UK: Annual Review of Football Finance 2010

Last Updated: 12 July 2010
Article by Deloitte Sports Business Group

Most Read Contributor in UK, August 2017

Europe's premier leagues

  • Despite the challenging global economic environment, the European football market grew to €15.7 billion in 2008/09. The 'big five' leagues' revenues (England's Premier League, France's Ligue 1, Germany's Bundesliga, Italy's Serie A and Spain's La Liga) grew by 3% to €7.9 billion.
  • In their local currencies, the 'big five' leagues all managed to increase their total revenues in 2008/09. The Bundesliga, Serie A and Ligue 1 achieved growth across all three key revenue streams.
  • The Premier League increased its revenue by £49m (3%), however, due to sterling's deterioration against the euro, revenues fell by €115m to €2,326m in 2008/09. Despite this, the gap to the second highest revenue generating league, the Bundesliga (having moved ahead of La Liga), was still €751m.
  • The Bundesliga's revenue growth of €137m (10%) to €1,575m, the highest absolute and relative growth of any of the 'big five' leagues, was driven by an impressive €99m (16%) increase in commercial revenues.
  • La Liga growth of €63m (4%) to €1,501m was driven by combined growth of €93m by Real Madrid and Barcelona, the world's top two revenue generating clubs. The remaining 18 La Liga clubs recorded an aggregate fall in revenue of €30m.
  • Serie A's revenues increased by €73m (5%) to €1,494m leaving it in fourth place of the 'big five' leagues ahead of Ligue 1 whose clubs revenues exceeded €1 billion for the first time, totalling €1,048m (up 6%).
  • The 'big five' leagues' wages increased by €305m (6%) to exceed €5 billion for the first time in 2008/09. Serie A clubs' wages grew by €121m (12%), with wage inflation of 11% experienced by the Premier League (up £132m) and the Bundesliga (up €78m). La Liga and Ligue 1 had more modest increases of 4% and 3% respectively.
  • The Premier League and the Bundesliga were the only leagues to achieve operating profits in 2008/09, with the Bundesliga (increasing to €172m) overtaking the Premier League (falling to €93m) (£79m).
  • European club football is increasingly polarised; Europe's top 20 revenue generating clubs earned over €3.9 billion in 2008/09, 25% of the entire European football market. Amongst the 'big five' leagues La Liga is the most unequal with a revenue spread of 25 times between the biggest and smallest club. The Premier League and Ligue 1 are the most even with an equivalent spread of six times. The scheduled return to collective selling of broadcasting rights for Italian clubs in 2010/11 should reduce the revenue imbalance in Serie A, while the Spanish LFP is reportedly looking at the feasibility of such a change.
  • Whilst the 'big five' leagues have shown admirable resilience to the economic climate in terms of revenue generation, the imbalance between revenue and costs has, in the main, worsened. With UEFA's focus on greater cost control for clubs planned to be effective from the 2013/14 season, clubs will need to start preparing themselves now to achieve a more sustainable balance between their level of spending and income generation.

Revenue and profitability

  • The overall revenues of the 92 top English professional clubs exceeded £2.5 billion for the first time in 2008/09, an increase of almost £100m.
  • The challenging economic environment restricted revenue growth such that total Premier League club revenues just failed to reach £2 billion (up 3% to £1,981m). By contrast, Championship club revenues increased by 12% to £375m, helped by a change of mix in clubs in the division.
  • Broadcasting continues to be the biggest contributor to Premier League club revenues at 49% of total revenues. 2008/09 was the middle season of the current £2.8 billion Premier League broadcasting contracts.
  • Matchday revenue increased by 2% across all the Premier League clubs. Commercial revenues fell to £449m (down 1%).
  • The next set of Premier League broadcast rights contracts, which start in 2010/11, are expected to drive revenue to £2.2 billion. The total value of these rights packages has increased by c.30% to £3.6 billion, with almost all of the increase coming from overseas packages which have more than doubled in value to £1.4 billion over three years.
  • From 2009/10 Football League clubs have benefitted from new three-year broadcasting deals with the BBC and BSkyB worth £264m. Additionally, overseas rights have increased by 300% to £24m over the same period highlighting the attractiveness of all levels of English football to the global market. When combined with the increased parachute payments and enhanced solidarity package from the Premier League, we forecast that in 2010/11 Championship revenues will be c.£100m higher than in 2008/09 at c.£470m.
  • Premier League operating profits fell by more than half to £79m, their lowest level since 1999/2000, primarily owing to wage inflation (£132m) being greater than the £49m increase in revenue. Profitability particularly weakened at a number of clubs outside of the 'big four' who invested heavily in players either to strive for European qualification or to protect their Premier League status.
  • The polarisation of operating profits in the Premier League is stark. Together Arsenal, Liverpool and Manchester United and the newly promoted clubs collectively generated operating profits of £196m. By contrast, the other 14 clubs recorded combined operating losses of £117m.
  • It is likely that operating profits will have reduced further in 2009/10, as many clubs will have committed a portion of the future uplift in revenue into their player budgets before the income is received.
  • The new broadcast contracts provide the immediate opportunity to substantially boost operating results and, as a minimum, reduce pre-tax losses to more sustainable levels. Most clubs must ensure that this level of profits is the floor as the economy emerges from recession, like many other businesses, they need to improve their profitability in order to repair their balance sheets.
  • The 92 top professional clubs contributed around £957m to the Exchequer in 2008/09, a 11% increase on the previous season. The introduction of the 50% income tax rate for high earners is likely to see this total pass £1 billion for the first time in 2009/10.

Wages and transfers

  • Total wage costs across the 92 top professional football clubs in England exceeded £1.8 billion in 2008/09 following a £191m (12%) increase. Premier League clubs were the largest contributor to this growth as their total wages increased by £132m (11%) to over £1.3 billion.
  • The wage bills of Premier League clubs have now recorded double digit percentage growth for three years running and total wages have grown by in excess of 55% (£474m) in that period. With wages growth outpacing revenue growth in 2008/09, the Premier League's wages/revenue ratio increased to 67% – a record high. This key performance indicator increased in all four divisions in 2008/09.
  • The most rapid inflation in Premier League wages has been in the group of 13 clubs outside of the 'big four' and the three newly promoted clubs as the pressure intensifies for them to secure European qualification or to avoid relegation.
  • However, whilst there continues to be a strong correlation between wage costs and league finishing position at the very top (top four) and the bottom (relegation places), there is an extremely weak link for the clubs in the middle. This again highlights that money spent on wages is certainly no guarantee of success for the majority of Premier League clubs, and suggests many clubs are getting questionable value for investment in player wages.
  • The Championship saw total wage costs in 2008/09 increase by £45m (15%), the third successive year of double digit growth and the largest absolute year-on-year increase for nine years. With total wages in the Championship increasing by almost 50% (£108m) in three years, against revenue growth of £57m, the wages/revenue ratio has jumped from the low 70s to 90%. The correlation between wage levels and Championship performance remained extremely weak, except for a few clubs at the very top of the league.
  • Overall, The Football League is now spending 86% of its revenues on total wages, with only an £82m surplus of revenue over wages to manage the rest of the business, fund operating costs, and consider transfer budgets, which is a huge, and ultimately unsustainable, financial challenge.
  • Gross transfer spending across the 92 top professional clubs increased marginally (1%) to £784m in 2008/09 (up by £5m), with £713m (2007/08: £664m) spent by Premier League clubs.
  • A buoyant domestic transfer market, with the value of intra-Premier League deals increased by over 85% to £298m in 2008/09, meant more money stayed within English football with net transfer payments (i.e. to overseas clubs and agents) decreasing to £220m (2007/08: £276m). This increased domestic activity is evidence of the impact of sterling's decline against the euro and that many of the world's best players are already located in England.
  • Agents' fees increased by 4% to £80m in 2008/09, such that these payments represented 36% of the total net transfer spending (up from 28% in 2007/08). Five clubs were responsible for more than 50% of the total amount paid to agents.
  • Manchester City's ongoing heavy investment in their squad resulted in a record single year's gross spending of £138m (net spending of £125m). Tottenham Hotspur had gross spending of £119m but recouped £72m through player sales, while Manchester United's sale of Ronaldo for a reported £80m meant they generated net player transfer receipts.
  • Ten Premier League clubs had net transfer spending of less than £20m with a further six being net sellers. These findings perhaps provide an initial sign that many clubs were starting to reduce transfer spending, either through choice or necessity. Falls in transfer activity in the summer 2009, and particularly January 2010, transfer windows provide further evidence of this shift.
  • The growth in wages is more difficult to slow down given existing three-four year player contracts but must nonetheless be reined back to address clubs' declining profitability. Genuine performance related pay has its place to play in delivering this, although it is not without its challenges.

Stadia developments and operations

  • In 2008/09 capital expenditure on stadia/facilities by English clubs rose to £196m, the third highest figure since the formation of the Premier League. More recently, the economic downturn has slowed certain major planned developments, primarily due to the unavailability of funding. The full impact on such investment will not flow through until next year's Annual Review and beyond.
  • Both the Championship and League 1 saw record levels of investment in 2008/09 – mainly due to new stadium builds for Cardiff City and Brighton & Hove Albion.
  • Most new stadium projects continue to be at Football League clubs. In 2008/09, investment by Premier League clubs in stadia/facilities was at its lowest level since 1996/97, mainly because there were no major construction projects on-going for Premier League clubs. The two biggest spenders at Premier League level were Tottenham Hotspur and Liverpool, whose new stadia are both yet to reach the construction phase.
  • Combined 2009/10 attendances for the Premier League and Football League exceeded 30m – a level not seen since well before the introduction of all seated stadia. " Average attendance for the Premier League in 2009/10 was down 4% to 34,215 per match, although this was predominantly due to Newcastle United's relegation.
  • Average capacity utilisation in the Premier League was unchanged, and stayed above 90% for the 13th consecutive season, showing the continued attractiveness of Premier League matches despite the economic downturn.
  • Total Football League attendance in 2009/10 hit 17m for the first time since the Premier League was formed, showing the lasting appeal of the Football League as a live entertainment spectacle.
  • Looking at matchday revenue, we expect to see the effect of the economic downturn – notably on corporate hospitality revenues – in a small negative impact on average revenue per attendee in next year's Annual Review.
  • For the first time, two clubs – Manchester United and Arsenal – each generated over £100m in matchday revenues in 2008/09. Together, these clubs generate almost £2 in every £5 of matchday revenue across the whole league.
  • Looking forward, it appears that the public's appetite for live football remains extremely hearty, and over recent seasons clubs have adjusted prices to help maintain attendances. Securing funding and in some cases planning permission for new stadium developments will remain a challenge. However, new stadia continue to be constructed across the 92 clubs and a decision by FIFA in December 2010 to appoint England as hosts for the 2018 World Cup would provide a boost to investment.

Club financing

  • Premier League clubs' net debt at the end of the 2008/09 season increased to £3.3 billion (2008: £3.2 billion). This includes £1.4 billion of non-interest bearing 'soft loans' from club owners. If this soft loan type debt were to be reclassified as, or swapped for, equity the total net debt in respect of Premier League clubs would reduce by around 40%.
  • The two largest assets on Premier League clubs' balance sheets at end of the 2008/09 season were the £1.9 billion carrying value of tangible fixed assets, reflecting the investment of over £2.7 billion investment by English clubs in facilities over the last 17 years, and the carrying value of player registrations costs which exceeded £1 billion for the first time.
  • Almost two-thirds (over £1.9 billion) of the total net debt related to Arsenal, Chelsea, Liverpool and Manchester United. On the positive side of the balance sheet, in aggregate these four clubs had a carrying value of £1 billion in respect of investment in facilities and £385m from investment in players.
  • Net bank borrowings have decreased by £200m since summer 2008, whereas 'soft loans' have increased by £186m, in part reflecting the reduction in availability of bank debt financing.
  • The overall net interest charges in respect of Premier League clubs in 2008/09 was £184m, with 12 clubs failing to generate sufficient operating profits to cover interest charges. However, the non-interest bearing nature of loans at a number of clubs help to keep the net debt service charge at under 6% of the overall debt balance.
  • By December 2009 Sheikh Mansour Bin Zayed Al Nahyan's had invested £440m in Manchester City's playing squad, operational management and infrastructure. This has been the most significant investment by an owner since Roman Abramovich, whose overall investment in Chelsea has grown to around £725m over six years.
  • In February 2010 Portsmouth became the first club to enter Administration whilst in the Premier League. Unsurprisingly, unaffordable expenditure on players and lack of financing were the key causes of the club's financial demise.
  • Reported net debt in respect of Championship clubs at the end of the 2008/09 season had risen to £406m (2008: £327m), funding much of an aggregate pre-tax loss of £160m. It will remain the case that, in general, a Championship club can only hope to significantly reduce its net debt in the short to medium through either promotion to the Premier League or an injection of equity funding from its owner.
  • Below the top two divisions, managing a club's financial position is a challenge from one season to the next. Legacy debt issues and the risks taken by some boards of directors will, without correction, inevitably lead to further insolvency cases in the seasons to come. Chester City, Darlington and Stockport County all entered Administration in 2009.
  • Increasingly there have been initiatives from the football bodies to promote sustainable business models for football clubs. In future, we expect there will be a more intense scrutiny of a club's ownership and debt position from supporters and the media. Enhanced disclosure and communication can help educate this interest and reduce misunderstandings and instability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.