Football finances laid low by virus<\/p>\n<\/p>\n
Premier League and Championship football teams return to action behind closed doors on 17 June in the face of huge financial repercussions from the coronavirus crisis.<\/p>\n
Since football leagues suspended their seasons in March<\/a>, clubs have seen massive drops in their broadcasting, matchday and retail revenue streams \u2013 an experience that will be well understood by companies in other entertainment sectors, if not always at the same scale.<\/p>\n Football\u2019s mega-rich top tier has not been immune, with Tottenham Hotspur taking out a \u00a3175m loan from the Bank of England to tide it over a cashflow gap.<\/p>\n Tottenham and all the other English Premier League (EPL) clubs are required to pay a \u00a3330m rebate to Sky and other broadcasters. With the rest of the season taking place behind closed doors, clubs will lose out on matchday revenues from catering, retail and other operations that have been shuttered since mid-March.<\/p>\n Presenting Manchester United\u2019s latest financial results in May, executive\u00a0vice-chairman Ed Woodward noted it had not laid off or furloughed any staff during the Covid crisis, thanks to its robust business model and financial resilience.<\/p>\n As of 31 March, United had a \u00a390.3m cash balance together with an additional \u00a3150m available under the company\u2019s revolving credit facility.<\/p>\n But Woodward warned about the new economic realities facing the game. The next two sets of quarterly results would reveal the scale of the fall-out from the football shutdown. It would not be business as usual for some time, he added.<\/p>\n Manchester United expected to bounce back strongly by adopting a prudent and cautious approach to cost controls, the transfer market and any significant new capital projects.<\/p>\n Burnley CEO Neil Hart made similarly resolute comments this week about the loss of TV and matchday revenues from the Clarets\u2019 final four scheduled home matches.<\/p>\n \u201cWe will be like any other business; this will cost us,\u201d he told the club\u2019s website. \u201cAs a club we are resilient, we are strong, we\u2019re unified and we will ride this out and we will come through this and hopefully it won\u2019t be too long before we\u2019re back to normal.\u201d<\/p>\n Spurs, United, Burnley and other EPL clubs appear well-equipped to adapt and survive the pandemic, but the forecast is grim for clubs in the Championship and Leagues One and Two.<\/p>\n For Championship clubs, Liverpool University Management School football expert Kevin Maguire said that around one quarter to one third of clubs\u2019 revenues come from matchday income, excluding parachute payments for clubs relegated in previous seasons. Many second-tier clubs already lose at least \u00a320m per year, with lack of game income now worsening losses, he added.<\/p>\n Business interruption insurance policies might pay out for some, but the future resilience of many Championship clubs\u2019 who have previously relied on owners to bail them out in tough times \u201creally comes down to the wealth and inclination of the owner\u201d to continue bankrolling them.<\/p>\n In contrast to the top two tiers with their rich benefactors and hefty TV revenues, Leagues One and Two of the English Football League (EFL) voted on Tuesday to end their seasons, with promoted and relegated teams and play-off places based on a current points-per-game basis.<\/p>\n Ahead of the decision, EFL chairman Rick Parry said clubs faced a \u201c\u00a3200m hole\u201d in their finances by September, acknowledging that some may go bust.<\/p>\n \u201cThe aim is to make sure all the clubs survive and we will be working 24 hours a day to make sure they do,\u201d Parry told BBC Sport on Wednesday.<\/p>\n During the crisis, many lower league clubs have had to furlough non-playing staff, defer players and find other ways to cut costs. Oldham Athletic, for example, revealed that income for March 2020 was \u00a3225,000 lower than in March last year, and matchday and commercial income for April and May was \u201cclose to zero\u201d.<\/p>\n Kieran Maguire from Liverpool University pointed out that while income plummeted and clubs were refunding season tickets, they still had to foot enormous player wage bills and outstanding transfer fees.<\/p>\n \u201cThey\u2019ll be hurting quite a bit. It\u2019s a big cash drain for clubs,\u201d he said.<\/p>\n Insolvency specialist Begbies Traynor\u2019s eighth Football Financial Distress report<\/a> filled in some additional details. Pre-lockdown Begbies estimated that five of the EFL\u2019s 71 clubs were in major financial distress following Bury FC\u2019s expulsion<\/a> from the EFL last August.<\/p>\n \u201cUnfortunately those clubs with wealthy foreign owners may not necessarily be immune from disaster either,\u201d said Begbies Traynor partner Gerald Krasner, who used to be chairman at Leeds United.<\/p>\n \u201cOverseas owners will be forced to respond to the effects of the global pandemic on their own finances and business interests, and for some that could mean that ownership of an English football club is simply no longer viable,\u201d he said.<\/p>\n Krasner now estimates that at least 10 clubs in leagues one and two are in danger of financial collapse due to the effects of the pandemic. Rob Wilson, a football finance expert from Sheffield Hallam University, thinks it could be even more, estimating that 15 or 16 league clubs could go into administration by the year\u2019s end.<\/p>\n Keep an eye out for Macclesfield Town. The League Two club, already docked 11 points for non-payment of player wages, faces another EFL punishment for late payments in March \u2013 and possible relegation to the National League.<\/p>\n Tranmere Rovers chairman Mark Palios, once of PwC and former chief executive at the Football Association<\/a>, put forward proposals to the EFL on equitable ways to end the season. After these ideas were rejected, his club was relegated to League Two.<\/p>\nStruggles at the top <\/strong><\/h3>\n
Distress in the lower leagues<\/strong><\/h3>\n
Relegation impacts<\/strong><\/h3>\n