The other Premier League story

There is more than one way of looking at the economics of the English Premier League.

The threat of damage to the economic success story that is the Premier League has been used to marshall arguments against a football regulator existing at all, and is now being used in attempts to limit the reach and influence of that regulator. That economic success story is presented, and has been largely accepted, as a given. But how accurate is that story of economic success? And what does it tell us about the need for a regulator in the first place?

At first glance there can be little argument about the League’s economic success. Many of the world’s top players earn top wages to play for some of the game’s most successful clubs at some of the best stadiums in front of full houses and with a huge global TV audience watching.

Figures compiled by EY and quoted in the Premier League’s Annual report for 2023/24 show the League contributed £8 billion to the UK economy during the 2021/22 season, with £5 billion of that economic footprint located outside London. Average crowds topped 40,000 for the first time during that season, and the global TV audience was estimated at over 1.5 billion – a figure that explains why domestic broadcasters alone paid £6.7 billion to secure coverage when the last deal was signed in 2023.

A success, then, by any measure? Well, I’m not going to argue the Premier League is a dud, but I am going to present another perspective. Because looking deeper reveals a strange kind of economic glory.

Liverpool, who will most likely be crowned champions this season and are one of the two truly global club brands in the Premier League are, according to analysis by Swiss Ramble, on course to make a pre-tax loss of £57m – the highest in the club’s history.

For Liverpool, this loss is no great cause for alarm. The club’s on-pitch successes, domestically and in returning to the Champions League, along with its huge global following pushing commercial revenues ever-upwards, means that it is not in danger of running into serious financial problems unless it makes some very poor decisions.

Which brings us to the League’s other truly global club brand, Manchester United. As an example of how to reduce a financial powerhouse to a debt-ridden basket case, there can be few better examples than United under the Glazer family. The Glazers, of course, have done very nicely out of loading the club with debt. But United the club booked a pre-tax loss of £131m, the second worst in the club’s history and the highest in the division.

New part-owner Jim Ratcliffe is promising to turn things around, but is slashing costs, claiming the club would have gone bust by Christmas if he hadn’t acted. So up go prices, and down go the number of staff jobs. One of the world’s biggest clubs has even had to axe the staff Christmas party, such are its financial problems. Although a new £2 billion stadium is not beyond its means, apparently.

Many will say that these financial troubles are minor for two such big clubs. And it is hard to imagine a financial institution brave enough to pull the plug on such football giants. But these two clubs are not big because of the Premier League. They are big because of long periods of sustained success, and deep roots in community and tradition, that were developed long before the Premier League was even thought of.

You could argue, in fact, that one of the reasons the Premier League is so successful is because these two clubs are in it – at least now that they have decided they don’t want to bin the Premier League off entirely for a European Super League. What, one wonders, would have become of the economic success story if the self-appointed top six had been allowed to get away with that?

A look across the League reveals that nearly half the 20 clubs in the Premier League lost more than £50m in the 2023/24 season. And losses of that size are neither unusual or infrequent. Being £50m down year after year may be something Liverpool or Manchester United can handle, less so Wolverhampton Wanderers or Nottingham Forest.

Let’s keep looking at the detail of the economic success story. Manchester City, Arsenal and Chelsea are probably the closest to achieving the global brand status of the Big Two – although they still have some distance to make up.

For Chelsea and Manchester City, let’s just say the financing of success doesn’t exactly stack up as a conventional business success story. Much has been written elsewhere about both clubs.

Arsenal take some pride in presenting themselves as a sustainably-run club, and the Gunners’ pre-tax loss of £18m doesn’t look too bad against some of the figures from other clubs . But despite the relatively healthy finances it was still apparently essential for ticket prices to go up next season. As the Arsenal Supporters’ Trust said: “We understand that costs are increasing across football, especially for player wages and agent fees, but feel that Arsenal and all Premier League clubs should be making greater efforts to control these pressures rather than relying on supporters to take the strain.”

Up the Seven Sisters Road at Tottenham Hotspur, analysis of the 2022/23 season’s accounts, the most recent set available, revealed a £95m loss. Spurs, of course, have recently built a stadium that generates around £6m every match day and are widely viewed as a well-run business, although not so much as a well-run sporting institution.

But the business is not so well run, apparently, that Spurs can afford to match the player wage spending of the clubs they say they want to compete against – no such restraint in the boardroom, it must be noted, where the chairman is number one in the highest paid Premier League director charts. And not so well run that they can give anything back to fans – the recently announced freeze in headline season and match day ticket prices disguising the fact that the club has increased charges in a range of other areas.

Not all clubs made a loss. West Ham United made a pre-tax profit of £57m. This has been been achieved through some smart player trading, and recent success in Europe. But, as their competitors would no doubt point out, being given a taxpayer-funded stadium in a very favourable deal hasn’t hurt. (There’s more forensic detail on the ins and outs on the Olympic Stadium Coalition website).

Brighton & Hove Albion and Brentford are regularly posited as the poster boys in the well-run clubs debate, and there is much to admire about what both have achieved. But both depend on beneficial owners not calling in vast loans – in 2022/23 the interest-free unsecured loan to the Seagulls from owner Tony Bloom stood at £373m, while Brentford owner Mathew Benham has backed the Bees with a £62m interest-free, unsecured loan.

Newcastle United, owned let us remember not by a nation state but by a sovereign wealth fund that is absolutely not what the name suggests unless the fund itself is arguing it is in an effort to block the discovery of documents in a court case, made a loss of £11m in 2023/24. Nottingham Forest racked up a £67m loss as they clung on to Premier league status in 2022/23.

And in some of the latest figures released, Bournemouth’s annual accounts for 2023/24 reveal underlying losses of £55m on turnover of £170m, with owner loans of £123m underpinning things. As one observer remarked: “That’s a lot of money to finish 8th.”

As I said earlier, on one level there can be little doubt that the Premier League is a roaring success. But there is another picture, the one painted above, that features debts, subsidies, the use of vast wealth to get ahead, the failure to trickle down economic benefits to the fans who help produce the product. And it is that last point that may become very relevant if another of the bricks in this big old jenga tower is removed – because if the TV money pulls out, it will change everything.

So yes, there’s success. But is it sustainable? Is it achieved through the best practice? Is it achieved with the best possible outcome?

We need to think too about the impact the Premier League has on the rest of the game. While the League’s PR people emphasise “The Premier League’s scale of support for the lower leagues and the wider game is unmatched in world sport,” management consultants Lane Clark and Peacock observe in the rest of the game “a culture of short-term speculation financed by borrowing or equity injections to achieve Premier League status.”

The benefits on offer mean many clubs will take huge gambles to get in on the action. As one regulatory insider remarked to me: “Reading and Derby County are salutary tales of what happens when clubs gamble on promotion to the EPL – and fail.”

The picture at the top of this piece shows the home of Ipswich Town, former UEFA Cup winners let’s not forget. Their 2022/23 accounts show a pre-tax loss of £18.2m, and this despite a 51% rise in revenue. The club is owned by a US investment company, with a US private equity firm making a significant financial input too. The owners have said they have bought ”an asset, at a lower value, that has potential and history”.

Ipswich look likely to go down this season, and that will test the commitment of the owners – owners who, to be clear, are investors first and foremost. Any initial problems may be offset by the existence of parachute payments, a measure introduced and fiercely defended in explicit recognition of football’s flawed economics (I covered parachute payments in a previous edition). But longer term, it is not hard to imagine Ipswich’s future may not spell out ‘economic success story’.

The more you understand the true nature of football’s unique economy, the more an independent regulator sounds like a good idea.

• There are extensive links to the excellent financial analysis of Swiss Ramble in this, and a subscription is highly recommended if you are interested in football finance and are partial to a musical reference.

Photo © Martin Cloake