Football is bust: enjoy it while you can, because it is not going to last in this form.


By Tony Attwood

“Football is unsustainable — since the start of the Premier League in 1992, there have been 64 incidents of clubs in the top four divisions going into administration.” So said Fair Game’s director of financial policy Dr Mark Middling, a senior lecturer in accounting at Northumbria University, as reported in The Athletic.

“Companies House data reveals that 44 of the top 92 were technically insolvent in 2022, and 31 per cent of clubs were spending more than they earn on players’ wages. That figure rises to 68 per cent when you look at the Championship.”

Now e have been looking at this in a couple of previous articles: Football is teetering on the edge of a financial disaster: here’s why and how, and by way of introduction: Football Finances: it’s just like a casino.

But now let’s try and go a bit further and look at the strange situations in three big clubs: Manchester City, Real Madrid and Barcelona. 

And it is worth doing because there is a general assumption that Manchester City being owned by, well you know who, are debt free.  But actually they are not: they owe £473m!

To be fair that money is owed by the City Football Group, but on the other hand at the heart of the City Football Group of 12 main clubs plus a range of separately constituted subsidiary clubs.

The Group is borrowing money to build a new stadium for New York City.  And rather than spend some of  Sheikh Mansour bin Zayed Al Nahyan‘s trillions they have taken out a huge loan: one of the biggest ever in the history of sports borrowing money. Which is a little odd when Sheikh Mansour and his chums in the royal family raised £400million by selling some of itself to the US investment group Silver Lake in 2019.

I will try and answer the “why?” in the next article in the series and for the moment consider the issues of Real Madrid and Barcelona.   These two giants have been involved in a dispute with Uefa over the fact that both of them have been selling future earnings, such as TV rights for the years to come.  

Of course it is a bit like buying a house:  most of us don’t have £290,000 (the average cost of a house in England) so we borrow the money and pay it back over 25 years. But what Barcelona has done is taken that money and called it a profit, while most of us call what’s left on our mortgage, a debt.

But Uefa has said no, you can’t call it profit in order to get yourself out of a Financial Fair Play hole of your own making.

As a result it is widely reported that Barcelona and Real Madrid won’t be able to comply with FFP. Indeed Barcelona’s books now have another €700 million debt showing.  For Real Madrid the problem is about half that size, but still a huge chunk of debt.

Now to make things worse Uefa have fined Barcelona half a billion euros for breaking Financial Fair Play regulations and for “wrongly reporting profits on disposal of intangible assets.”

In short, the regulations say that financial reports to Uefa have to accord by Uefa’s rules, and if some new whizzo scheme is cooked up for balancing the books, it’s a good idea to ask Uefa first if it is ok.  Seemingly neither Barcelona nor Real Madrid bothered to check.  (The clubs did check with La Liga, but unfortunately, neither the clubs nor the league bothered to ask Uefa).

As a result Barcelona’s next sale of another tranch of its future earnings to an American bank is in doubt, as the banks don’t want to play if the clubs won’t pass FFP rules, because that means huge fines and potentially points deductions and possible relegation.

But worse, Barcelona now have a €400 million hole in its accounts for next year when under new rules only 90 percent of income can be paid on salaries, transfers, agent fees and the like.  Then in two years time that goes down to 70 percent.

What is particularly interesting is that Real Madrid has often been seen by journalists who really don’t like getting their fingers dirty by touching a calculator, as financially sound.  But it seems they have been playing accountancy games and the league has ruled that the €23 million profit their presented in their accounts was actually a €293 million loss (hidden by taking future profits from banks to which they have sold their future).

In short neither Barcelona nor Real Madrid are Uefa FFP Compliant.  And that affects a lot of other clubs to whom they owe stage payments for past transfers.

Put another way, in previous articles we’ve been saying that having almost every club losing money, and borrowing against the future is dangerous.  But if Real Madrid and Barcelona start defaulting on debts or get kicked out of the Champions League for FFP misbehaviour then the whole pack of cards starts to come tumbling down.

But that doesn’t really explain why City Group with all its billions is borrowing money.  That comes next.

5 Replies to “Football is bust: enjoy it while you can, because it is not going to last in this form.”

  1. Forcasting the demise of Europes elite football clubs has been going on 20 years. Yet they spend more and more every season. Maybe thats why FIFA is not applying FFP rules to Saudi Arabia so the Saudis can bale out Europes indebted clubs.

  2. Fairfan I take your point about the debate having been long running, but I think it is Uefa that is implementing FFP rules, and of course Uefa has no juristiction over Saudi Arabia. And I think this is the first time that we have seen the biggest of the European clubs with real financial difficulties – as we have seen in the past year with Italian clubs.

  3. Does the Spanish government allow companies to make up the rules as they go along? Or is that just for football? But now for some good news: Mike Dean has been retired.

  4. The trouble is there are different forms of debt and you need to be clear in each case what the reality is. As far as City are concerned I doubt their owners would ever allow them to go to the wall, given its about sportswashing the blow to their image would be unacceptable. Its not as if they are ever going to run out of money.

    Barcelona and Madrid are a very different case and there could be major problems here.

    Then there’s Spurs who owe over a billion. But that was spent building a new stadium, which is generating significant extra cash. Further the debt is in the form of long term (up to 35 Years) low interest fixed rate bonds. Its not so much football debt as commercial debt and the extra income more than covers the extra expenditure.

    Then you’ve got the Manchester United situation. Effectively the owners dumped their debt on the club. Its just been United have been so profitable that they’ve got away with it even if the club has suffered.

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