Football clubs cutting spending says BDO

FINANCIAL rules, aimed at making the business of football more sustainable, are beginning to have the desired effect, according to research.

According to a survey by accountants BDO, more than 80% of financial directors working for Premier League and Championship clubs, said they were expecting to see freezes, or falls, in payroll costs this year.

The flip side of this new era of austerity caused by the introduction of financial fair play rules, may be more non-Premier League owners looking to sell up as they are prevented from spending big on the hope of winning promotion to the world’s richest league.

BDO’s report, ‘A New Dawn for Fair Play?’ reveals a growing reliance on benefactors to plug funding gaps at clubs.  In total, 65% of clubs acknowledged a reliance on principal shareholder(s) to finance operating losses compared with 58% last year; for the Championship the figure is 94% and for League One it is 64%.

Faced with such challenges BDO says that 28% of Championship club owners and 36% of League One club owners are considering a full or partial exit in the next 12 to 18 months.  

BDO North West partner Julien Rye said: “The pot of gold that the Premier League, which attracts substantial commercial income, is perceived to represent means there is intense competition for a limited number of promotion places.

“This creates a temptation for Championship and League One clubs to overspend and push themselves into the red, leading to a dependency on principal shareholders bankrolling trading shortfalls.  
 
“In this context, and due to minimal resources, we now see around a third of existing owners seeking a full or partial exit.”

The survey reveals that:

:: 85% of clubs expect to comply with FFP rules in 2013/14 without any significant changes to their business models;

:: Just 12% of clubs expect to increase their transfer budgets with almost half of clubs in the Premier League and Championship (44% and 41% respectively) saying FFP is a key driver in this decision;

:: 30% of FDs describe their club finances as ‘very healthy’ – although there are major differences between the divisions, with Premier League finance directors the most positive  (83% describing their financial position as ‘very healthy’) and their counterparts in League One the most concerned (14%).

Mr Rye, added: “The divisions below the Premier League are crying out for a sustainable business model.  Football clubs play a vital role in the North West and in local communities, so there is a clear need for greater financial stability and a higher proportion of clubs living within their means.”

As sustainability becomes more essential, particularly in the lower leagues, Mr Rye believes there will be more community/supporter ownership of clubs.

“This may see some clubs go back to basics, with overly ambitious promises of silverware traded for closer ties and greater financial stability – a backlash, perhaps, against the profligacy of previous regimes.

“However, the challenge as ever will be to balance that with the continued demand of the fans’ desire for success.”