28th November 2016












18th December 2018


The balance of probability indicates that it is highly unlikely that Manchester United will qualify for Champions League football for the 2019-2020 season unless they win this season’s competition given the club’s current erratic Premier League form. It has happened before, in 2014-15. The club finished 7th and 5pts away from a Europa League place at the end of the previous season and thus missed out on UEFA’s participation and prize-winning payments.

The resulting financial hit was significant. Revenue dropped £38m year-on-year to £395.18m, pre-tax profits dropped from £40.50m to pre-tax losses of -£3.57m and the club’s economic profit performance moved from a £730k loss to £39.77m. For a club that is almost designed for regular European competition, the non-qualification status must have been a shocking interlude.

The sacking of Jose Mourinho is the latest step in a process of decline at the biggest club by revenue in the land. But our own perspective sees a decline not just in on-pitch performance and player transfers but in the financial strength of the business as a whole.

On the surface, Manchester United appears to have grown fat on the back of a hugely successful drive to increase commercial revenues.


The influx of sponsors/commercial partners and their money has propelled the club into one of the three most valuable sporting clubs on the planet. In revenue terms the annual total is just £10m shy of £600m. Pre-tax profits, although very modest, are a regular feature and the club has invested over £431m on a net basis in new playing talent since 2014.

But despite the big numbers, the club has failed to emulate the heady heights of a Premier League title since the retirement of Sir Alex Ferguson in 2013. Does a Europa League title count? Yes it does, but it sits uncomfortably in the trophy cabinet besides the equally twitchy FA Cup win of 2015-16 and the League Cup win of 2016-17.

There is no doubt that Mourinho is an exceptionally good manager but his last days in office were apparently dominated by his inability to get the best out of predominantly his own multi-million pound acquisitions. Add to this the failing and falling output from the club’s long-admired talent factory and it becomes very clear that on the playing side of the club at least, a change was necessary.

But the malaise on the pitch is aptly matched by a creeping financial malaise off it. United is a sporting financial behemoth. It has been clear that the prevailing thinking is that it can spend its way back to success. A minor hiccup along the way in 2014-15 with no European competition participation whatsoever seemed to hardened the resolve to spend more, which it did. (see below). Unfortunately, the near neighbours had the same idea and actually outspent United on a net basis ie £514.20m vs £431.30m, from 2014.


Inevitably the costs mount up and so the financial profile starts to take on a very different look. The following movement note which compares 2013 performance with that of 2018 presents a perfectly clear view of the deterioration in United’s financial position, primarily as a result of investment in staff ie players.


When viewing the business using the economic profit measure – which includes all the costs of capital used by the business including equity capital – there is a clear downward trend since Sir Alex Ferguson retired. The business is still in reasonably good shape but what should be a profitable enterprise from an economic profit standpoint is anything but as costs rise faster than revenue without those important returns on the pitch.


The probability of a lack of European competition in 2019-20 together with an ingoing trend of increasing economic losses points towards a lack of an overall strategic plan other than increasing revenue without too much emphasis on the costs of doing so. This is a common failing in business and has been the root cause of many a high-profile failure eg Carillion. The following graphic highlights the negative effect on the overall financial profile (as mentioned at the start of this piece) when the club is restricted to domestic competition.

Finally, there is one local rivalry to speak of which sums up very neatly the magnitude of the club’s recent decline. Since Sir Alex retired the club has given up 77 Premier League points to a Middle Eastern-owned Manchester City. It might have cost the Sheikh over £775m in economic losses but the Blues are on the cusp of eclipsing the Reds. Who would have thought it just over 5 years ago?

















20th November 2018


The Premier League continues to accumulate revenue records with almost monotonous regularity. However, is there a direct link between the wealth of clubs and on-pitch performance?  Our work suggests that the relationship between money and playing performance is more complex than a simple linear proposition.

For example, the top 6 clubs by revenue i.e. Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham Hotspur, despite producing positive “profit before tax” numbers, have not achieved a collective economic profit since 2009. Chelsea and Manchester City are collectively responsible for £1.3bn of the £1.9bn of economic losses accumulated in the division since 2009.

The notion that the Premier League, with its current economics, is the modern equivalent of the “Gold Rush” is quite simply wrong. The record shows that over a period of 9 years, owners have given their wealth to other stakeholders to the tune of £1.9bn, predominantly to players and their agents.  This is despite a rate of revenue growth that most other industries can only dream of.

By developing the Economic Profit concept further, we believe that valuable and more detailed financial insights can be uncovered by benchmarking all the clubs using a single index.  Accordingly, we developed the vysyble Football Profitability Index® (FPI) which measures the economic efficiency of each club based on the simple relationship between revenue generated and economic profit. In other words, how much revenue is actually translated into an economic surplus?

It is expressed as EP/R ®.

For instance, an FPI value of 100 represents a break-even position i.e. £0 economic profit/loss per £100 of revenue. An FPI value of 95 represents an economic loss of £5 per £100 of revenue i.e. 95-100. An FPI value of 105 represents an economic profit of £5 per £100 of revenue ie 105-100.

The index reveals some very interesting features about the inherent dynamics within the Premier League particularly when it comes to the business of relegation. The following table shows each of the three clubs at the bottom of the Premier League from 2009 to 2017 with their FPI values and FPI ranking within the Premier League division.

If the top 6 clubs by revenue are excluded from the analysis, then we see that the lowest-ranking clubs by FPI value – and therefore the most economically inefficient clubs – have been relegated every season for the last five seasons when accounts have been available. As a matter of interest, the clubs that were ranked by FPI  value in 19th position in 2016 and 20th position in 2017 were Chelsea and Manchester City respectively.

An alternative view is to take the same table but to highlight the most economically efficient clubs in the division.

When viewed through this lens, in four of the last nine seasons the most economically efficient club has been relegated.

Surely something is amiss?

We do not think so. In fact, we think that there are a number of factors at play here.

As we have already mentioned and despite impressive revenue growth, the Premier League is economically-challenged primarily, but not exclusively, to Chelsea and Manchester City; two clubs which have in effect warped football’s financial fabric in a similar manner to that of a black hole warping time and space.  In the desire to remain competitive and attract the “best” players, other clubs have been sucked into the gravitational pull of ever-increasing player wages which in turn raises costs. The dynamic derives its energy source principally from the increasing TV revenues.

The relegated clubs with low index values e.g. QPR, Aston Villa, Sunderland etc have over-extended themselves and in effect taken on commitments way beyond their economic capacity in a “dash for growth” that has unfortunately failed with damning consequences. Getting too close to the financial “black hole” can have very serious consequences.

The opposite position is aptly illustrated by those clubs that have chosen to preserve their financial sanity over and above any notion of staying in the Premier League ‘at all costs’. Whilst the lucrative revenues of the Premier League has clouded rational thought on occasion, the preservation of the balance sheet for certain clubs is paramount, regardless of performance on the pitch. In this regard, the business strategy is both sensible and pragmatic and accommodates a longer-term view in that the ability to return and fight another day prevails.

Indeed, the combination of relegation with a healthy balance sheet provides for an increasingly quicker return back to the top flight when compared with clubs with damaged and battered balance sheets, as Burnley FC has ably demonstrated on three occasions since 2009.

Given the index output, is it possible to predict the relegation candidates of the future? The very nature of reporting accounts means that the ‘view’ is almost out of date as soon as it is published as there is usually a 6-9 month period after the accounting year-end before the numbers are released to the public.

Occasionally there are pointers. For example, there is an inevitable decline in economic performance over time once clubs have experienced a first season in the Premier League following promotion and the accompanying wall of revenue money when compared to Championship-level earnings. However, with one-third of promoted clubs experiencing relegation during that first season, the financial fillip of promotion can be relatively short.

Over longer periods of time, clubs eventually fall into a phase that we term ‘economic exhaustion’ whereby the annual FPI value either consistently falls albeit with small increments or sits on the breakeven line until the club simply does not have the economic means to compete and is subsequently relegated.

Stoke City’s recently released 2017-18 accounts display all the hallmarks of a club that has fallen into this trap with a marginally positive (ie above 100) FPI performance from 2013 up to 2016-17 before sharply dropping in 2017-18 with an FPI value of 72.49. The club was thus operating at a much higher level of economic inefficiency than big-spending Manchester City (FPI value 89.30) during its relegation season.

It would seem that the club’s undoing was a combination of rising wages and a drop in revenue which realised an economic loss of £35m despite 2017-18 being the second year of the usual three-year domestic TV cycle.

Whether or not Stoke City has the dubious honour of the lowest FPI value in the Premier League for 2017-18 remains to be seen, but it is the lowest value achieved by a non-top 6 club since Aston Villa’s 65.82 in 2015-16. Nevertheless, Stoke City shows that the relationship between poor economic performance and relegation is maintained.

Conversely, the proposition that the top performing club in economic profit terms is a candidate for relegation is much more problematical and less consistent.

Overall, whilst it might seem obvious that poor financial management leads to poor on-pitch performance, the continued and widespread use of the revenue number as a measure of financial performance provides for a wholly misleading view. The desire to maintain Premier League status and thus revenues has driven a number of clubs beyond the margins of financial safety and without consideration for the overall financial wellbeing of the club.

Nevertheless, the Football Profitability Index has shown that what matters off the pitch can be just as important as what matters on it. With that in mind, it may be that the most important position in a football club is not the manager/coach but the Finance Director.





Previous Entries

9th October 2018A Different View – Why fans ought to be acutely aware of football’s financial dynamics

17th August 2018The End of the Beginning – La Liga heads west to conquer new worlds

9th August 2018Reaching for Sky – the sequel – Latest offer price for satellite TV company is good for shareholders, less so for prospective owners.

8th August 2018American Dreams – English Premier League economic dynamics and American money – is a Euro Super League the next step?

3rd August 2018Mall Administration – Retail Property Co. bonus payouts at odds with increasing shareholder value.

20th April 2018Goonernomics Part Deux – The departure of Arsene Wenger…

18th April 2018The Price of Everything – Tesco’s latest numbers offer little in value.

12th April 2018Say What? – WPP’s very mixed message.

14th February 2018In Case of Emergency – Premier League’s UK TV rights auction comes up short.

7th February 2018 – Lost in Transmission – Top Premier League clubs look beyond domestic TV rights.

4th December 2017A Billion here, a Billion there… – The Premier League reaches a major milestone, quietly…

25th November 2017Getting out of Toon. – Is Mike Ashley pitching the sale price of Newcastle United at the right level?

16th October 2017 – Goonernomics. How the ‘Bank of England’ club falls short of its North London neighbour.

25th September 2017 – Highlights. More record-breaking numbers from the biggest football club in the land, but no economic profit…

23rd September 2017Football’s Economic Back Pass. A guest blog for the Soccernomics website.

12th September 2017 – Crystal Balls-up. Changing strategic direction is not a good idea when you haven’t looked at the economics.

27th July 2017Football’s Summer of Money and the £65 pint of beer. The sport that just can’t spend enough.

11th July 2017Football Special. Observations following the launch of ‘We’re So Rich…’

9th May 2017Illuminating, non? Political energy lacks vision and power.

2nd March 2017Claudio’s Burden. The price of failure outweighs the price of success.

12th January 2017Shopping for Godot.  A never-ending quest for value in Retail.

27th December 2016Reaching for Sky. Is Rupert Murdoch’s £10.75 per share a fair price?

6th December 2016Auld Lang Syne. A reminder from history of the damage that poor financial planning can cause.

1st December 2016Fork Handles? Four Candles? Tesco’s blurred strategic vision.

27th November 2016Football’s Instant Replay. Financial warning signals for the top English Premier League clubs.