State of the game report is no surprise

Football finance guru Kieran Maguire was asked on Radio 5 this morning if the interim State of the Game report issued by the independent football regulator was a surprise. He said that it was not and he had written a similar report for the Government in 2020.

As long as benefactor owners keeping turning up, do fragile finances matter. As Maguire pointed out, fewer clubs are going into administration than 20 years ago.

I cannot think of any other sector of the economy where the producers are largely those in existence 100 years ago, including most of the leaders. Given their importance to fan identity, mergers usually only occur at the non-league level.

It is one thing to identify the problem, another to come up with workable solutions. Meanwhile, faas and last night even players criticise owners for failing to 'invest'.

English football brings in over £9bn but IFR finds 94 per cent of clubs are loss making. Nearly two-thirds of EFL and National League clubs are technically insolvent and increasingly reliant on owners. More than a quarter of clubs would be unable to survive more than 30 days if owners pulled funding

The IFR’s draft State of the Game report has concluded English football’s finances are dangerously exposed, with the majority of clubs living on the edge of financial disaster. The report found that while interest and investment from around the world continues to grow, the underlying foundations of the pyramid are under intense strain and require urgent reform.

According to the IFR’s research 94 per cent of clubs are loss-making, with long term security being put at risk through excessive short-term spending to keep up with rivals. This has led to a dangerous cocktail of rising debt and an over-reliance on owner funding, leaving clubs and their fans at risk.

IFR Chair David Kogan said:

"At the heart of English football’s success is a massive contradiction. While some of our clubs are among the richest and most competitive in the world, others are standing on the edge of financial disaster.

"Skyrocketing revenues have been outpaced by costs which in turn have pushed up debt, loss-making and an over-reliance on owner funding.

"A significant number of clubs have told us they would not survive if their owners walked away. This lack of resilience can no longer be ignored.

"Anyone reading this report can be in no doubt about the need for intervention.”

The report sets out how English football has become the richest, best and most deeply competitive in the world, driven by the economic success of the Premier League.

But, at the same time, it highlights a growing contradiction in the game, as the financial cliff-edges between and within leagues have grown significantly. The average Premier League club now earns more than eight times the average Championship side, the report found.

The existing system of parachute payments paid by the Premier League to Championship clubs relegated from the top division contributes to the incentives for Championship clubs to overspend. This in turn drives up player wage inflation, leading to those teams taking even bigger risks to chase the dream of a place in the Premier League.

Beyond player costs, the IFR report found that lower down the pyramid the pressure from operating costs was also on the rise, with 17 EFL and National League clubs incurring costs exceeding revenues. These clubs would be loss making even if they didn’t pay their players.

The report found that more than 60 per cent of EFL and National League clubs are technically insolvent with their liabilities exceeding the book value of their assets. More than a quarter of clubs would be unable to survive for more than one month if owner funding was withdrawn, with the majority lacking a basic contingency plan to mitigate their risk.

Taken together the findings of the State of the Game report should serve as a wakeup call for English football.

As part of the report, the IFR is announcing today a six-point plan to address some of the issues it has identified and deliver on its mission to improve the financial sustainability of clubs and resilience of the whole of the pyramid in the long-term interests of fans.

The plan includes measures for clubs to improve how they manage financial risk, including holding more cash and putting robust contingency plans in place in case owner funding is withdrawn.

It also outlines how revenue distribution should be reformed to ease cliff-edges throughout the pyramid, urges action on rising losses and calls on clubs to show how they take fans’ views into account, and the steps they are taking to improve diversity and governance in the boardroom

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The Political Economy of Football V2

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