Finances of UK football clubs increasingly sustainable

30 September 2015 Consultancy.uk

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).

Sustainability

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.

Finances of UK football clubs increasingly sustainable

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.”

TV revenue

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.”

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Late payment culture cripples productivity of SMEs

29 March 2019 Consultancy.uk

UK SMEs are seeing their efforts to grow stifled by late payments, causing thousands to enter insolvency proceedings each year. According to experts from Duff & Phelps, this also has a major impact on the UK’s economy, meaning late payment culture must be tackled if the country is to dodge yet more economic stagnation in the shadow of Brexit.

Small and mid-sized enterprises in the UK face a myriad of pressures at present. Brexit anxieties are keenly felt by SMEs, with more than nine in 10 suggesting recently that economic conditions have worsened in the last 12 months. 66% of SME leaders also expect conditions to further worsen in the coming year.

At the same time, firms are keen to see value for money from investing in external expertise. Consulting fees which weight much more heavily on smaller firms, who spend £60 billion per year on professional services, but feel that more than £12 billion of that figure is wasted on unnecessary or bad advice.

Late payment culture cripples productivity of SMEs

Above all, however, SMEs are extremely vulnerable to late payments, and, according to a new study, the situation is only getting worse at present. According to corporate rescue consultancy Duff & Phelps, small businesses in the UK are facing a collective bill of £6.7 billion per annum due to late payments by other companies, while the average value of each late payment now stands at £6,142. This has risen from £2.6 billion in 2017, illustrating the plight of SMEs, particularly with uncertain economic times ahead.

Indeed, the spike in late payments has already caused significant productivity issues for SMEs, which in turn compromises their financial stability. With staff wasting hours chasing down late payments and businesses becoming preoccupied with short-term cash flow problems, they are less able to concentrate on creating new value for the firm, which in many cases gradually slides toward insolvency.

Small businesses across the UK are facing major cash flow pressure, leading to increased financial instability as a direct result of a late payments culture. This is likely a big driver of the UK’s 20% boom in insolvencies over the last three years, especially as it has a knock-on effect on other SMEs within the supply chain of those struggling firms. Approximately 50,000 small businesses fail each year because of late payments, amounting to a shortfall of more than £2.5 billion for the UK economy. 

Commenting on the findings, Paul Williams, Managing Director, Duff & Phelps, said, “In this modern era of technology, which is designed to enable business agility, late payments are particularly galling as there are no excuses. The day of the ‘cheque is in the post’ is long over!... More can be done to avoid businesses reaching this situation in the first place. SMEs underpin the economy, so prioritising timely payments will help allow business owners to focus their time and energy on providing good quality products and services and adding value to the customer experience, rather than chasing outstanding payments.”

The UK Government currently promotes its voluntary Prompt Payment Code to encourage good practice, but late payments by larger companies remain a common pain point for many SMEs. There may be hope for an end to late payments, however, following an announcement in the Spring Statement from Chancellor Philip Hammond. The Government aims to crack down on the practice, with Hammond stating big companies should hire a Non-Executive Director to be responsible for reducing late payments to small suppliers. The statement also advises that organizations publish payment practices in their annual reports.