Why are so many Premier League clubs losing so much money?

 

 

 

By Tony Attwood

• And so there we are: Champions at last! Thanks to every player and every supporter.
• Champions Champions Champions

Winning the league this season takes Arsenal up to 14 top division titles – something I did not hear many people on the radio say yesterday, although everyone seemed to want to say how many years it was since the last title.  It is funny how even announcements of statistics can become politicised and a negative found even when the news itself is utterly positive.

But just so you know, two clubs are above us in terms of titles, and they are on 20 each: Manchester United and Liverpool.   So we can at least say we are the best team in the Midlands and the South in terms of title wins.  Although I am not at all sure why the number of titles is that important, unless we are discussing Tottenham Ho (two).

In passing, we might like to note that Manchester City have ten titles, Chelsea six and Tottenham two (or did I just mention that last one?)  So, unless I have missed anyone en route, there are only three London teams that have ever won the League in its various guises.   Arsenal on 14 are way out in front, and then Chelsea on six and Tottenham on two.

Meanwhile, as we have been tracing on the Arsenal History Society website, this win, which is singularly impressive since it comes in the 100th consecutive season in the top division, a record that no other club comes near.

Indeed, it is a bit of a shame that  Arsenal FC has chosen not to celebrate the achievement of 100 consecutive seasons in the top division.   Still, I suppose it did require a fair amount of data collecting – and we shall, of course, continue with the series on the Arsenal History Society site, so someone has published the full record.  

But now we can look forward to a long-running series of articles about the players that Arsenal are going to sign, must sign, and then just miss out on because the club was too slow and doesn’t seem to appreciate how many new players ManC are bringing in for next season etc.  In short, a re-run of last summer’s tales, and the summer before that, and….  well, you know how it goes.

Now the media have been making a lot of noise about how many years it is since Arsenal last won the league, forgetting to say that then Arsenal built and paid for a new stadium in the interim.   Last time we won the league, we followed that up with winning the FA Cup, and coming second in the league.  But then we had a series of eight seasons in which Arsenal always came in the top four, and so got into Europe again, but could not win a trophy.   That lasted until we won the 2014 FA Cup Final.

The reason for that was, of course, paying for the cost of building the new stadium, after Highbury had been reduced to a capacity of 38,000 to cope with the government’s new regulations about all-seater stadia.   This time I imagine there will not be any such restrictions and Arsenal will be able to continue moving forward without such financial restraints.

Except that Arsenal, like the vast majority of Premier League clubs are losing money, and that has to be put right as well.  There has been a lot of criticism of the club about its price increases, but the reality is that spending money on players is what winning the league is about. That, of course, is not a guarantee that the club will win, but it is part of the deal.

What we can be delighted about is that Tottenham Hots also want to win the league, but whereas Arsenal managed to build and pay for a new stadium while retaining a position in the top four season after season, Tottenham have not been able to do this at all.  Even though we had Totty fans writing to us saying that the building of the new stadium had cost them nothing, and they had as much money to spend on transfers as they wanted and needed.  I wasn’t sure, but if that really was the case, they are certainly made an absolute balls up of the whole moving procedure.

Now there is always a lot of chit chat about club finances going on, and I know this can get a bit confusing, not to say tedious.   Indeed, reading different reports on the matter quite often bemuses me, and as I noted in a previous piece, before retirement I was chair of a PLC – not the finance director, but nonetheless able to read financial statements and know which department was not doing their bit.

So when I read that ManU made a loss of £3m last season, having an income of two-thirds of a billion pounds, I know something is very screwy indeed, and I wonder what their rescue plan is.   As far as I can see, it is, “play in the Champions League every season, and get as far as the semi-finals”, and I would say, “as a plan, that is a very risky approach, although not at all uncommon as football plans go.   

In fact, any team aiming for the top needs to have Champions League football because that is where the big money is.  Indeed, reaching the final this season is a mega boost for Arsenal – and it will be even if we lose that match, because we are, of course, guaranteed a place next season, not just for winning the league this time but also for that amazing run of wins from the opening eight-game mini league through to taking us to the final.

In fact, it is said that just playing in that opening League Phase of the Euros makes the club around £80m extra profit – so the over-expenditure of clubs like ManU can easily be seen, although such figures mean little when we note that ManU are something like £1,300,000,000 in debt. 

At least I think that is right.  Others skip over it a bit to make it sound a bit more manageable.   But really it isn’t, because the level of interest they are paying out on that debt is itself hardly imaginable..   

Worse, half a billion pounds is owed on transfers, and there are comments being made about clubs with players for sale, putting the price up if ManU are bidding, because no one is willing to guarantee that ManU will be able to pay, even if the debt is factored over four or five years.  So I am told ManU is now having to give guarantees that it will be able to pay for its purchases.

Worse ManU made less money out of matchdays in their last set of accounts than the year before.  Now with this detail, we must recognise that they still make more than other clubs because of the size of their ground and their value as a tourist attraction – although that income is slipping year by year. 

And there is another financial factor that needs to be incorporated these days – the cost of sacking a manager.  Managers are generally on four-year contracts, and when they are sacked, it is often the case that a lot of the period left on the contract has to be paid out to the manager, even though he is not there.    Indeed, some clubs can find that financially at any one time, they might have three or even four managers being paid, even though, of course, only one is actually doing any managing.

As a result, the newly appointed manager comes in with the thought of buying new players, only to find that a lot of the transfer budget is already spent paying off his predecessors.  Worse, clubs are getting into the habit of holding back on a sacking until just after their accounts year finishes, so that the negative on the latest accounts can be dramatically reduced.   The problem is that negative comes into accounts one year on, and the people lending money to the club know that, of course.   Which is why they put their interest rates up on such debts.

This is where Arsenal score particularly well – they sacked Emery but rarely get involved in such sackings, so the income we give the club each year for our tickets actually does go to the club – and not to a whole series of managers sacked over the previous years.

And this is important because typically accounts show how much the wages bill for players goes down when the players are sold, but not how much was spent on getting rid of a manager.  Indeed, we might note just how many managers are dismissed just after the end of the financial year, so by the time the figure hits the book, a year has gone by, and maybe the club will have won something.