By Tony Attwood and Christophe Jost
And so slowly, very slowly, the media starts to get it. If you stop football for a while, then there will be economic consequences of mega-proportions from which many clubs may well never recover.
The Daily Star (yes really) said, “the loss of TV rights money, matchday revenue, European and domestic cup cash prize money could top the £1bn mark.”
The Express looked like they were travelling the same route with the headline “English football set for mega £10bn loss if season is over thanks to coronavirus epidemic.”
Except that reading into the detail we see that, “Manchester United have had £613m wiped off their share price in the last three weeks with the volatility of the stock markets. That is an unprecedented 25 per cent crash and if you factor in the similar issues with all other clubs in the Premier League that loss soars to £9bn.”
£9bn or £10bn it doesn’t really matter. The fact is that some rich people have invested a lot of money in clubs and now they are seeing that wiped out. Meanwhile the clubs can’t earn money from TV or live matches. It is a bit of a mess.
Back in October 2019 the Sun (yes I know, not the most reliable but here’s what they said) gave us Highest Premier League annual wage bills, 2019-20
- MAN UTD – £332m.
- LIVERPOOL – £264m.
- MAN CITY – £260m.
- CHELSEA – £244m.
- ARSENAL – £223m.
- TOTTENHAM HOTSPUR – £148m.
So using rough and ready figures we can work out something a bit like this.
Arsenal have £279 million income that is completely dependent on games being played. And Arsenal have a wages bill of £223 million. Take that £279m out of the income, and we clearly don’t have the cash to pay the £223m needed for the staff. The company quickly becomes insolvent.
Of course, this doesn’t just affect Arsenal, it affects everyone. Although the situation is far far worse for the Premier League clubs, as this breakdown league by league shows…
- Premier League: £100m
- EFL Championship: £36m
- League One: £6.9m
- League Two: £3.6m
These are very simple figures – without games being played, clubs are in difficulty.
Arsenal of course also have the problem that Leicester, Wolverhampton, and Sheffield United have pushed in ahead of them in the league table before football was shut down. Just in case you have forgotten here’s what it looked like…
We have mentioned many times the data we discovered on Wolverhampton borrowing against their TV income from next year. It is likely that to sustain their challenges Leicester and Sheffield United have most likely been doing the same sort of thing, to give them cash to buy players and pay higher salaries.
Even without being able to imagine that the virus would hit (and of course it was inevitable it would happen one day, but we all expected it to be some other generation’s problem) the policy of borrowing against future earnings to enable purchases to be made and higher wages to be paid, is dangerous, and is the most common cause of clubs either going bust or being put up for sale.
But now factor in a lock down at least until mid-June and clearly the 2019/20 season is over. Of course the gulf states could come in and purchase a few clubs each, but that given the suspicions that surround the doings of Manchester City, that might look to be no a very wise thing to sanction.
It is also possible that China could move in to purchase some clubs. After all they have seemingly come out of the problems of the virus and being ahead of the game will be excited by the opportunities of even more growth for their economy, as they offer (at a price) to help other economies recover.
Meanwhile we haven’t even seen the start of any shakeup happening at home. The Athletic recently ran an interview with Mark Palios, executive chairman and co-owner of League One’s Tranmere Rovers. His view was that “players will need to take pay cuts to help the professional game survive the coronavirus crisis or ‘they will not have an industry to play in.”
He went to acknowledge that £50m the EFL had given the club but added that the 71 clubs League clubs would need the same again if they were to survive until whenever the next season starts. His view was that there were two immediate issues: first, the clubs’ short-term cash-flow problem and second how to fund the clubs through July and August when they normally survive by using the income from season-ticket renewals.
And there were further steps he advocated. He wanted the current season to be completed, seemingly no matter how long that took, more money from the Premier League and a commitment to control wages. His exact words were…
“As an ex-player and [union] rep, I don’t say this as just an owner, but [players] do need to get real as to what is happening. I would again make the point that any ‘bale out’ funding package should contain some conditionality focusing on the area of wage control.”
He added, in talking to the Atheltic, “Football needs a salary cap, the simpler the better. It will be supported by the public and it will reflect the financial reality.”
Now that is interesting since elsewhere we have been looking back to the days of the retain and transfer system, which itself then led to the salary cap.
The salary cap has been a perennial topic in football, as we’ve tried to reflect on Untold – here are just a few that we’ve published when the idea has hit the news.
February 20th, 2009: How the salary cap will affect Arsenal
August 25th, 2012: Is it time for a wage cap in the Premier League?
September 9th, 2012: Salary cap or financial fair play within the league. Which clubs will vote for such moves?
June 23rd, 2017: Arsenal in player salary crisis as new PL regulations catch the club out.
But it has never happened. So when a club owner talks about the need for a salary cap now we can take it with a pinch of salt.
For even though this current crisis in football is of a type that has not been seen since 1919, there have been plenty more crises in the meantime. But major changes in football tends only to come about where a group of powerful clubs see such a move as their chance to make even more money (as with the formation of the Premier League).
Anyway, the Telegraph reported that if the season cannot be completed, Liverpool would be handed the league title and the top two teams from the Championship would be promoted.
There would however be no relegation, but five teams would be relegated the following season. This would mean extra fixtures in an enlarged league, but to make time the Carabao Cup would be junked for one year. As for who would qualify for Europe at the end of the season, no one seems to have worked that out yet.
Meanwhile on the financial front Uefa have relaxed the FFP rules so that tax bills, transfer instalments and wages that needed to be paid by 31 March can be held back and paid on 30 April. I am not quite sure how this helps, since there is unlikely to be any money coming in between those two dates – so a bill that can’t be paid on 31 March probably won’t be any more likely to be paid on 30 April.
Academy, stadium, women’s team and community funding could come from the owners, but the whole point of FFP was to stop owners putting money into other areas such as players and their salaries. If Uefa allow that, then presumably they will drop their case against Manchester City, since that is what they have been prosecuting the club over.
So far Uefa has delayed Euro 2020 to summer 2021 and ruled that all leagues this season must finish by 30 June or be considered cancelled. Aleksander Čeferin has deemed the idea that league leaders will be handed the title as ‘fake news,’ adding, “I can say that it’s not true. Our goal is to finish the leagues and we didn’t recommend anything like that to any association or any league.”
So everything hinges on June 30th and if chaos reigns what then? We suspect that the Bundesliga will close ranks behind a serious and competent leadership and become the leading league in Europe by having sorted themselves out properly. Italian clubs will make it through, as the clubs are embedded in society’s fabric, there is a lot of solidarity flowing both ways.
What’s more, in Germany the fans own 51% of the club in all but two cases so there is a fair chance of survival, and the other two are owned by Volkswagen and Bayer, so they’ll be ok.
But now, who is leading the way with the Premier League? Seemingly no one. Apparently we are going to finish the season, then everything will be ok.
2 Replies to “What happens next? In Germany its becoming clearer, but in the Premier League, less so.”
Yes, this article raise many important questions.
It is not just about if the Premiere League season can be finished this year, but also if restrictions can prevent the next season from starting with an audience.
I hope those who have analyzed the corona virus can tell us about it in detail because only then can make the mest medicines. The corona is a virus, and we know viruses keep mutating non stop, and vaccines against viruses have very little value when just one little mutation can render a vaccine useless, and as such flu vaccines did only help 1% according to study many years ago. Many mutations may not be bad thing as a virus can also mutate to become less dangerous, and there is a real chance of that. In Iceland that private company “de Code Genetics” tested 9768 persons, and they found 40 mutations of the corona virus. The Danish professor and researcher on viruses, Dr Allan Randrup Thomsen, has said the corona may well develop to become more contagious, but also likely less dangerous. And if less dangerous to the degree very few people will be at risk, then less restrictions needed, and the virus will die out as a real threat. It is not in a virus`interest to kill us a hoast, but if our immune system is not working well, then our immune defense can overreact so much it can kill us.
To the degree football matches will be played without an audience, then music should be played. This is also an an opportunity to create a special new
football show in which you can set up special situations with players not only from one or two clubs, and you could for instance test what would happen if putting say 4 of the best headers of the ball when a corner is taken, and only the keeper to beat. This is a not what I would advocate for regular matches, but it could be fun to watch and guess the outcome.
To catch up clubs may play football matches every second day as suggested in Spain, and if football players train correctly for better stamina without over training, then that should go well. The” secret” is to use muscles needed often enough every day, and I know this from self experience when feeling totally rested the next day after running 2 times 5 km every day using 18 minutes over 5 km. Feel free to ask me about this!
Borrowing against future earnings is what finally caused Leeds United’s financial collapse in 2003-4. (not the goldfish in the Chairman’s office)