certainly put its money where its mouth is, investing significant sums to bring the stadium up to scratch with the promise of very substantial sums being spent on the visionary Sports Quarter development.

Manager Chris Davies put it very well, “Some supporters here have been through a lot of suffering. For them to see the team playing, winning, dominating games, has been welcome from where the club has been at.”  He added, “One of the big attractions for me when coming to the club was the ambition, but also the investment behind it and having a clear plan on how to get there. It's an exciting time to be here.”

That is undoubtedly true, though they are likely to face a more daunting challenge in the Championship, which is one of the most competitive leagues in the world.