Big spending Premier League clubs record first loss since 2012 season

15 May 2017 Consultancy.uk

According to a new report from Big Four professional services group Deloitte, Premier League football clubs have recorded a combined pre-tax loss of £110 million; the first such loss since the 2012/13 season.

The New York head-quartered group’s research found that despite colossal revenues of £3.6 billion – up 9% from 2014/15 (£3.4 billion) – a combination of increasing amortisation debt charges and record transfer spending, meant the EPL clubs still lost money. The League’s collective wage-bill also continued to climb, growing by 12% to £2.3 billion.

The shock fairy-tale victory of Leicester City, last year’s unlikely champions, meanwhile undoubtedly also played a role in stimulating the English transfer market. Their squad, assembled for £54.4 million, prompted England’s elite clubs to spend more than ever before in the pre-season transfer window. Exemplary of this were Manchester United, whose current squad became the most expensive ever assembled according to the CIES Football Observatory, after a summer spending spree took their collective recruitment bill to over £600 million. Most infamously this included the world record £93.2 million spent recruiting Paul Pogba, as new manager Jose Mourinho set out to assure a return to lucrative Champions League football in the 2017-18 season.

English clubs make up half of the world’s top 10 most expensive squads currently, with Manchester City, Chelsea, Arsenal and Liverpool each attempting to keep pace with United. Tottenham, Everton, West Ham and Southampton also make it into the top 20, while incumbent champions Leicester are down in 27th on £114 million – having still doubled their own collective price-tag.

Paul Pogba and Zlatan Ibrahimovic

No concern yet

While this surprising loss might give any other industry pause for thought though, Deloitte expect that the league’s new three-year broadcast rights deal will see a return to record profits for clubs the 2016/17 season, in spite of these early figures.

Adam Bull, a senior consultant in the sports business section of Deloitte, commented that the mass spending of the Premier League is well backed up by the forecast TV rights windfall: “We have already seen to some extent the impact of the current broadcast rights deal, with clubs’ combined transfer expenditure over the course of the 2016/17 season reaching almost £1.4 billion – eclipsing the previous record set in 2015/16 by one-third and far exceeding any other league in world football.”

The long-term viability of this may still be in doubt however – with Deloitte’s Big Four professional services rival KPMG recently publishing its own study, suggesting Premier League clubs offer the “worst value for fans in Europe.” As clubs also pass their huge costs onto their supporters, KPMG placed five Premier League clubs – Arsenal – who faced a toilet-roll protest from visiting Bayern Munich fans earlier in 2017 at their entry prices – Chelsea, Tottenham, Everton and Liverpool – in a “red zone”, for expensive tickets measured against the value of their enterprise. European giants Real Madrid, Barcelona and Bayern Munich meanwhile, the three “most valuable” clubs - were all positioned in the “green zone”. While for now the clubs in the red zone seem capable of counting on fan revenue to also part fund their spending then, growing unrest amongst fans priced out of attendance could jeopardise what remains an essential part of their revenue.

Beyond the lofty broadcast revenue of the English Premier League meanwhile, research from consultancy firm BDO recently suggested that many teams outside the UK’s highest level are in a more financially precarious state. BDO found that 23% of English Championship clubs and 40% of Scottish Premiership teams believed their finances need urgent attention, or are a cause for real concern – evoking memories of 2008 FA Cup winners Portsmouth and former Scottish champions Glasgow Rangers’ respective periods of administration in 2012.

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