Premier League football approaches the cliff edge, but no one seems to mind

by Tony Attwood

An opinion poll by Opinium shows that 60% of the UK population disapprove of the way the government has handled testing for Covid-19.

The survey also shows that more people think the UK has done worse in handling the pandemic than France, Spain, Italy, Japan, Sweden, China, Australia, South Korea and Germany.  The only country considered to be worse than the UK at handling the crisis was the USA.

I mention this because I have been wondering how people feel the football authorities are doing in handling the football crisis.  I think people are waking up to what I see as the complete cock-up the government has made of the corona crisis, but have not quite realised what this means for football.

Of course many clubs in the Premier League did make a profit in the last set of figures released (2017/18) but others didn’t and when one looks at the Championship the situation looks particularly dire.

Loss-making clubs for 2017/18 in the PL include Bournemouth, Crystal Palace, Everton, Stoke City, Swansea City, Watford and West Bromwich.  Right on the brink were Leicester City with a £2m profit from a turnover of £159m, while other worryingly small profits were created by Manchester City (£10m on a turnover of £500m), and even Manchester United (£26m on a turnover of £590m – although the money available to the club is far less than this because of the way the owners take money from the club each year in “B” share dividends).

To be clear, these figures are not particularly affected by transfers (those are normally written into the accounts over four years), or stadium work (usually written into accounts over a much longer period).  These are the profits and losses made after balancing out all these sudden incomes and expenditures.

So 35% of the clubs in the richest league in the world were making a loss.  Add in the three clubs with profits to be considered on the small size, given the turnover, and half the Premier League – the richest league in the world – are not doing that well.

And that’s before the virus took hold.

The situation in the Championship was even worse. Despite the league creating its highest-ever revenue of £749m, overall spending on player and staff wages exceeded clubs’ revenue by 11%!  As a result Championship clubs ended up with a record-high total of £307m in pre-tax losses in 2017-18.  All the figures revealed thus far suggest that 2018-19 will be worse.

And already over half the clubs are spending more on wages than they make in income.  That’s not more on everything (like transfer fees, ground upkeep etc) but more than the wages bill alone.

In 2017/18 Wolverhampton were the biggest losers with a pre-tax loss of £57.2m.  In fact only five clubs made a profit in the Championship that year.

Now Wolverhampton is quite an interesting case here.  We’ve been covering their current situation in which they have already borrowed money from a high-interest bank, equal to next season’s first TV fee payment.   And we can see why – because they are trying to patch a gigantic hole in their accounts dating back at least to 2017/18.

So they are now spending money they have not yet earned – next season’s TV money.  But they did that before they knew that this season’s TV money might have to be repaid in part.  If it were, their finances which are already on the edge of a cliff, would fall off the edge.

The Athletic has said that if the season is not finished with the normal level of exclusive coverage for Sky and BT, the clubs will have to repay £762m.   That’s probably around £38m for Wolverhampton, plus the losses from not having gate receipts for the last games of this season.  I think they’ll have to borrow it.

And remember last summer (obviously not shown in any of these figures) was a time of very big spending on transfers.

So why are clubs behaving like this?

One reason is that if a club does go up to the Premier League their purchase and sales limit is increased to more than £100m, meaning some clubs run up huge losses gambling on getting into the Premier League.

This is exactly what Wolverhampton have done, and why they have already borrowed money guaranteed by next season’s TV income.  But such actions are very risky.  Now Wolverhampton like everyone else in the league has no income, and no guarantee that there will not be a mega-refund due to Sky and BT for the matches not played this season.  If that happens Wolverhampton will have to apply for special dispensation from the League to allow its excesses, but even if that happens it will simply not have enough money to pay its debts.

And what we are talking about here are not just a few clubs running into trouble, but lots of them.  For football clubs do not behave like normal businesses.

In a normal company, profits are set aside for future use.  Growth is moderated over time.  But not in football – money is spent because fans demand progress now.  Just look at the way that Arsenal bloggers are talking up transfers – we have almost 80 players tipped so far as coming to the club in the summer.

Of course the general response at such times is for fans to expect owners to put money into clubs, but not all can, and indeed not all will (especially if their other businesses are in decline as a result of the virus).

Obviously clubs funded by the oil states (Manchester City, PSG and Newcastle) will be safe, because even though the price of oil has dropped dramatically they’ve got enough money to keep them going, but many other clubs will have owners whose other businesses are also slipping into decline.  Mr Kroenke and family may have $10 billion in wealth, and it may have increased in the last financial year for which figures are available, but that money is in sports clubs and shopping areas.  I’m not sure the value of these is going to go up in the coming months and years.

So while football argues about playing ghost games, and finishing the season, and players worry about their safety in playing games, there is another issue lurking.   Through every fault of their own, many clubs have been living on the brink.   And now, because of the virus, they find themselves going over the edge.



One Reply to “Premier League football approaches the cliff edge, but no one seems to mind”

  1. I do hope that when this is all over , we, the supporters get to buy in to the club directly , especially in terms of live tv . Thus bypassing those tv companies who now control it all.

    I, personally would like to pay directly to the club to view our games . I do not see the need of a third party , who may not necessarily have my interest in their minds. I also will not like to indirectly fund our opponents .

    And I would hate to know that my money will be paying the salaties of those morons who pose as experts .Most of us have a hard times as it is in knowing that we pay our idiotic lawmakers, as the screw us over !

    Over the last few weeks , many internet platforms have emerged to stage medical and fraternal ‘meetings’ and conferences , all from the comfort of our own homes .

    Why not do this for live football , with close friends , and away from crowds ? I like to think that the Arsenal has enough fan support worldwide to sustain our club.
    Now is the time for those who have always demanded the club to ‘Spend more money ‘ to put up the cash !
    Up the Gunners !

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