Financial sustainability in football.
The financial reporting season for football clubs is upon us and, as usual, the numbers are causing alarm. Kieran Maguire, Associate Professor in Football Finance and half of The Price Of Football podcast, puts it like this:
“If the owners effectively went on strike; if they said “We’re going to effectively fold our arms, this is not sustainable, it cannot continue,” dozens of clubs would be out of business in six weeks because they couldn’t afford to do the next two payrolls. Some of the clubs couldn’t afford to do the next payroll.”
The Championship is the most at peril; combined losses per season have risen from £62M in 2006-07 to a projected £346M in 2024-25. Michael Eisner, former Disney CEO and Chairman of Portsmouth, has warned that “There are dark clouds hovering over the English football pyramid and it seems to me there could be a real collapse where only the Premier League survives.”
A major issue with the second tier is the gulf in finance between the Premier League and the Championship. It tempts clubs to overspend wildly to get promoted; the rewards are great but the penalties for failure can be existential. The parachute payments made to clubs relegated from the Premier League exacerbate the problem; teams vying for promotion have to compete with those coming down who have been tempted to overspend by the knowledge that failure can be rewarded.
There’s nothing new in clubs betting the farm against future success and coming unstuck. At the start of the current millennium Leeds United borrowed funds to assemble a squad capable of competing at the highest level. For the gamble to come off, gate receipts and other revenue from the Champions League games would have to cover the cost of loans taken out to buy players like Rio Ferdinand, Robbie Keane, Mark Viduka and Robbie Fowler. Failure to qualify for the Champions League in 2022 doomed the project to failure and Leeds entered a downward spiral that culminated in administration and relegation to League 1.
Stockport County’s own results for season 2024-25 were released recently. They show a loss of £9.2M, an eye-watering sum for ordinary mortals. It needs to be seen in context, though; it’s above average for the division but others spent far more. The three promoted clubs, Birmingham, Charlton and Wrexham, lost £39.3M, £16.7M and £14.85M respectively.
Of the clubs that stayed in the division, Bolton (£13.91M) and Wycombe (£9.9M) lost more than County. At the other end of the scale, Peterborough and Exeter actually made money, £2.9M and £0.35M respectively, on the back of player sales. Those two are outliers, not least because Peterborough are content to yo-yo up and down the pyramid while buying low and selling high whenever possible and Exeter are fan-owned and finding it hard to survive on that basis in League 1.
At County, we’re fortunate that Mark Stott has converted his loans into equity, meaning the funds are now invested in the club as shares rather than debt. We’re incredibly grateful for his continued support, which provides stability and reduces the risk of the club facing financial pressure from repayment demands.” That doesn’t mean, of course, that we wouldn’t be in a mess if he just walked away but at least club wouldn’t immediately go down the plughole. There is obviously more to the financial side of the club than the bottom line, and a news item on the website emphasised the positives:
- Total revenue was up 25.6% to £11.5M.
- Core revenue streams such as matchday, commercial, conferencing and retail were all on the up.
- The stated loss reflected continued investment into the playing squad, infrastructure and organisational capacity required to compete at the top end of League One.
- £1.1 million profit came from player trading, a source of funds and a philosophy the club intend to continue.
What chance does anyone have of improving matters and making the football industry as a whole more sensible and sustainable?
- The Premier League have just agreed to replace the existing Profit and Sustainability Rules (PSR) with a Squad Cost Ratio (SCR) system from next term. The phrase that springs most readily to mind here is “tinkering at the edges.”
- Player salary caps are a very blunt instrument and wouldn’t do much good in a global market, so we can discount that as a way forward.
- All EFL clubs have been under new Profit and Sustainability Rules (PSR) from the start of this season, so we will have to wait and see how much better clubs’ results are this time next year.
Perhaps the new Independent Football Regulator (IFR) will be able to help. In a recent speech David Kogan, the IFR himself, recognised that the entire football pyramid is “ultimately and entirely unsustainable” without better financial mitigations. By the end of this year, the IFR will issue the draft State of the Game report, which will identify the stresses and strains in the system and look at ways of making the whole industry more sustainable. A major pillar of any reform will be fairer distribution of money within the game, a stumbling block in past negotiations between the Premier League and the EFL.
We can all agree that something needs to be done, the hard bit is deciding what that something is. Time alone will tell…..