English football scales back spending amid Covid-19

18 September 2020 Consultancy.uk 4 min. read
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Half of English football clubs describe their finances as in need of attention or a cause for grave concern, according to a startling new study of the industry. Despite record-breaking broadcast revenues having been put in place in 2019, the coronavirus pandemic has exposed many of the spending practices of clubs across football’s top four tiers as unsustainable.

Professional football is a lucrative yet financially vulnerable industry. The 2020 coronavirus pandemic has already demonstrated that the sport’s finances are particularly finely balanced, as while football seemed to be enjoying a seemingly endless boom in recent years, the abrupt suspension of the game saw even football’s elite competitors take a massive financial hit.

This was illustrated by a report from KPMG which estimated that if Europe’s top five leagues had have cancelled the remaining games of last season, it could cost them a combined €4.1 billion.

Being the biggest earner, the top flight of English football would have made the biggest losses in the event of a scrapped season – but according to a new study from BDO, clubs all the way down the league structure are suffering from the economic slowdown caused by Covid-19. According to the research, while only around 20% of clubs in the English Premier League (EPL) eventually partook of the Government’s job retention scheme, almost all the clubs in the Championship and Leagues One and Two were forced to do so, thanks to the hit their finances took from the loss of gate revenue.

How would you rate you clubs current financial position

The inflated commercial income and broadcast fees of elite football meant many Premier League teams were able to rely on deferring sales taxes to help shore up operations. The top-tier of clubs took more Government support in this form than any other level of English football – with top clubs also availing themselves of employment tax deferrals at a similar rate to clubs further down the pecking order.

Despite these measures, the majority of English football clubs now find them in deteriorating situations, with some staring at the prospect of collapse. Months after domestic club revenues topped £6 billion in 2019, with a television rights package worth more than £3 billion per year running until 2022, half of clubs told BDO that their finances were in need of attention, including around 5% who said they were on the verge of administration.

With Macclesfield Town having just become the latest lower league club to face being wound up – owing more than £500,000 in debt, including £190,000 in taxes – the threat of more clubs sharing the fate of Bury FC is becoming a reality.

Last season the perfect storm of a neglectful manager, a turbulent market, and a regulator seemingly asleep at the wheel, saw the historic club close the doors to Gigg Lane at the end of August 2019, having been kicked out of the English Football League (EFL) after failing to provide proof of its financial sustainability.

Are you likely to increase or reduce your transfer budget for 2020/21

In a bid to avoid such a collapse, many clubs are planning to scale back their spending. For several years, player wages and salaries have been increasing, but this was being shown to be unsustainable even before the pandemic. Now, many clubs are facing reductions in first team squad sizes, in order to control their salary costs.

In BDO’s 2019 version of the same survey, when looking forward to 2019/20, only 6% of respondents expected to increase their squad sizes, but 38% expected to increase their costs. This picture has changed dramatically, and now only 5% of clubs are expecting to increase salary costs – a figure which falls to 0% outside of the EPL and Championship – while 60% of clubs plan to decrease their squad size and 74% anticipate a decrease in salary costs.

Similarly, the free-spending ways of elite football in the UK look certain to become a thing of the past, as clubs look to strengthen their bottom-lines. When asked if they would increase or decrease transfer spending in the coming year, the vast majority of Premier League teams opted for the latter. While there are some exceptions – most notably Chelsea and the Manchester clubs – most top flight residents will be living more frugally than the season before.

This is echoed in the Championship to a lesser extent, but contrasted by the majority of League One and Two clubs, who intend to keep their budget the same. In the coming year, this might leave those clubs more exposed – especially if there is a second lockdown in the near future.