By Sir Hardly Anyone
In 2019/20 it was shown that the number of Premier League clubs that exceeded UEFA’s 70% wage control guideline had risen to 13 out of 20. Even more bizarre two of the Premier League clubs at the time were shown to be spending over 100% of their income on wages.
Interestingly, those two clubs were clubs that tended to get a generally good press: Leicester City and Bournemouth. There was even a video circulating suggesting that Leicester is the best run club in the Premier League. Indeed in January 2022 the article Leicester City lauded as ‘perfect’ club was also being widely cited.
Part of this propaganda came from articles such as “The £230million profit Leicester have made on five sales since promotion” which have helped build the story of a small club rising ever upward.
However in February 2022 Inside World Football reported that Leicester “had posted a pre-tax loss of £33.1 million for the year to end-May 2021.” Given the chaos in the world of football at the time that didn’t look too bad, for it included a rise in turnover of just over one-third.
This was one of a number of success stories for Leicester, who won the FA Cup in 2021, but it turns out that the figures released at that time were improved because they rather craftily took a fifth of the revenue from the league and sponsorship from 2019-20 and moved it into 2020-21.
This was justified because matches were stopped after the 9 March 2020 game because of covid. So ok, it was a legitimate one-off accounting move, but still a bit like having £1000 in your house in moving it from the sitting room to the bedroom so the bedroom is now showing a hefty increase in profitability (and not asking why).
But the reality remains the cost of running the club is far in excess of the income. And this is dealt with by… well, first playing games by moving the accounting period around, as above, and then by selling players at a profit. Like the profit involved in selling Ben Chilwell’s sale to Chelsea.
There is a very interesting thread on Twitter from Swiss Ramble (@SwissRamble) in which the esteemed writer on the finances of football looks at how clubs have fared across the years before 2020/21 – the covid season.
Leicester’s revenue in the ten years from 2010/11 to 2019/20 is shown at £1.043 billion – by way of comparison Arsenal’s is £3.231 billion (while Wolverhampton is shown as £599 million). But as the figures also show Leicester spent £783 million on wages – considerably over the level recommended by Uefa as the maximum based on turnover.
Of course, they are not alone in this: as Swiss Ramble pointed out “Over the last 10 years, 32 of the 44 clubs in Premier League and Championship are above UEFA’s recommended 70% upper limit.” And Leicester were certainly not as bad as the 12 clubs that in that period spent over 100% of income on wages!
The big problem is that Leicester lost £51 million during the period Leicester won the league for the one and only time in their history as well as winning the Championship a couple of years before. They also got their one season in the Champions League – another big money-spinner. Yet they still made a loss. By comparison, Arsenal made a profit of £112 million across the same period.
OK Arsenal have a bigger stadium, but moving down the scale a bit Hull City made a profit of £11m, Barnsley £5m and Norwich City £3m. Profits are possible.
Obviously, Leicester can go on like this as long as a) their owners plough money in and b) the league’s rules allow them to continue to make year-on-year losses. But in 2021/2 Leicester sank down to eighth in the league, neatly reversing the position with Arsenal who the previous year had been 8th but now rose up to 5th.
Leicester’s income will be smaller this coming season without any European games, after two years of having that extra funding. And of course, the League might ignore their financial status and allow them to lose money year after year. But here’s the point: Leicester turned in a profit on player sales across the last ten years of just under a quarter of a billion pounds. But what they need now is to bring in better players to get back to the top seven or achieve another FA Cup win.
Last season Sports Mole suggested they would end up fifth and win the Europa. In a survey of all the leading football writers in the Guardian, the average position again was also fifth.
In fact almost everywhere one looks, the predictions for Leicester last season were the Europa Final and fifth in the Premier League. 90min was one such.
The reality was that Leicester were 17 points off fifth at the end of the season, and by chance they were exactly the same number of points away from relegation. And that financial hole is still there.
Their problem was that only six teams in the Premier League let in more goals than Leicester last season – but I suspect the media will want to tip them as coming fifth again. After all, no one has apologised for the predictive errors they made this time a year ago.
just noticed that Hector Bellerin is with the team in Germany a listed as shirt Nr 2 on Arsenal’s website.
Is he the solution to the right back position ?
Saliba and Torreira are on the team list. but have got no number, whereas AMN and Nelson have theirs
Why would anyone have to apologise for an incorrect prediction when surely it was only a guess or opinion anyway?
Have only just caught on a lot of reading , lots of reasons but fingers crossed can engage on here as in the past
Thought when I flagged up to you Tony that you would find Leicester City’s finances interesting and not the golden standard the press would have us believe
As I said to you they were worth an article and apologies that I never got around to writing it.
The fact that they haven’t signed any players is down to one thing and one thing only money . Just not what cash they have although the owe all over the place and most of those debts are attracting interest which runs at about 5-10% of turnover.
The new FFP regulations that are to be in place from Jan 2023-December 23 will allow clubs to spend 90% of income on wages, amortisation and agents fees. Whilst it’s difficult to get a precise handle on their income it’s likely that they will exceed 100%. The allowable sum then drops to 80% in 2024 and then 70% in 25. Buy a player now and it will still be an accounting factor for probably 5years to come so it’s just not about the here and now.
The suggestion is that the current top 6 will probably be ok in meeting the levels not just by keeping costs down for these clubs Income will grow ever more . Of course others will meet the % allowable but their problem is that they rely so heavily on TV money . They all need to grow commercial significantly or sell players
Leicester have to sell players for around the sum of amortisation they have in their accounts as a minimum but that is not enough to support the level of wage and agent fee costs.
Put another way Leicester probably have to sell a player for big money each season and by big money I mean around 2 times what they spend on players if they want to maintain the wages at the current level .