The Political Economy of Football V2

The Swiss Ramble reviews West Bromwich Albion’s finances as they face the threat of a points deduction that could seem them relegated.   It remains unclear whether there will be a points deduction or if it will be applied this season given the complications that could then arise for the competition as a whole.  If they do go down, this would be only the second time in their history that West Brom had been in England’s third tier. The club has spent many seasons in the Premier League with their most recent relegation taking place in 2020/21. Since then, they have finished between 5th and 10th in the Championship, getting close to promotion in 2023/24, when they reached the play-offs.   This underlines the extent of the decline this season, so the threat of a points deduction could not have come at a worse time. Ownership change It wasn’t meant to be this way after the club was acquired in February 2024 by Bilkul Football WBA, a company ultimately owned by Florid...

Football finance guru Kieran Maguire is sceptical about the basis for the financial charges brought against West Bromwich Albion.   There is no conspiracy to deceive and it may just be that someone made a mistake in adding up the figures:  https://www.bbc.co.uk/sport/football/articles/cx2rr73g0pgo John Pelling has substantial experience in this area and was brought in by the Beggies to help with PSR issues:  https://www.expressandstar.com/sport/football/west-bromwich-albion/west-brom-john-pelling-psr-6573887

West Bromwich Albion are facing a possible points deduction after being charged with an alleged breach of the EFL’s Profit and Sustainability  (P&S) regulations.  The charge relates to the three years ending with the 2024-25 season, with Championship clubs allowed to lose £41.5million ($56m) over that period. According to the club accounts posted on Companies’ House, West Brom lost £7.6m in 2022-23, £37.6m in 23-24, and £18.8m in 24-25, amounting to a pre-tax loss of £64m. P&S allows exclusions from this total for “healthy” expenses, such as long-term infrastructure or community projects, which can be added back from the loss calculation.   This includes the Category One academy, which costs the club several million pounds per season in operating costs. Accounting for these exclusions, the breach is thought to be marginal. Under the EFL’s regulations, sporting penalties from the previous term must be applied in the following term, suggesting any potential po...

This season is the fourth in a row for West Brom in the Championship, which is the their longest unbroken period out of England’s top flight for more than 20 years, but there is still an air of quiet positivity around The Hawthorns. This could be attributed to the change in ownership, as Bilkul Football WBA, a company ultimately owned by Florida-based entrepreneur Shilen Patel and his father Dr Kiran C. Patel, acquired an 87.8% shareholding in West Bromwich Albion Group Limited, the parent company of West Bromwich Albion Football Club, in February 2024.   The remaining 12.2% is owned by minority shareholders, many of whom are represented by Shareholders 4 Albion (S4A). West Brom had effectively been in decline ever since the club was sold in August 2016 to a Chinese consortium, which bought out former owner Jeremy Peace’s stake. Controlling shareholder Guochuan Lai’s ownership turned out to be fairly disastrous for the club, culminating in numerous financial issues following ye...

With the Trump administration in the US threatening punitive tariffs against UK exports (the US is the UK’s biggest single country market at 22 per cent of exports), geopolitics become even more important in top flight football. The UK government is attempting to facilitate investment into one of the British economy’s most successful exports: the Premier League, which broadcasts to 189 of the 193 United Nations member states. In May, the Premier League said 1.87billion people follow the division worldwide and 900million homes globally are able to watch Premier League football. Little wonder, therefore, that North American investors have taken a liking to a product that attracts $450m (£355m) per season for the U.S. media rights alone from NBC. Only 20 years ago, there were no majority American owners in the Premier League. Now nine of the top flight’s 20 teams are majority-owned by U.S. investors: Manchester United, Arsenal, Aston Villa, Liverpool, Chel...

West Bromwich Albion had effectively been in decline ever since the club was sold to a Chinese consortium in August 2016, paying a figure north of £200m to buy former owner Jeremy Peace’s stake. Controlling shareholder Guochuan Lai’s ownership was fairly disastrous for the club, but his unloved tenure finally came to an end after Bilkul Football WBA, a company ultimately owned by Florida-based entrepreneur Shilen Patel and his father Dr Kiran Patel, acquired an 87.8% shareholding in West Bromwich Albion Group Limited, the parent company of West Bromwich Albion Football Club. This change in ownership was urgently required, due to the numerous financial problems facing West Brom, including growing high-interest debt and serious cash flow concerns, following years of no investment from the former owner. Indeed, West Brom’s auditors had already rung the alarm bell in the 2021/22 accounts when they cast doubt on the club’s ability to continue as a going concern without making player s...

Last Thursday, West Bromwich Albion announced that Florida-based businessman Shilen Patel has agreed to buy them from current owner Guochuan Lai. This news was joyfully greeted by the Championship club’s fans as Lai’s clueless spell in charge has seen two relegations, albeit with one promotion in between, and a massive deterioration in the club’s finances. So much so that a once well-run club was heading towards bankruptcy. Perhaps the best evidence of this narrowly avoided crash can be seen in the return on investment Lai is getting. The Chinese businessman paid about £200million for what was a Premier League club in 2016. Patel is paying him only £10m guaranteed – £2.5m on completion, £2.5m in August and £5.5m in August 2025. There is the possibility of bonus payments if West Brom are promoted. Go up this season, and they are currently fifth, and Patel will pay Lai an extra £18m. Promotion next season would trigger a £10m payment, £5m the following sea...

The takeover of West Bromwich Albion by Florida-based businessman Shilen Patel is a step closer after the Championship club’s current owner Guochuan Lai agreed a deal to repay a loan he secured on shares in West Brom’s parent company. Lai borrowed £2million from a company controlled by local entrepreneur Alex Hearn in 2021. Repayment was scheduled for last week but the Chinese businessman failed to settle the debt, which meant Hearn was entitled to claim at least 2.35 per cent of West Bromwich Albion Holdings. The outstanding amount had already grown to more than £4million and a default interest rate had just kicked in, which had the potential to see the debt grow quickly, potentially giving Hearn the right to claim a larger stake in the club. As a result, he had been in talks about joining Cheshire-based lawyer Chris Farnell’s bid for the club as a minority partner.   However, with the Patel bid now in the lead, Hearn has decided to let Lai repay him in three instalments over...

Football finance guru Kieran Maguire reports that West Bromwich Albion are ' in advanced talks with Florida businessman Shilen Patel over potential takeover. Patel understood to be the preferred bidder at this stage. No timescale on a deal, but this is ongoing/moving forward.' A Chinese consortium led by businessman Guochuan Lai bought a majority stake in Albion, then a Premier League side, for £175million in 2016. It was a price tag that seemed steep at the time but now looks like the high-water mark of English football’s Chinese investment boom, a period of irrational exuberance . Under his ownership, Lai’s lads have been relegated to the Championship, promoted out of it and then relegated to it again. They have also consistently lost money, a situation not helped by his unfortunate habit of borrowing money from the club on terms that are very friendly to him but not so sensible for West Brom. Anyway, with Albion no longer in receipt of parachute payments (the money clu...

Football finance guru Kieran Maguire discusses the 'massive disdain' of West Bromwich's owner for the club's loyal fans:  https://www.footballinsider247.com/kieran-maguire-drops-disturbing-west-brom-verdict-amid-concerning-takeover-update/ This year I intend to give a worst owner of the year award and Lai is certainly up there.

Financial challenges are building up for Guichan Lau whose company WBA Holdings owns 66 per cent of West Bromwich Albion.   His company's accounts show that it is in default on a £2 million from a West Midlands heating company called Warmfront Holdings. Warmfront has agreed to take no action to reclaim the loan and interest until February next year.  Given a punitive rate of interest of 5 per cent a month, the amount outstanding will then be around £4 million. Lai has missed three deadlines to repay a loan from the Baggies to his Hong Kong company Wisdom Smart Corporation.  [sic]  Meanwhile the club have a £20m loan from MSD UK holdings at an annual interest rate of 13.8 per cent.

West Bromwich Albion’s managing director, Mark Miles, recently confirmed what every Baggies’ fan knew, namely that the club continued to face financial challenges.   West Brom’s auditors had already rung an alarm bell when they cast doubt on the club’s ability to continue as a going concern without making player sale. Another indication of Albion’s financial issues came when they took out a £20m 4-year loan with MSD Holding UK Ltd in December 2022 “to finance the general business operations of the club”, secured on the club’s assets including the stadium.   Moreover, this loan is high interest, currently charging nearly 15% (9.75% plus SONIA 4.93%), which means that Albion have to stump up around £3m a year. Given the supporters’ understandable scepticism about the club’s management, they felt obliged to add, “for the avoidance of doubt, the loan will only be spent on the purposes of the football club”, though they did not define exactly what was meant by “purposes”. ...

A group that includes Egyptian businessman Mohamed Elkashashy and Manchester-based sports lawyer Chris Farnell are in talks to buy a minority stake in West Bromwich Albion that could eventually lead to a full takeover.   Farnell in my view needs to be treated with some caution. Farnell was briefly disqualified from becoming a football club director in England, although he later successfully appealed against the ban. He was also cleared of any wrongdoing by the Solicitors Regulatory Authority.  West Brom are currently owned by several Chinese firms and businessmen but the controlling shareholder is Guochuan Lai, who runs the club’s parent company Yunyi Guokai (Shanghai) Sports Development Limited.  The web of Chinese owners that is led by Lai have been in charge at The Hawthorns since the Chinese businessman paid more than £200million to buy former owner Jeremy Peace’s 88 per cent stake in the club in August 2016. Elkashashy and Farnell have previously been li...

Concerns over the financial future of West Bromwich Albion continue after Xu Ke (aka Ken), who is the single director of WBA Group, refused to answer any of the 38 questions submitted by independent shareholders. The questions focused on a £5 million loan taken out by the club's owner Guochan Lai, to prop up his Hong Kong company Wisdom Smart.   Several repayment deadlines have been missed.  The shareholders were told that they were not entitled to the information. The Baggies will not have the benefit of any parachute payments next season and have a high interest £20m loan to service.

The Championship has become the division of financial strain and distress. The majority of its 24 clubs are now conditioned to accept loss-making. Money spent on wages consistently — and comfortably — exceeds the collective revenue each year. Fourteen Championship clubs have already shown they committed more to wages than they earned in total revenue for 2021-22, painting the latest dysfunctional picture of life in the Championship. Kieran Maguire, finance academic and host of the Price of Football podcast, has calculated the operational losses for last season to average out at a remarkable £476,000 ($594,000) a week for every Championship club. Fulham, Bournemouth and Nottingham Forest, the three clubs eventually promoted last season, collectively lost £158million on their roads to the Premier League. The EFL accepts life cannot go on like this in its marquee division. It continues to push for a revised distribution model in its arrangements with the Premier League; one that wou...

Football finance guru Kieran Maguire reports: ‘The audit report for both West Brom and the parent company makes for depressing reading in terms of uncertainty about the club’s ability to trade as a going concern unless player sales generate enough to cover the losses.’ West Brom Group £20m loan from MSD Holdings interest rate is SONIA plus 9.75%, so works out as 13.93%…or £7,600 a day. West Brom parent company has taken out a £2m loan from Warmfront Holdings, owned by the club owner, on which interest is being charged at 5% per MONTH, which works out at 79.6% per annum.  Maguire asks: ' What did West Brom Holdings do with the £2m from WarmFront? It lent the same amount to another company related to the owner at a lower rate of interest and some other companies…which have never been repaid and impaired to zero in the accounts.'

West Bromwich Albion have secured a £20m loan:  https://www.wba.co.uk/news/west-bromwich-albion-group-limited-secures-msd-loan Football finance guru Kieran Maguire comments: ' No interest rate given or repayment schedule. Poor governance, lack of transparency and a contemptuous way to treat minority shareholders if information not communicated. MSD lent to Southampton at 9.14% when interest rates much lower than at present.# 4 31 192

The authoritative Swiss Ramble reviews the latest accounts of West Bromwich Albion. The club swung from £23m pre-tax loss to a small £0.1m profit, as revenue almost doubled from £54m to £107m following promotion to the Premier League, though profit on player sales fell £25m to £4m and operating expenses rose £4m (4%) in the top flight.   WBA were one of only five Premier League clubs to report a pre-tax profit in 2020/21. Before last season’s small surplus the Baggies had posted three consecutive losses, amounting to £37m. However, traditionally West Brom have been quite prudent financially, making money every season from 2010 to 2017. Indeed, they had the seventh highest profits in PL in last 10 years. Revenue Main driver of the£53m revenue increase was broadcasting, up £56m from £41m to £97m, due to the more lucrative Premier League TV deal, though commercial also grew £2m (21%) to £10m. This offset the COVID driven reduction in gate receipts, down £4.8m (98%) to just ...

Football finance guru Kieran Maguire has criticised West Bromwich Albion's handling of its finances after it was revealed that Gouchan Lai borrowed nearly £5m from the club which he has not paid back:  https://www.footballinsider247.com/west-brom-lambasted-by-kieran-maguire-after-appalling-reveal/

Football finance guru Kieran Maguire has produced a report with a colleague at Portsmouth University for the DCMS on the financial sustainability of football and it does not make for comforting reading:  https://news.liverpool.ac.uk/2022/04/27/new-report-finds-serious-concerns-around-financial-sustainability-in-football/ Using industry-based limits from pre-pandemic club figures (2018-19), the research found that in the Premier League, only three clubs were not deemed at risk under any of the applied risk metrics (Arsenal, Manchester City, and Newcastle), while over half were deemed at risk under at least two metrics. I n the Championship, there was only one club that was not deemed at risk under any of the three applied risk metrics (West Brom, in receipt of parachute payments that year) and 20 were deemed at risk on at least two risk metrics. In Leagues One and Two, where only balance sheet metrics were applied due to available data, 14 and 10 clubs respectively were deemed at ...