The introduction of Financial Fair Play and sustainability rules binding over much of the high tier UK football clubs have seen almost universal compliance, finds a recent BDO report. Only smaller clubs have successfully sought to weaken the FFP rules to allow them to compete with bigger more established clubs. Overall, coupled with increased TV revenue, many clubs are finding themselves in sustainable positions, and some, are even profitable.
Football in the UK often means big business behind the beautiful game. The English Premier League revenues for the 2013/14 period are estimated at £2.8 billion. To better understand the financial side of the business, a recent BDO surveyed talked to 60 Financial Directors from clubs in the English Premier League (EPL), English Football League Championship (FLC), Football Leagues One (FL1) and Two (FL2) and the Scottish Premier League (SPL).
One of the reports key findings is that many of the Financial Officers at clubs are being prudent on the back of Financial Fair Play (FFP) and sustainability regulations now required by clubs. These rules require clubs to spend within their means and not take risks in their ambitions for success that may affect their long term survival. Of respondents, 98% say that they were now playing fair. More than half (58%) agree that the rules meet the principle objective of promoting sustainability, while almost a third (31%) says that they are a step in the right direction. “FFP is clearly promoting stability, and on balance this is supported by football finance bosses,” explains Ian Clayden, Partner at BDO.
One downside of the rules is that it prevents lower tier teams from competing for high value players that may give them a chance of moving into the higher tiers. The FFP rules were therefore softened slightly, as Clayden explains: “However, the debate on competition continues as clubs outside of the Premier League, and their aspirational investors with the desire and means to compete, fail to see how they can bridge the financial gap under the existing rules.” He goes on to say that: “This has, to some extent, been recognised by the Football League with a recent relaxation of allowable losses under FFP to a rolling three-year aggregate of £39 million. However, it remains to be seen whether this will be sufficient to enable Football League clubs to break into the top tier.”
The survey finds that the new TV broadcasting deal with the BBC and Sky – worth £5.1 billion over three years – is a 70% gain on previous contracts and is expected to boost Premier League club incomes by as much as £35 million on average. Even the lowest scoring Premier League clubs are expected to receive TV revenue of just under £100 million from the 2016/17 season. “The ground-breaking TV deal agreed earlier this year has got football clubs excited about their financial prospects,” says Clayden.
Overall, the vast majority of clubs (87%) say that they are in a financial position terms ‘healthy’ or ‘not bad’. Of the clubs however, only 40% are expecting to turn a profit before player trading and amortisation in their next accounting period. Across the different levels, considerable disparity is disclosed – 9 out of 10 English Premier League clubs expect to turn a profit, whereas only 12% of Championship and less than a third in Football Leagues 1 and 2 expect to do so.
With the boost in TV revenues, clubs are also expecting to increase their investment in player acquisitions and wages – with higher revenues. Caps on player salary growth of £4 million per year have been put in place to reel in the ever growing salary competition for top talent, following the Sustainability rules. Clayden explains, “In anticipation of this change in revenues, we are seeing top flight clubs spending more on strengthening their squads – but it’s likely to also benefit Championship clubs who will have a stronger financial base on which to develop home grown-talent.”