The old joke that to make a small fortune you should start with a large fortune and invest in a football club is becoming even more true. At the top level you need to be either a billionaire or a private equity firm. The effects are trickling down to the lower reaches of the EFL and even to the non-league system. I support a non-league club and the chairman rang up one day and asked if I could oblige with a few k.
What has happened since the pandemic in terms of football
finances has been subjected to the usual authoritative and forensic analysis of
the Swiss Ramble from his Zurich lair.
It doesn’t make for comfortable festive reading but subscribe to his
Substack page to get the full sp. What
is clear is that the big six are pulling away from the rest and the finances of
the Championship are becoming even crazier,
More cash is coming in but more is going out. Alan Sugar once referred to the prune juice
effect and I got in trouble once for referring to it on Radio 5, but it
reflects an unfortunate truth.
In the five years since 2018/19 the loss before tax in the
Premier League has hardly changed, averaging £8m per club. However, this
disguises a steep decline in the Big Six, which swung from a £5m profit to a
£13m loss, while the loss at the other 14 clubs in the top flight narrowed from
£13m to £10m.
The pre-tax loss is even higher in the Championship – and
it’s getting worse, as this widened from £10m to £13m. The average is pretty
much the same for clubs receiving parachute payments and the other clubs, but
this has significantly worsened for those without parachutes.
Although losses are much smaller in the lower leagues, it is
striking how much they have increased in the last five years. In fact, they
have more than doubled in both League One, up from £2.0m to £4.3m, and League
Two, up from £0.5m to £1.2m.
In total, the operating loss at the Championship clubs
widened from £24m to £28m, though the increase was much more dramatic for the
parachute payment clubs, where the loss nearly doubled from £30m to £55m. This
can be partly attributed to the “price of success”, as it included hefty
promotion bonuses, after relegated clubs quickly bounced back to the Premier
League.
Operating losses in League One substantially increased from
an average of £2.9m to £6.8m, rising four years in a row. This was also the
case in League Two, where the operating loss climbed from £1.2m to £2.1m.
Of course, many football clubs aim to offset operating
losses with player trading, so there was some better news from the steep
increase in profit from player sales, exacerbated by more sales of Academy
products and more player swaps.
This was particularly the case in the Premier League, where
the average profit more than doubled from £22m to £57m. The Big Six shot up
from £32m to £81m, while the other 14 clubs also significantly increased from
£17m to £46m.
The Premier League has an unbeatable ability to generate
revenue, so the average rose £59m (23%) from £258m to £317m in the last five
years. However, the gap between the Big Six and the other 14 clubs widened, as
the elite cohort increased by £100m from £500m to £600m, while the rest “only”
grew by £42m from £154m to £196m.
The main driver of the Premier League’s revenue growth has
actually been commercial income, which increased on average by £35m (50%) from
£71m to £106m. This was due to new sponsorships, more retail sales, higher
catering income and clubs making better use of their stadia for non-football
events.
Average match day revenue in the Premier League has
increased by a third in the last five years, rising from £34m to £45m. Yet
again, the absolute growth is disproportionally larger in the Big Six, where
the average has shot up £23m (28%) from £82m to £105m.
he Premier League’s impressive revenue growth has been
consistently eaten up by increases in the cost base, so average wages rose £46m
(30%) in the last five years from £156m to £202m (though this was unchanged
from the previous season).
Of course, this hides the fact that the Big Six have
increased average wages by £66m (24%) from £276m to £342m, while the growth at
the other clubs was much smaller, only rising £39m (37%) from £104m to £143m.
Transfer spend has significantly increased in the Premier
League, rising by £63m (68%) from £93m to £156m on average. This was driven by
the Big Six, especially Chelsea, who were practically in a league of their own,
as this more than doubled from £136m to £287m.
The question we asked ourselves at the beginning of this
piece was whether profitability and sustainability regulations had improved the
finances of football clubs in England. This
is very clearly not the case, at least in the five years since 2018/19,
especially looking at how operating losses have widened, though the damage has
been limited by better results from player trading.
There has been good revenue growth, but this has been more
than offset by increases in the cost base, accompanied by higher borrowings,
both financial debt and transfer payables.
In addition, owners at the vast majority of clubs have had to regularly
provide funding, as seen by them contributing nearly £4 bln in the last six
years, either by writing-off loans or converting debt into equity.
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