Martin Cloake has produced another great read, this time in Daily Finance UK…
It is, as Deloitte’s Dan Jones said in summing up the latest report into English football’s finances, “crunch time”. Put simply, the dilemma clubs face is this. Despite a clear correlation between wages paid out and success achieved, they need to stop paying out ever higher wages.
As we reported earlier, the wages to revenue ratio in the top division is 67%. The 2009/10 season ended with pre-tax losses across the 20 clubs hitting £445m. Wages grew 5% to over £1.3bn. But from the start of the 2013/14 season, UEFA rules require clubs to break even.
UEFA sanction
If they don’t, they could face the ultimate sanction of being barred from competing in Europe, with all the financial and sporting drawbacks that would bring. The thinking behind UEFA President Michel Platini’s (pictured above) move is clear, but what is less clear is whether it will achieve its laudable aim.
In England, the Premier League is where the money is, and so clubs do all they can to get into to it and stay in it. On his BBC blog, Robert Peston observes that “there is a clear correlation between survival in the top rank and a willingness and ability to pay those humungous players’ salaries.”
Outside the Premier League the problem is worse. The clubs’ scramble to get to the top flight has seen wages grow at double the rate of revenue. The spend for success model is clearly not sustainable and that’s because of what football consultant Alex Fynn says is a major failing of the system.
Alex Fynn’s view
When I interviewed Fynn earlier this year (the link is below) he said the big problem is that “every team has to have success”. With the rewards so skewed towards the elite Premier League, clubs have little choice but to throw money at getting there.
But the numbers don’t add up. There are 92 professional clubs, 20 places in the Premier League and four major trophies on offer. To be a sport, everyone must want to win. But in the modern football business, everyone has to win. And that is just not possible.
In Germany, the rewards for success are not tilted so heavily towards the few. That has produced a more competitive league that has seen attendances rise and profits overtake those generated by the self-styled ‘greatest league in the world’.
German model
But to introduce the German model would require a major change in attitude. First from the corporations and oligarchs who run England’s biggest clubs. But also from the fans. While many fans can see the problems with the current system, they still want their club to pay big for the players who will help them win. And the nature of many modern fans is to demand instant success.
There has always been an element of buying success in football. Blackburn Rovers were perceived to have bought the title in 1995 on a wave of owner Jack Walker’s money that now looks like a trickle. Bill Nicholson’s great Spurs sides of the 1960s was not averse to paying out for players, and Arsenal was known as the Bank of England club when it was first a power in the 1930s.
Money has always played a part, but so do did the development of players and the art of coaching. Now, if a club’s in trouble, the answer is to buy new rather than develop what you have. And that in turn means short-term fixing rather than long-term planning for a more sustainable future.
Wage spending
UEFA’s new rules will mean the big clubs have to rein in the wage spending. But, as the piece linked below on Chelsea FC’s losses shows, there are likely to be a web of provisos. And those rules could also make the situation much worse.
Clubs will still spend big to reach the top division, and again to stay there. Man City’s qualification for the Champions League is an example of a club splurging to achieve a position from which it can then try to balance the books, using the position it has effectively bought.
What Financial Fair Play could mean is that the big spenders are locked in at the top with the rest incapable of challenging the income they can generate by dint of their lofty position. And then there’s the magic of accountancy. What will balancing the books really mean in a world where Manchester United can both generate a profit and carry huge debts?
Continue reading HERE…
