16/4/25 Championship finances are a little less crazy — The Political Economy of Football V2
The Championship has the most stretched finances of any UK football league and in effect functions as a Premier League Division 2, reinforced by the distorting effects of parachute payments. What follows is an edited and slightly enhanced version of forensic analysis by the Swiss Ramble.
The 24 clubs generated just under £1 bln of revenue (£956m
to be precise) and £22m other operating income, but then paid out £1.7 bln in
operating expenses, split between £892m wages, £260m player amortisation and
£505m other expenses.
This led to a sizeable £678m operating loss, exacerbated by
£73m net interest payable, which was only partially offset by £420m profit from
player sales and £17m exceptional items. As a result, the division as a whole
lost £314m.
Revenue shot up £207m (28%) from £749m to £956m, while
profit from player sales more than doubled from £183m to £420m. However, this
was offset by a steep increase in operating expenses, which were a third
higher, rising £417m; while net interest payable rose £40m.
This is obviously substantial growth in a single season, but
this was largely driven by the relegation of three sizeable clubs to the
Championship (Leeds United, Leicester City and Southampton). They replaced
three smaller clubs that were promoted to the Premier League (Burnley, Luton
Town and Sheffield United).
The three clubs most recently relegated from the Premier
League fill the first three places in revenue, profit from player sales, wages,
player amortisation, squad cost and transfer spend. They are quite often
followed by the parachute clubs that came down the season before.
In fact, the three relegated clubs figure strongly in the
list of all-time Championship records:
·
Leeds United – highest revenue, match day,
commercial, player amortisation, other expenses, squad cost and transfer debt.
·
Leicester City – wages, wages + amortisation and
financial debt.
·
Southampton – broadcasting and profit from
player sales
Leeds United and Leicester City both broke through the £100m
revenue barrier for the first time in this division with £128m and £105m
respectively. The other relegated club, Southampton, contributed another £85m,
while the highest non-parachute club was Bristol City with £42m.
Four clubs managed to generate a profit in 2023/24, namely
Southampton £17m, Watford £13m, Coventry City £9m and Blackburn Rovers
£3m. Not a single Championship club has
managed to deliver an operating profit in the last two years, while over half
of them lost more than £20m without the benefit of player sales.
The Championship’s match day revenue shot up £72m (51%) from
£141m to £213m, thus overtaking the previous £161m peak in 2016/17, which
featured some very large clubs, such as Newcastle United and Aston Villa.
In 2023/24 Leeds United set a new record with £31m, followed
by Leicester City £18m and Southampton £16m, while five other clubs generated
more than £10m (Sunderland, Norwich City, Middlesbrough, Ipswich Town and
Coventry City).
Incredibly, the Championship has the fifth highest
attendances in the world, only behind the Premier League, Bundesliga, La Liga
and Serie A. Some will point out that it contains 24 clubs, while other leagues
have far fewer teams, but that is still a notable achievement.
Growing importance of commercial revenues
Like the Premier League, commercial is becoming increasingly
important in the Championship, rising by £101m (51%) from £200m to a massive
new high of £301m in 2023/24.
This was driven by Leeds United setting a new club record
for the division of £43m, which surpassed their own previous £34m in 2019/20.
Leicester City generated £33m, the third best ever in the Championship, while
Bristol City’s income was £25m.
Commercial had its highest ever share of total Championship
revenue in 2023/24 with 31%, which was up from the previous season’s 27%.
Broadcasting remained the most important revenue stream at 46%, though this was
down from 54%, while match day also increased from 19% to 22%.
Championship wages rose £184m (26%) from £708m to a new
record £892m, thereby reversing a steady downward trend from the previous £774m
peak in 2017/18.
The Championship’s other expenses, effectively the clubs’
running costs, once again significantly grew in 2023/24, rising by £106m (32%)
from £335m to £441m, partly because of the mix of clubs, but also the impact of
higher inflation on services and especially utilities. Increased employer s’ national insurance
contributions from April will have an impact this season and the UK continues
to have higher electricity prices than comparable countries.
This cost category is often overlooked by analysts, but it
has become increasingly important, so no fewer than seven clubs in the
Championship paid more than £20m last season, led by Leeds United £48m,
Leicester City £39m, Southampton £38m and Ipswich Town £27m.
The debt pile
Gross financial debt in the Championship slightly increased
by 3% to £1.6 bln in 2024, though this was still lower than the record £1.7 bln
three years ago, having steadily risen from £937m in 2018.
Five clubs owed more than £100m last season, led by
Leicester City with £226m. Otherwise, the clubs with the largest debt tend to
be those not receiving parachute payments, so the next highest were Stoke City
£151m, Blackburn Rovers £148m, Cardiff City £117m and QPR £104m.
However, Championship debt levels would have been more than
twice as high without owners converting £1.6 bln of their loans into equity and
writing-off another £125m of debt in the last ten years.
However, Championship debt levels would have been more than
twice as high without owners converting £1.6 bln of their loans into equity and
writing-off another £125m of debt in the last ten years.
The Championship has become a selling league with net sales
in each of the last six years, adding up to £617m, whereas it had £106m net
spend in the previous 6-year period.
Championship clubs have spent around half a billion Pounds
on capital expenditure in the last ten years, mainly on stadium and training
ground developments. The only large
investment was Birmingham City’s £26m, as the Blues’ new ownership started to
address years of under-investment in the stadium and training ground. The next
highest capital expenditure was at Coventry City £7m, Stoke City £6m and
Ipswich Town £6m.
Owner funding
The need for owners to put their hands in their pockets at
Championship clubs is highlighted by them providing a hefty £3.1 bln of funding
in the last 10 years, comprising £2.2 bln loans and £978m capital injections.
The loans are usually converted to equity at a later date.
This is big money by almost anybody’s standards, so anyone
looking to acquire a Championship club as a potential cheap route to the top
flight should really take into consideration the ongoing need to cover ongoing
losses.
The highest funding by far was Leeds United £158m, though
four other clubs received more than £30m from their owners, namely Birmingham
City £54m, Ipswich Town £39m, Leicester City £37m and Norwich City £33m. Furthermore, owners had to put in at least
£10m at 19 of the 24 clubs, so owning a football club is an expensive
business/hobby.
There remains a significant gap between England’s two top
tiers, e.g. the Premier League’s £6.4 bln revenue is more than six times as
much as the Championship’s £956m, so it is perhaps understandable that clubs
spend big in an attempt to reach the “Promised Land”.
This has led to significant operating losses in the
Championship, which was still very much the case last season, though there are
some signs that clubs are being a little more responsible with transfer spend
and wages.