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Covid-19 and the Financial Impact on English Football

1/5/2020

 
By Seán O’Connor

With the closure of stadiums across Britain and throughout the world, much of the discussion to date has focused on the financial viability of clubs. Stories of clubs asking players to take salary cuts along with other clubs taking the option to furlong staff have been some of the options considered. At their core it appears football clubs are cash-flow businesses. Any incoming revenue is quickly pushed out to cover costs, most notably player salaries. However, when incoming revenue dries up, salaries still have to be paid. This post examines the proportion of salaries (including pension costs) to turnover, to attempt to provide an indication of which clubs may be most at risk due to the ongoing stoppage of football.

Latest submitted accounting returns were examined for all clubs in the English football league. While the English league system consists of 4 tiers not all clubs accounts were available. Moreover, some clubs accounts are more up to date than others. Clubs are classed into a division depending on when the period their accounts relate to. For example, Sheffield United have accounts available for the 2018/2019 accounting period, therefore they are classed into the 2018/2019 football season and considered a Championship team. Below provide the numbers by league. To the right of this table is the breakdown of when financial returns are submitted by clubs. 
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In broad terms the financials of under 8 out of 10 clubs in England’s top four tiers can be examined. The lower share in lower leagues can be explained by the fact that these clubs are only required to submit micro financial returns, so information on turnover and salaries isn’t always available. Moreover, 80% of clubs returns relate to 2018/2019 season, so provides us with a reasonable up to date picture of financial health.

At a very high league level we can observe the percentage share of salaries to turnover. This is demonstrated by the table below.
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​To briefly summarise on average a Premier League club spends 63% of their turnover on salaries. However, the remarkable thing here is for Championship clubs were on average their turnover doesn’t cover their salary costs. This figure is slightly distorted by one club, but if we examine how many clubs have a share of 100% or greater, we get the following picture.
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So nearly 6 out of 10 Championship teams are spending more on salaries then they are taking in on turnover.

However, this isn’t to say that these clubs might be most at risk, given the current climate. From examining various club accounts during this analysis, revenue streams are diverse across divisions and clubs. At the higher end, TV money, commercial deals and other areas look to provide some clubs with a solid grounding. In the lowers leagues gate receipts are a particularly high proportion of turnover. With this type of income suspended indefinitely they may need to relay even more so on their benefactors to see them through this period intact.

The final graph below provides an illustration of each clubs relative share of salaries to turnover. It’s quiet interesting to see Tottenham (bottom of list) having one of the lowest shares but appeared to be one of the first clubs to consider the furlong option.  
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