Deloitte heralds ‘new dawn’ for football financesby
The UK’s Premier League looks to be returning to robust health following the pandemic, but the annual Deloitte Football Review flags up several nagging concerns about sustainability and fairness.
Despite the absence of fans from a majority of games during the 2020/21 season, Europe’s top football leagues collectively increased their revenue by 10% to €27.6bn.
England’s Premier League accounted for £4.9bn (€5.8bn) – just over 21% of that total. “The Premier League is further ahead of competition than ever before,” commented Tim Bridge, lead partner of Deloitte’s sports business group.
Cumulative operating profits for Premier League clubs increased from £49m in the Covid-restricted 2019/20 season to £479m in 2020/21. The increase is largely due to £330m in deferred broadcast income from the previous season.
Few clubs run at a profit
However, only four Premier League clubs – Leeds, Manchester City, Sheffield United and Wolves – reported a pre-tax profit as overall, the clubs’ net debt increased 4% from £3.9bn to £4.1bn.
The clubs’ collective pre-tax losses for 2020/21 were £669m, compared to £991m the year before. The main reason for this discrepancy is because operating profit figures omit player trading profits and other exceptional items that are included in the pre-tax figure.
Under UK GAAP, the contracts for acquired players are amortised on the teams’ balance sheets over the period of their playing contracts. This liability increased £60m in 2020/21 to an annual collective figure of £1.5bn, while profits generated from player sales fell £191m to £353m as the market for players slumped post-Covid.
Chelsea generated the largest pre-tax loss of £169m as profits from player sales fell by £143m to £28m and amortisation costs increased by £127m to £180m.
Net debts increasing
The aggregate losses for England’s top league over the previous two seasons was £1.7bn, further increasing net debts to £4.1bn at the beginning of the 2020/21 season.
“It is vital these losses are addressed through good governance and sustainable financial planning,” commented Bridge in his introduction to the review.
Premier League clubs responded to these challenges in different ways, either drawing on cash reserves to see them through the fallow times or increasing their borrowing, which rose to £612m. Tottenham Hotspur accounted for £706m of the net figure due to the costs of constructing its new stadium.
Most clubs drew more heavily on bank loans, or the Covid Corporate Financing Facility in the case of Tottenham (£175m) and Arsenal (£120m).
Premier League club owners increased their equity stakes across the league by £460m, more than double the previous year, with Everton (£100m) and Aston Villa (£97m) leading the way. The report noted that new owners and financing structures at Newcastle and Chelsea are likely to alter the debt profile in next year’s review.
Lower leagues decline
While the Premier League looks to have weathered the economic storm of the pandemic, club revenues in the Championship dropped 12% in 2020/21 to £600m. Net debt among Championship clubs increased by 32% to £1.8bn in the period covered by the review.
League One teams fared even worse, with revenues dropping 22% to £129m.
“There can now be no doubt that significant change is required to drive long-term financial sustainability for clubs, without the need for continual owner funding at this level,” the Deloitte review concluded.
In response to the European Super League debacle in 2020, the government launched a fan-led review of football governance. Chaired by Tracy Crouch MP, the review called for increased diversity and inclusion within club management structures and the creation of shadow boards consisting of fans, supplemented by an independent regulator for English football.
“It is a testament to the resilience of the industry that it is now well on the road to recovery and the same tenacious attitude should continue to build strength for the long term,” wrote Bridge.
“Those responsible for promoting and regulating the sport have the opportunity to ensure that they now create a sustainable and inclusive environment for the next generation of clubs, players, owners, investors and fans.”
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