The Political Economy of Football V2

Although things have taken a turn for the worse on the pitch, Luton Town’s finances look in pretty good shape. This was referenced by chief executive Gary Sweet after the double relegation, “The backdrop of our custodianship of the football club is financial stability. It’s an absolute cornerstone. The club was unstable, it’s more stable now than it probably ever has been financially and structurally.” The club’s sustainable approach resulted in limited expenditure on the squad after promotion to the top flight. Instead, the club invested much of their windfall gains in building a new stadium. While such investment will be beneficial to Luton’s long-term prospects, it is clear that this strategy had an adverse impact on their ability to compete in the Premier League.   Indeed, the directors admitted that they had probably under-spent in the transfer market, especially in the January window, as they attempted to stay up: “In hindsight the club might have reinforced more.” It...

Luton was a club which had fallen out of the Football League entirely in 2009 following a 30-point deduction imposed by the English Football Association due to financial irregularities. A fan-led consortium saved the club from administration but there was no way of preventing Luton dropping into non-League. It took five years for Luton to win back their League status but once they did, they became turbo-charged, winning four promotions in nine years, culminating in that remarkable win against Coventry with a squad that cost just £11.9million to assemble – a pittance in Premier League terms when you consider during summer 2023 £2.36 billion  was spent on player recruitment. Luton were literally not equipped to deal with the Premier League: they had to spend £10m improving their beloved but dilapidated Kenilworth Road stadium, a ground so embedded in the heart of the community that the entrance to one stand is physically connected to a row of terraced houses. Around £20m w...

Luton Town's one season in the Premier League paid off for them financially as they reported record turnover and profits:  https://www.lutontoday.co.uk/sport/football/luton-town/premier-league-promotion-sees-luton-town-announce-record-turnover-and-profits  

Luton’s success on the pitch was achieved on a very low budget. In 2022/23 their pre-tax loss widened from £6.4m to £16.3m, largely due to a hefty promotion bonus, which drove a £14.3m (57%) increase in operating expenses. On the other hand, revenue rose £0.7m (4%) from £17.7m to £18.4m, while profit from player sales (and manager compensation) was up £3.6m from just £1.1m to £4.7m. The main reason for Luton’s revenue growth was commercial, which rose £0.9 (40%) from £2.3m to £3.2m. Match day was slightly up by £0.2m (4%) to £5.1m, but broadcasting dipped a little, falling £0.3m (3%) to £10.1m. Luton’s profit from player trading “and other related income” virtually quadrupled from £1.1m to £4.7m, though the increase was mainly due to compensation received following the departure of Nathan Jones and his coaching staff to Southampton. Luton have only posted a profit twice in the last decade, £0.6m in 2017/18 and £3.4m in 2019/20, but they have managed to restrict their losses ove...

According to Deloitte Sports Business Group, reaching the top flight via the Championship play-off final in 2022-23 will earn the winner an increase in revenue of at least £170million across the next three seasons. This figure could rise to more than £290m if the club avoids relegation after their first season in the Premier League. Deloitte, the accounting firm, estimates one season in the Premier League will bring additional revenues of at least £90m. Add on two years of guaranteed parachute payments (the extra financial support that the Premier League gives to relegated clubs), worth close to £80m, and the play-off final will likely yield approximately £170m across three years to its winners, even if their stay in the top flight only lasts 12 months. Brentford, who secured a 13th place finish during their debut Premier League season, secured merit payments of close to £15m in 2021-22. Avoiding relegation in their first season also secured a third year of parachute paymen...

Here is a financial comparison of the two clubs competing in the 2022/23 EFL Championship play-off final, Coventry City and Luton Town.    On paper, the two clubs are pretty evenly matched. Coventry’s £18.1m revenue is slightly higher than Luton’s £17.7m, while their squad cost is £7.4m compared to Luton’s £5.5m. On the other hand, Luton’s £17.8m wage bill is higher than Coventry’s £15.7m. However, what is abundantly clear is that both finalists are punching well above their weight, considering the financial power of many of their Championship rivals.     In terms of revenue, both Coventry and Luton are towards the lower end of the table, well below the Championship average of £27m. Luton’s £2.3m commercial income is one of the lowest in the Championship, less than half of Coventry’s £5.0m. However, both clubs are far below the top clubs, led by Stoke City £16.6m, followed by Bristol City £15.8m and Fulham £14.0m. The real differentiator in the Champi...

Luton’s progress has been achieved on a very low budget, as can be seen by a review of their 2021/22 accounts. Luton’s pre-tax loss widened from £1.9m to £6.4m, despite revenue rising £5.0m (39%) from £12.7m to £17.7m, as profit from player sales halved from £2.2m to £1.1m and there was no repeat of prior year’s £2.9m other operating income. In addition, operating expenses increased by £5.4m (27%) from £19.7m to £25.1m. Although losing money is rarely good news, Luton’s £6.4m loss was actually one of the best financial performances in the Championship, so they cannot be accused of spending their way to success. Luton have only posted a profit once in the last decade, £3.4m in 2019/20, but they have restricted losses over this period to less than £16m. This is not too shabby for a club at this level, though the £6.4m loss last season was the highest for some time. Luton’s revenue has more than doubled since promotion from League One in 2019, rising £10.0m from £7.7m to £17.7m. A...

The authoritative Swiss Ramble comments on the finances of clubs in the Championship play offs, noting that Sheffield United relates to Premier League (£115m revenue) and Huddersfield Town had a higher parachute payment in 2020/21, The figures emphasise how well Luton Town have done to reach the play-offs (revenue £13m, wages £14m and squad cost £5m).   Huddersfield's £44m revenue will be lower in 2021/22, as parachute payment is smaller in 3rd year after relegation. £25m wages probably down as well. Nottingham Forest only have £18m revenue, but their £37m wage bill was one of the highest in the Championship for clubs without parachute payments.

Luton made an operating profit of over £3m in 2019/20 mainly due to player sale profits of £9m and income almost doubling following promotion to the Championship. Kieran Maguire of the Price of Football comments: 'Luton Town show clubs can break even and survive in the second tier.' Luton received £463k from the furlough scheme in 2019/20. Luton spent almost £2m on signings in 2019/20 and had player sales of £9m

The 2018/19 accounts of football clubs are appearing in rapid succession and one of the latest is from Barnsley. They had an operating loss of £4.8m in League One, reports Kieran Maguire of the PriceofFootball. Turnover after relegation was down from just under £14m to just under £8m. The main factor in lower income was a 45 per cent decrease in TV money following relegation. Barnsley paid £105 in wages for every £100 income as they sought to return to the Championship, well above the recommended maximum of 70 per cent. Player purchases of £1.3m were dwarfed by sales of £5.1m. Barnsley are in danger of a return to League One with a consequent impact on their finances. Luton Town It looks as if another club promoted from League One, Luton Town, lost £2.1m in 2018/19. Income was up by about 30 per cent.

Luton Town are finding it a financial struggle to compete in the Championship, not a surprise: Gary Sweet talks about Luton's financial constraints Kieran Maguire of the PriceofFootball is now the leading academic analyst of football finance living in the UK. The estimable Swiss Ramble lives, of course, in Switzerland. I am greatly looking forward to Kieran's book on the subject which is coming out in January and which will be reviewed here. Kieran is publishing with Agenda and my own book on football with them is due for submission in July. One of Kieran's strong (and justified) views is about Championship finance. I think that the linked article is wrong in saying that Luton have the smallest budget in the Championship. That honour belongs to Charlton Athletic, currently owned by barmy Belgian Roland Duchatelet. If the new owners from Abu Dhabi are approved by the EFL, and I don't see why there should be any objection, that is likely to change. Shell shocke...

Luton will not overstretch themselves financially in the Championship: Prudent approach Of course, they are right, particularly given the club's history. However, in many ways this division has a less level playing field than the Premier League because the money coming in from broadcasting is not large. As a newly promoted club you are up against teams with parachute payments or that often sell Premier League players at a big profit. Team spirit, enthusiasm, dedication and good management can all help to overcome these obstacles, but only to an extent. Ask Rotherham who have played some good football this season but still got relegated.

Not only are Luton riding high in League One, but they also have hopes of leaving behind their atmospheric but somewhat ramshackle Kenilworth Road home after 113 years there. January will be a key month for the future of Luton with Luton council finally to decide on planning applications for a new 17,500 capacity stadium in the centre of town, financed by a mixed use office, hotel and retail site off Junction 10 of the M1. It is just ten years since the Hatters left the Football League with a 30-point deduction that led to a five year exile in the non-league system. The club is run by a consortium of local businessmen and supporters who continue to provide investment. The club has refused sponsorship from betting companies since 2011 at a time when many clubs rely on it.