Back in October of 2019, University of Liverpool football finance lecturer Kieran Maguire and comedian Kevin Day joined forces to launch ‘The Price of Football’ podcast, following the money to find out what’s really going on behind the scenes of the beautiful game.
Fast-forward almost two years and the scripts are written for episode number 173, with listener numbers closing in on three million downloads. Ahead of a new Premier League season, Maguire spoke to ICAEW Insights about how signing the right accountant for the club can be the difference between securing silverware and the team collapsing.
Teams are being relegated based on their accounting
Football has a unique place in British society. The interim report from Tracey Crouch MP, an update on the government's fan-led review into football governance, summed up that while football clubs are businesses, they are not run in a normal manner - with the main metric of success not always profit or shareholder dividends.
However, clubs still need the financial controls, checks and balances that any business requires, along with governance. “I think that's where the world of accounting and finance can make a positive contribution to football, “ said Maguire. “We are seeing clubs being relegated or avoiding relegation based on their accounting, as well as what they achieve on the pitch”.
A prime example of this was Bury FC’s expulsion from the English Football League after 125 years of membership due to unpaid debts back in November 2020.
“Only recently, Sheffield Wednesday were relegated thanks to a points deduction handed down because of the way they accounted for an asset disposal,” added Maguire. “And Derby County were given a £100,000 fine in respect of the way that they treat their football players in the accounts and that might result in a future points deduction.”
He continued: “Accounting and finance has come to the fore in recent years, and without wanting to sound too twee, having a good accountant and financial lawyer on your team can be as important as signing a player because it can make a difference.”
Casino style management – ‘put it all on red’
The fate of finances of the football industry was precarious even before the pandemic struck. “If we take the Championship in the English Football League, wages were 107% of revenue in 2019 [before COVID hit]. And in I think six of the previous seven seasons, wages have exceeded revenue, so clubs were losing money before they even switched on the floodlights,” said Maguire.
The cumulative net debt held by Premier League clubs reached record levels of nearly £4bn at the end of the 2019/20 financial year, up from £3.5bn in the summer of 2019, according to Deloitte’s Annual Review of Football Finance 2021. By the same token, Premier League Clubs’ total revenue decreased by well over half a billion pounds (£648m, 13%) in 2019/20 to £4.5bn as the average revenue per Premier League club reduced by £33m to £225m. This was the first drop in total revenue in Premier League history and the lowest total revenue level since 2015/16, with the financial impact of COVID-19 felt by all clubs.
“The finances of clubs with poor lack of cost control and casino-style management is worrying,” said Maguire. “Club executives are effectively putting everything on red, and sometimes red doesn't come up”.
Maguire believes that, in terms of the finances, there needs to be either an acceptance by owners that there's no alternative to the current status quo, or there needs to be an alternative where everybody buys into trying to run the clubs on a more sustainable basis.
“We've lost Bury, we've lost Macclesfield Town, both of which have got huge history and heritage for their towns they represent. We nearly lost Bolton and Wigan, and there are other clubs in a fairly rocky position at present. I think the finances of the game going forward, especially for medium-sized clubs and smaller clubs, is something which really focuses on the mind.”
Which teams have got their finances properly in check?
According to Maguire, many Scottish clubs manage their finances well as they operate more of a breakeven model. Because their owners don't pretend to be as wealthy and therefore are not prepared to underwrite the losses.
Maguire also thinks that some form of regulation has to come because self-regulation hasn't worked. “I presented to the fan-led review and we've seen the interim report, which appears to suggest a licencing system, perhaps some form of risk, certainly some form of redistribution of money because there is an awful lot of money at the top of the game. Without curtailing the fact that Manchester United and Liverpool deserve to be at the top of the table because they're global brands.
“It's a case of getting the balance right without turning it into a sort of a Soviet-style, flat income, flat costs league. There's got to be a better position than we have at present and that will involve both winners and losers,” explained Maguire.
If you want to hear more from Maguire, book tickets to attend An Evening with Kieran Maguire on Thursday 16 September at Amex Stadium, Brighton.
Listen to the ICAEW Insights podcast where a panel of guests dissect the latest headlines and provide expert analysis on the top stories from across the world of business, finance and accountancy. Members should also listen to ‘The Price of Football’ podcast with Kieran Maguire and Kevin Day on Apple Podcasts.
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