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Record losses, and disaster awaits. The Premier League crisis

By Tony Attwood

The 20 clubs in the Premier League were very careless last year.  And I mean very careless.

I mean if  lose a £5 note I am fairly pissed off.  And these guys lost 100 million times that amount between them.  £25 million per club on average.  Lost. Gone.  Down the plug.  Vanished.    In the richest league in the world the losses in one season were £484m.

Doesn’t that suggest either something is very seriously wrong, or someone is being careless.  Or maybe someone is really trying to screw the whole operation up?

Doesn’t that suggest that this can’t go on?

What is the power than runs this league?  At least on this one I can give you the answer – although of course you know it already.  Wealthy owners is the answer.  16 out of 20 of the clubs have them.

The clubs’ problem comes most from wages – 68% of their turnover went on wages.  Football clubs are not the only organisations that put all their money into salaries – in the UK schools and GP surgeries do the same, at the same percentage level.  I don’t know much about GP surgeries (the place where you go to get first line medical treatment when your hangover starts to last for weeks rather than days) but I know that this approach to schooling causes endless problems in British education.  But that’s another matter.
There is a growing awareness that this situation in football is unsustainable, an awareness that is especially strong among MPs in Britain who are currently investigating football.  One senior figure even called for the financial fair-play rules (which require clubs to move towards breaking even by 2014) to be introduced across all of English football.
The point is now being made that this financial issue is the key to our future footballing happiness, and that the FA should start to act as a controlling influence.
Except… this is the FA we are talking about.  The organisation that went cap in hand with a royal prince, the Almighty David Beckham, and the Prime Minister of the United Kingdom of Great Britain and Northern Ireland, to Fifa to ask for permission to spend billions on the world  cup, and then, when only getting one vote, suddenly discovered Fifa was corrupt, and started to make a fuss.  It doesn’t give one much confidence.

Hugh Robertson, the Conservative minister for sport in the Coalition government that runs Britain has said he is awaiting the select committee’s report before deciding what to do, although he has said that football is “the worst governed sport in the country”.

In a statement of mind-blowing stupidity, ineptness and crass ignorance, which has only be surpassed by other statements from the same organisation, the Premier League issued a non-attributable statement saying  the league is encouraging “sound financial management” by introducing a “sustainability test”.  Clubs have to present their accounts and future budgets to the league, to demonstrate how they will fund themselves next season.

You can imagine how it goes.

“Ah yes, Bolton,” said Mr Prem League Committee man.  “How will you sustain yourselves next year?”

“The owner will pay.”

“OK fair enough,” says the Committee man.  “Next…”

The Parliamentary Select Committee to which Untold made a submission, written by Phil Gregory, has finished taking evidence and will publish a report at the end of June.

Meanwhile we have the Uefa financial regs which apply to clubs entering the Euro competition.  This says EPL clubs can make a cumulative loss of €45m (£39.7m) altogether over the next three seasons and can’t rely on owners’ subsidies to cover those losses.

Given that it is interesting to note that all the top seven clubs except Arsenal lost money (Arsenal made £56m).   Manchester City lost £121m, while Man U lost £79m.  But slightly more worryingly we lost £6m between May and November last year.  Let’s hope that was a one off.

Chelsea lost £78m. Tottenham lost £7m loss and took £15m from Joe Lewis.  Next season without Euro football will be tough for them, and Arry’s supply for new player money will dry up just as he has to toddle along to the court to explain himself in that long running legal case of his.   Aston Villa lost £38m  while Liverpool lost £20m.

Wolverhampton Wanderers, Birmingham City and WBA were the only others (beside Arsenal) making a profit.  WBA made it in a lower league while Birmingham City are tipped to go bust if they go down – showing that their tiny profit was a little blip in an otherwise disastrous financial screw up which Untold has mentioned from time to time since the current owners bought the club.

Only four clubs did not take money from owners: Arsenal,  West Bromwich Albion, Everton and Manchester United.    Man U in fact did the reverse by paying its owners £42m to cover interest and £65m on refinancing fees.  (Quite a clever ploy if you can manage it).

At Manchester City, they managed a different trick – taking a stadium built with £132m of tax payers money and then throwing multi-millions at players.  Actually as a UK tax payer I feel rather miffed about that.

So, what next?

Quite honestly, no one knows.  Putting faith in the FA seems pointless and pathetic, and the EPL itself denies anything is wrong even though the churn rate in the EPL is phenomenal (as I have mentioned elsewhere).  Under half the teams who were in the Premier League when Mr Wenger came along to Arsenal are now in the Premier League.  Financial and footballing survival seems quite a trick in itself and very few clubs are pulling that off.

Whether Parliament has the power and the will to regulate football in England seems highly questionable, and it is most likely that the free market will be left to itself – especially as we have a Conservative Party dominating the Coalition.   (Very pro the free market are the Conservatives.  It is the party of Margaret Thatcher).

Which means, more of the same.  More sky high wages, more clubs at the bottom going bust, more hopefuls coming up.  It can’t go on like this forever, of course, but for the moment, everyone pretends it can.

One little thing will tip it over the edge.  My guess is it could be the new Euro regulations on selling TV rights by country, but it could be the collapse of the Glazer empire, a revolution in a certain oil rich country, or… well practically anything.  It’s on teetering on a knife edge.

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25 comments to Record losses, and disaster awaits. The Premier League crisis

  • Mr Venger

    These figures are too negative , its come to the point where someone else could be given a chance to take the reigns.
    You cant sugar coat this!
    If brum go down & subsequently bust which looks very possible…
    Bye bye Scudamore

  • belfastkiwi

    Like all financial bubbles this one will burst. I wonder what the trigger will be? Perhaps Sky losing it’s country by country broadcast model and blatant differential pricing. If the EPL and lower leagues do not introduce a salary cap at a reasonable and sustainable level clubs will go like dominoes. Added to that the HMRC eventually changing the preferential treatment of clubs in administration….. looking gloomy.

  • Jonny

    But Damn I am tired of waiting for things to go boom. I used to think our prudence would pay off but then Liverpool just seemed to get away with certain doom (whilst their previous owners got hammered). It seems the Glazers have had several ridiculous offers for Scum Debt Utd – which would make them another Arab plaything club.

    The UEFA regs seem to be irrelevant as of now – no one is taking them seriously and UEFA have made no noise to suggest that they have the the bark or the bite to match their changes to the once beautiful game.

    I’m still proud of the stance we take but I do wonder if the game is capable of policing itself.

    Big money flouts all the laws we set up for society – it has run amok, escaping almost any taxation. What is to say it will not just continue to do so in football.

    If I sound disillusioned – I am. Not with Arsene and the club’s admirable ethos but with the world at large. The ‘super rich’ appal me and they continue to grow in numbers.

  • Marcus

    That is a staggering fact Tony.

    The tax payers financed the Man City stadium??

    Are you saying that while those players earn 200,000 per week, we are financing their stadium?

    This is outrageous

  • Shard

    @Marcus

    I would have thought you knew that. It was built for the 2002 commonwealth games. Just think if Spurs had gotten the Olympic stadium. You as a tax payer would have financed the stadiums of ManCity and of Spurs, but not of Arsenal. Great world we live in don’t you think

  • Marcus

    That is not a free market.

    (Free markets are regulated to some degree anyhow).

    It seems that the EPL is one enormous trough with a lot of pigs stuffing their faces.

    Arsenal apparently try to do things the right way. Let’s see if they are vindicated in the long run.

    Sadly, I cannot see any real impetus to change this system. A few politicians will raise questions, but they will be drowned in petro-dollars.

    The football cartel could go on almost indefinitely I think….the USA has been chronically broke for decades, but it still rolls on…admittedly maybe for not much longer

  • Marcus

    LOL..sorry Shard…I didn’t

    What a scam, eh?

  • Shard

    I’m not sure it can be classified as a scam in legal terms Marcus. Apparently it was given to ManCity so as to avoid expenses of upkeep if the city council was unable to get rid of it. I’m sure there are many ways they could have dealt with it better, but hey, they claim they did it to save the taxpayers money. So no scam. Simple.

  • ak47

    yeah pools escape was disheartening,
    was it jp morgan who said summit along the lines of control the economy of a state and i care not who makes its laws?
    the first time i heard this i had a look around and thought he was bang on the money.
    what cant tens of billions buy? refs are car ashtray change if that, politicians or polly’s as i call em due to them being repetitive creatures are pocket change.
    i also support this club partly by the way its run. but sometimes believe we might have to loosen up somewhat to compete? guess we’l know in the next few months the intent of arsenal.

  • lew

    Arseanls profit is mainly due to sales of the highbury development. Next year we will be making a loss of a few million

  • Clerkenwell Gooner

    The EPL will increasingly chase overseas $$$ eg through merchandise revenue stream in order to have to the cash to attract players, since the options for revenue growth here in the UK are pretty much tapped out, I’d imagine.

    Probably in prospect are more empty seats at Arsenal, because once the govt’s sadistic austerity measures really kick in, UK unemployment is set to go through the roof.

    And as UK inflation ticks ever upward (I don’t know about you, but this year my gas, electricity, water, insurance, travel, phone, rent and food costs have all soared way above official monthly CPI rates, while wages – unless you’re a footballer – remain stubbornly inert), an increasing number of fans won’t be able to afford to travel, let alone pay steeper ticket prices.

  • walter

    I think if they would make real FFP rules and apply them the situation would be much better for the long term. Also clubs who have more loss than they have revenue should be banned from the EPL. You can only spend what you earn and you can borrow money to build a stadium but then that should be it.
    Also kick people who have been part of making a football club going broke out of football for at least 20 years. It will make them think twice before they go in to some kind of adventure

  • Diyo

    sure, Thanks a lot Mr. Proffesseur for massive profits. We made profits but now we want to take trophes. Please spend so that we win tittles. Thanks

  • A Casual Observer

    And therein lies the problem.

  • Kentetsu

    In case of Manchester City you can debate whether the tax payer should have payed for their stadium. As long as they pay a tenant fee, I do not see much wrong with it. What I do not understand, though, is why City can strike a multimillion deal for the naming rights, as will be announced soon, and rake in all the cash. For something that is not their property.

  • paul

    The only way for the EPL to be above the other badly financially run leagues ( Spain, Greece, etc ) is for the clubs to be more transparent. As has been highlighted many times here ( Birmingham, Notts county, S****). Why is it so difficult for those clubs to say who owns them and where does the money come from? As long as the EPL, FA, FIFA allow clubs to be run by faceless, shady organizations then the same concerns will still be around.
    It was ridiculous for Chelsea to announce a £70 million loss on the same day that they spent £71 million. What happened to them? Nothing. This will always happen as long as the Sugar Daddy scenario is allowed to continue. This from a Club who five years ago said they would be breaking even in five years time? They and the others will continue paying the highest prices and top wages to attract the best players as long as they are allowed too.
    We all feel hard done by at Arsenal as We try and do the right thing since Arsene came along and it really is about time the powers to be made the other clubs toe the line and then see how they manage.
    In Arsene I trust.
    Gooner for life.

  • Wrenny

    Man City pay ‘rent’ to the council to use the stadium, but as far as I know they didn’t have to pay a penny upfront as contribution to its construction. I believe this rent takes form in some kind of slice from the gate receipts.

    I’m surprised that the Sheikh didn’t try harder to buy the stadium for City, it would have boosted their revenues and helped them towards meeting the FFP regs as they’d no longer have to pay the council a slice of their earnings. They could also start to monetise the staidum in other ways, with concerts or international friendlies like the ones the Emirates has staged, although perhaps they’re already allowed to do that(?)

    Then again, the council might be rather keen to hold on to Eastlands and weren’t willing to sell. As City begin to draw in bigger crowds, up ticket prices, and will now see CL football next season, the stadium might be quite the cash cow for the council as their ‘take’ increases with City’s success.

  • Marc

    Tony – The upside to our loss is that it occurred during a period where we have a few months with reduced / no income but still have expenditure. With gate receipts of £3 million per match that can easily be corrected. It will be interesting to see the influence of the new owner on the clubs commercial activities, Arsenal are a very well run club but our 1 weakness is our commercial income compared to ManU and Chelsea.

  • paul

    @ Diyo
    “Please spend so that we win titles. ”
    YOU’RE JOKING RIGHT???????????
    I’m sorry but I have to say it.
    Chelsea spent £71 million in one day this year. What did it buy them? Their Sugar Daddy has spent upwards of £800 million to get them where they are today which is two places above us and Trophy less this season. Their manager doesn’t know if he’ll be there next season.
    You must have short term memory loss or you’ve just jumped on board in the last few seasons. Do you really understand what Arsene Wenger has achieved since he came? How many other managers could have kept us at the top while moving to a completely new stadium? I don’t think there are many. We have a young but stable squad and hopefully next season with a bit more luck we’ll be pushing even closer once again.
    A lot better than being in £800 million debt just for a couple of league titles, Fa and Carling cup and they still haven’t won the CL yet.
    We’ve already won titles and Fa cups without bankrupting the club under Arsene. That’s no easy feat these days.
    Be very careful what you wish for.
    Gooner for life.

  • tram

    Hang on just a minute. Why is it such a bad thing that absurdly rich people should want to pour their money into your club in some kind of a vanity project? And if you had their wealth, wouldn’t you, as a football fan, want to do the same? Look at Man Citeh. Their fans, celebrating an FA Cup for the first time in eons, sneering at us, possibly from above, looking at replacing Tevez with Ronaldo (according to today’s papers). And they’re doing all that in cheaper seats than at the Emirates. Why should their fans worry about their owner’s generosity?

    All that debt listed by Tony is extra money brought into football. We would not have the EPL we have without that extra input. Most club debts go on wages, and my understanding is that those wages attract UK tax (I remember the row about the impact on UK football from the hike to 50%). Those tax liabilities are building UK hospitals. Take away the big debts and you lose all of that.

    Unfortunately, it is Arsenal, the honest brokers, the wise virgins, who have got it wrong. Be assured that I write this as a passionate Arsenal fan, just a bit realistic. Citeh, Chelsea, even Manure and the scousers, they aren’t breaking any laws, they’re allowed to do it like that (although the same may not be true for the spuds).

  • Richard B

    As I’ve said on this site before the basic illogicality of the EPL is that club owners ‘gamble’ money on success at a much higher level than they can ever get back from any legitimate source (prize money etc.). It is a system of mutually assured destruction and we have witnessed the first casulties over the past few years.
    Devil-takes-the-hindmost is fine if it just involves relegation with a chance of re-promotion in the future. But from financial ruin there is very little chance of return.
    Hopefully the realisation within the EPL that they are stronger together than they are otherwise (in terms of global marketing)has now kicked in and there will be adherence to FFP and the basic principles of self sustainability.
    In order to acheive that, all big clubs (other than AFC) will need to change their business strategies and with those changes will come the risk of getting it wrong. High salary costs will, for some, only wash out of the system as high paid players come to the end of their current contracts. That will take a few years but will leave the only clubs able to pay top wages as being those who generate enough from their own ‘natural’ incomes.
    Logically that will be the clubs in the biggest stadiums, with the most bums on seats, paying the highest ticket prices.
    Hence Arsenals strategies over the last few years.

  • Anne

    @Tony:

    Very interesting post. I wonder how the current financial difficulties in the league tie in w/ the match-fixing and refereeing issues that have been highlighted on this blog? When you’re having a hard time making an honest profit, the temptation to bring in additional funds by illicit means must be strong…

    The fact that Chelsea was willing to spend 70 million at the same time that they’re suffering an “offical” loss of around the same amount is actually kind of suspicious. Is it possible that they have illicit revenue streams to shore up their profit margins?

  • Anne

    @Clerkenwell Gooner:

    Very interesting point about how the EPL will have to rely on overseas marketing to bring in funds. Because I live in the US, and right now, for the first time ever, the EPL seems to be making a serious effort to tap into the US market.

    It used to be that you had to subscribe to special TV channels to even watch a football match here. We have “Fox Soccer Channel,” which focuses on the EPL and Serie A, and aside from that, you have to subscribe to the Spanish channels. But just recently, they’ve started showing some EPL matches on our regular sports channels every weekend. Whether they’ll succeed in getting the American public interested is another matter, but they seem to be trying.

    Another interesting aspect of this new marketing is that it seems to be promoting ManU over any other club. Really, most of the marketing seems to center on ManU, and that goes for Fox Soccer Channel as well. A lot of times they won’t even show Arsenal matches. Part of my opinions about anti-Arsenal bias in the media are shaped by their level of coverage here, actually.

    Arsenal’s style of football is really attractive to neutrals, so it seems like they would be a logical club to promote if the aim is to open up a new market for English football. But they seem to be doing the exact opposite. I’ve always wondered why.

  • Rhys Jaggar

    Man City didn’t ‘take a stadium’ paid for by taxpayers. They pay rent to Manchester City Council. Go ask Richard Leese if you don’t believe me…in case you don’t know who he is, he’s the Chairman of the Council (and, it must be admitted, lifelong Man City supporter)….I suspect you’ll find that the Council expects to receive regular income for as long as Manchester City are based in Manchester………you can debate the rent if you want, but you can’t debate the ‘take or rent’. Because they rent……

    In another article here at this site you talk about ‘operating profit’ being the key metric for transfer fees. Then you go on about Man Utd being bust. Man Utd, on operating profit, is the most profitable football business in the world. The loss this year was mostly an accounting procedure associated with one-off refinancing costs for their silly debt, which is now a bond at 9% ish. Operationally, they are better run than Arsenal, and that’s saying something. Just because the Glazers are a bunch of leeches doesn’t mean you trash Man Utd as a club. Trash the Glazers, please…….I think you’ll find this year that operating profit will be around £100m and they’ll need to pay £50m in bond coupons. If they’re sensible, they’ll put more aside for bond repayments, but they’ll be profitable operationally……especially with reaching the champions league final……

    Spurs will cut their cloth and Levy has already said that fringe players in their squad will be sold. Hardly irresponsible, is it? They got to the Champions League and went for it. They haven’t made it this time so they’re adjusting. Very pragmatic and practical. I know you can’t admit it, but that’s your problem, not theirs……

    You’ll probably find Man City ditching about 6 – 8 players this summer too. Sure, at a loss. Sure, maybe paying some of their wages. But now they’ve made 3rd place, they’ll be looking to comply with ECL. Before, they didn’t have to. As they weren’t in it.

    I’d be a bit more positive if I were you. Blackpool structured their finances this season to make going down financially survivable. They only just went down today. A shame they didn’t stay up in my book.

    Wolves are doing the sustainable thing and are now expanding their stadium capacity. If you like clubs run properly, you’ll hope they stay up for a long time to come….

    As for next season, QPR may well become the next Citeh. If Mittal buys them out, he’s richer than Abramovitch and might splash silly money at it. Norwich will cut their cloth and are hoping to expand their stadium. They’ll sell out every game like that. It’ll be a job for them to survive, but they have a chance. They’re a well run club who should be admired, not trashed.