In our June 2021 report, we also considered the impact of COVID-19 on football. At the time of writing, football within the UK has returned to normal, pre-COVID-19 operations, with games having been played in front of capacity crowds and league and cup competitions going ahead as scheduled last season. However, clubs are continuing to deal with the financial consequences caused by the impact of COVID-19. The net impact, as set out in The European Club Footballing Landscape of February 2022 (a report commissioned by UEFA) evidenced the first decrease in European top-division club revenue in recorded history, with revenues shrinking by 10.4 per cent from €23bn in FY2019 to €20.6bn in FY2020. Unsurprisingly, given the cancellation of fixtures or with fixtures being played behind closed doors, UEFA’s analysis confirmed that the greatest losses suffered by clubs came from gate receipts (-23 per cent), TV revenues (-14 per cent) and sponsorship (-8 per cent).

Deloitte’s Annual Review of Football Finance (published in July 2021) found that, in the Premier League, over half of the clubs had reported an operating loss. Notwithstanding this, Deloitte found that the wage costs of Premier League clubs grew by 4 per cent, which, although it is the smallest increase since 2004/05, suggests that, given the competition for the very best (and the most expensive) players in the Premier League, player wages (without regulatory intervention) will only ever increase.

In a “normal” business, you would typically expect to see large operating losses followed by deep cost cutting, perhaps with a focus on reducing employee costs (whether by way of a reduction in the number of employees, or by looking to reduce (or eliminate) the salaries of the highest earners). However, in football, particularly the Premier League, the COVID-19 pandemic has shown this is rarely the approach. Football clubs need their players. Outside of real estate, a club’s main asset is its players, and therefore they believe they need to continue to extend player contracts and increase player wages in order to retain players (or risk losing them on a free at the end of their playing contract – see Paul Pogba and Manchester United, again). During the pandemic and with many clubs operating at a loss, such costs (as reported by UEFA) were largely funded by taking on additional debt

The effects of COVID-19 on the football industry could still not stop the inflation of player wages across European football, which continue to rise. Perhaps most notably, Kylian Mbappe recently extended his contract at PSG, which reportedly included a signing-on fee in the region of £100m as well as basic wages of around £1m per week. Indeed, recent analysis by Off The Pitch confirmed that average wage costs across European football have increased year-on-year since 2018, with a total rise of 23.6 per cent from 2018 to 2021. Revenue, however, has not tracked this increase in wages, resulting in the average wages-to-revenue ratio (calculated on a sample basis of 200 clubs) expanding from 66.3 per cent to 86.3 per cent in the same period

The Off The Pitch analysis further noted that half of the sampled clubs that have the most sustainable wage bills were Scandinavian, whilst eight out of the ten clubs that had the highest wages-to-revenue ratios were from the lower tiers of English football. This, as well as the Burnley case study below, suggests that the current financial model of many clubs, which is reliant on debt and clubs either obtaining or maintaining Premier League status, is not without risk. For many clubs, the effects of the COVID-19 pandemic has exacerbated these financial problems and there have been many recent examples of clubs in English football suffering serious financial difficulties, such as Bury and Derby County.

A case study: Burnley F.C.

Like many clubs, COVID-19 had a negative impact on Burnley’s finances. Burnley’s turnover fell from £134m in the 2019/20 season to £115m in the 2020/21 season, with the club’s accounts for the year ended 31 July 2021 citing a “lack of fan attendance and the lower placed league finish” as key factors. The accounts for the financial year ended 31 July 2021 also revealed that the club had recorded a pre-tax loss of approximately £3m for the financial year ended 31 July 2021, and that the club’s cash reserves had decreased from approximately £80m for the financial year ended 31 July 2020 to approximately £50m for the financial year ended 31 July 2021. Finally, the club’s accounts for the financial year ended 31 July 2021 indicate that that the club’s wage: turnover ratio had risen to 74.66 per cent (up from 70.20 per cent for the previous financial year), a figure which is above the 70 per cent included in the “squad cost rule” of Article 93.01 in the UEFA Club Licensing and Financial Sustainability Regulations (Edition 2022).

In our report of last year, we made reference to the debt that Burnley had taken on as part of the acquisition of the club by ALK Capital and, in particular, how this could quickly become a burden should the club’s fortunes on the pitch change. Indeed, the accounts for the club for the financial year ended 31 July 2021 confirmed that the club was an obligor in relation to a third party loan held by Burnley FC Holdings Limited (the club’s parent undertaking) and at 31 July 2021, there were amounts due in respect of the loan of approximately £65m, with the loan bearing interest at LIBOR plus 8 per cent per annum. Further, the club accounts for the financial year ended 31 July 2021 also state that, although the capital element of the loan is due for repayment in December 2025, if the club is relegated from the Premier League, a “significant proportion” of the loan would fall due for repayment shortly after the end of the season in which the relegation takes place. The implication for relegation on the external debt within the club’s wider corporate group is cited in the accounts for the financial year ended 31 July 2021 (together with reduction of turnover) as one of the two main factors in why the “principal risk to the company is the possibility of the football club’s relegation from the Premier League.”

With Burnley’s relegation to the Championship confirmed on the final day of the season, it will be interesting to see how the club reacts to its relegation and the inevitable financial consequences that will follow. 

The club will receive parachute payments, however, as predicted by Kieran Maguire, an academic and author who is a well respected voice on the finances of football clubs, this will “effectively be used to repay the loan and that would put pressure on wages and the (sic) Burnley would have to sell players”. Burnley’s chairman, Alan Pace, however, has maintained that the ALK Capital takeover is sustainable and that plans are in place for Burnley’s relegation.

Burnley’s activities for the remainder of the summer transfer window will be monitored closely by its fans. At the time of writing, Burnley have sold Nathan Collins to Wolves for a reported £20.5m, Nick Pope to Newcastle United for an undisclosed fee, and with the release of other senior players including Ben Mee (who subsequently joined Brentford) and James Tarkowski (who subsequently joined Everton), Burnley will have a different team this season to the side that was relegated in May. Indeed, with rumours continuing to suggest that Maxwel Cornet might be on his way to Everton, Burnley have clearly taken to steps to both reduce the existing wage bill of the club, as well as realising the value of certain players, as part of their preparations for life in the Championship.


Senior Associate

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