25th April 2021


25th April 2021

It is often said that a week is a long time in politics. Given the course of events since the afternoon of Sunday 18th April 2021, it would seem that the term is also applicable to football.

The European Super League (ESL) was announced with all the fanfare of a hastily convened last-minute stag night just before a shotgun wedding with a dozen seemingly willing participants determined to misbehave. And the citizens of football’s bailiwick did not like the intended disruption one little bit.

One week later and there is talk of recrimination, reprisals, fines, bans and other punitive measures designed to teach the miscreant clubs a lesson. The spectacular failure of the project just 48 hours after its ‘reveal’ has hardened attitudes among the fanbase. As any sensible business owner will tell you, alienating your customers/fans is commercial suicide. Just ask Gerald Ratner if you remain unconvinced.

However, vengeance aside, the underlying reasons why we all arrived here in the first place have not disappeared. If anything, the next few weeks will magnify them even further when all the Premier League clubs will have released their annual accounts for 2019-20 and our own interpretation of the numbers begin to hit the media.

Back in 2016 when we first reported on football, our ability to spot the reasons why a European Super League was such an obvious route for the bigger and, in particular, the US-owned clubs was down to the data. It was that simple. No fantastic algorithmically-charged models were used in the evolution of our predictions. Just the application of a very transparent financial measure (economic profit) which accounts for all the cost of conducting business and our consultative experience derived from working in other industries.

As the seasons have rolled on, the financial performance of football has markedly deteriorated even though football’s auditor of choice announced ‘a new era of profitability’ following the end of the 2016-17 season. Unfortunately, this is what happens when you pin your shirt to the wrong measure.

Granted, the Premier League’s clubs had indeed achieved record economic profits that year (£224m in economic profits vs £537m in pre-tax profits). Indeed, the auditors viewed it as transformational, yet we viewed it as an aberration given the historical record of poor financial performance exhibited by the clubs in previous years.

In the following year of 2017-18, the clubs barely scraped an economic profit (£31m) but pre-tax profits remained buoyant at £449m. The auditors extolled football’s ‘continuing financial success’. We thought otherwise and so it proved in 2018-19. This was the last year of the cyclical Premier League’s 3-yearly TV deal. The clubs achieved a collective and record economic loss of £599m despite a record revenue of £5.15bn in a year well before the first vestiges of a SARS-type virus started to percolate in the Pangolins of Southern Asia.

Now that we are another year down the road, the effects of the first months of virus-based lockdowns and the cessation of football in 2020 are being reflected in club accounts. When compared to previous years, 2019-20 will be marked as financially catastrophic. But it is part of a longer-term trend rather than the exception. The virus has accelerated what was already present, which is a refusal to control costs as a symptom of weak and ineffective governance.

The 12 ESL clubs are part of the problem but are not THE problem. FIFA, UEFA and the local regulatory bodies are just as culpable in pandering to the wishes of the select few whilst ignoring the collective demands of the game as a whole. The inconsistent application of a set of rules which uses financial measures that obscure the true performance of the clubs is not particularly helpful either. To some extent, the bigger clubs had little choice once the folly of their overspend started to hit home. How else were they going to safeguard their excesses and protect their money supply at the same time?

But the seismic shift in attempting to gain more control over revenues, outgoings and risk was to eliminate the very essence of sporting endeavour in favour of the route to profit. The wrong stuff indeed.

And when looking closer to home, the financial imbalance is not just confined to the Big 6 clubs.

From 2009 to date, we have seen that 83 Premier League club balance sheets have achieved an economic profit from a total of 236. That’s a success rate of 35%. This is a poor rate of return for any industry, let alone football.

When we look at club economic performance over the most recent 5 years of accounts, the Big 6 do occupy four of the top 10 positions in terms of overall economic losses. However, in amongst the potential ‘escapees’ resides a collection of clubs with seemingly ambitious owners who were either keen to preserve Premier League status or who had coveted it so much as to spend whatever it took to attain it.

The exception, perhaps, is Everton. Following the emergence of the ESL last weekend, the club’s hierarchy became one of the most vocal opponents of the elitist scheme. But when you look at the level of losses achieved by a club that is just about to embark on the construction of a new stadium, it is difficult not to be sympathetic to their protests bearing in mind the club’s potential and additional financial exposure if the ESL had actually gone ahead.

When we do look at the 2020-21 Premier League chort of clubs, just 3 of the 20 in the division have managed to achieve an overall economic profit in the most recent 5 years of released accounts. This is a damning lack of returns .

This financial imbalance is not confined to a select group of clubs. It is an endemic issue across the spectrum of professional football whereby clubs find that the objective of generating profits, even before the costs of any owner-sourced capital injection have been factored into the equation, is a near-impossible task. Indeed, the economic conditions that have spawned the ESL have not gone away. They are still there. In fact, they are about to get a lot worse.

And in amongst all the vocality surrounding the events of the week, Ben Wright’s superb piece in The Telegraph articulates our work in regard to football’s finances and points to one clear truth; the ESL will be a recurring theme until football’s financial mélange is resolved.

Sadly, for the fans and for the clubs alike, we do not think that this will happen anytime soon.


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