Covid-19 kicks £1bn hole in football league finances

Premier League football clubs are set to lose around £1bn in revenues as a result of Covid-19, having seen their combined revenues break the £5bn barrier last season, according to analysis from Deloitte

The firm says the disruption to the 2019/20 season caused by the pandemic and the halt on fixtures will reduce Premier League clubs’ revenues in the 2019/20 financial year by approximately £1bn.

Of this, almost £500m is permanently lost primarily due to the loss of matchday revenues and rebates on broadcast and commercial contracts from games being delayed and played behind closed doors.

The remainder - over £500m – will be deferred until the 2020/21 financial year, due to the delay of almost a quarter of the season beyond 30 June.

As a consequence, and despite anticipated potential continued disruption into the next season, Deloitte predicts the 2020/21 financial year may see record-breaking levels of revenue.

Premier League clubs’ combined revenues passed £5bn for the first time in the 2018/19 season, a year-on-year increase of 7%. In revenue terms, the Premier League was 73% larger than its nearest competitor, Spain’s La Liga, Deloitte calculates.

The European football market as a whole generated a record €28.9 billion (£25.5bn) for the year covering the 2018/19 season. Clubs in Spain’s La Liga generated combined revenues of €3.4bn in 2018/19, surpassing the Bundesliga (€3.3bn).

However, the earlier return to play of matches in the Bundesliga during the disrupted 2019/20 season will likely see the German league report higher revenues than La Liga in 2019/20.

Deloitte says revenue polarisation between and within European football leagues continued to grow. This trend is likely to be exacerbated by the Covid-19 pandemic, as the biggest clubs are likely to have the most contractually protected revenues, whilst smaller clubs rely more heavily on matchday revenue and single season commercial agreements.

Dan Jones, partner and head of the sports business group at Deloitte, said: We expect the ongoing Covid-19 pandemic to cause significant revenue reduction and operating losses across European football in the current season’s financial results.

‘Football returning – in a safe and sensible way - is clearly important to limiting the financial impact that the pandemic has had.

‘Leagues across Europe have been responding in different ways and at different paces. The success of each league’s return, and the strength of each one’s relationships with broadcasters and commercial partners, will have a potentially significant and lasting impact on the financial strength of clubs and leagues.

‘Nonetheless, we forecast that the restart plans for the Premier League and a number of its peers will cause a rapid recovery in financial results as some 2019/20 broadcast revenues are pushed into the 2020/21 financial year, which may result in a bumper revenue year.’

Cost control

In addition to the Premier League’s all-time high, Deloitte's analysis found that the 72 Football League clubs in the Championship, League One and League Two generated combined revenues of over £1bn for the first time ever, with each league generating more revenue in 2018/19 than in any previous season.

However, these record revenues did not translate to profitability, with each of the three divisions recording aggregate operating and pre-tax losses, primarily due to excessive wage spending.

Tim Bridge, director in the sports business group at Deloitte, said: ‘The level of losses in the Championship has been a recurring concern for many years. Even before the financial impact caused by the pandemic, EFL clubs were typically sustained by owner largesse and/or the pursuit of uncertain and uncontrollable promotion or player transfer windfalls.

‘Now is the time for serious action to address the issue of financial stability.

‘Our analysis shows that even a basic 70% salary cap mechanism across the Championship could have a rapid financial corrective impact, all but eliminating losses in a normal season, without damaging the vibrant competitiveness of the league.’

Deloitte’s analysis shows both the Championship and League 1 recorded more revenue across their clubs than ever before, with League 2 matching the record level set in 2017/18. It says the ongoing pandemic could force clubs to reassess their cost control measures and focus on long term financial stability.

Sam Boor, senior manager in the sports business group at Deloitte, said: ‘While revenue-generation is a new problem for professional football, clubs have had a cost control problem for decades.

‘The demise of Bury and the dangerous predicament many other Football League clubs find themselves in must move the game to introduce meaningful regulatory change and improvement.’

Annual Review of Football Finance 2020

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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