Football clubs get to grips with financial regulations
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.
Billy Cairns, Yorkshire-based partner in BDO’s professional sports group, said: “The divisions below the Premier League are crying out for a sustainable business model. Football clubs play a vital role in Yorkshire and in local communities, so there is a clear need for greater financial stability and a higher proportion of clubs living within their means.”
Cairns 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.
He said: “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. Football clubs continue to attract huge interest and publicity but, when it comes to the crunch, only a limited number of potential investors have the resources and the appetite to bankroll the cost of their club’s ambitions.
“Only a select few will attract very wealthy benefactors and so, for others, buyers are increasingly likely to be supporters, who recognise the important role that clubs play in their local communities. 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.”
