Article Taxonomy: Football Finance

Articles and reports on financial issues within football – soccer – from The Political Economy of Football.

Championship Revenues Show Steady Growth

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The Championship has resumed its path of steady growth, according to Deloitte’s Football Finance report. It has achieved annual revenue growth of almost 12 per cent, while Leagues 1 and 2 have grown at around 10 per cent. ‘In almost any other industry this would be lauded as outstanding,’ the report notes. Championship revenues increased by about 2 per cent to £336m in 2007/08. Total revenues of the Football League clubs exceeded £500m for the first time.

Premiership Revenue Tops £2 Billion

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The publication of the authoritative and comprehensive Deloitte report on football finance is always one of the highlights of the year for those of us interested in the business side of football. We will be providing further analysis from this year’s report over the next few days. It shows that the new television rights deal sent the revenue of Premiership clubs soaring to £1.932m in 2007/8 and revenues are estimated to have reaching £2bn in 2008/9.

Players Seek To Avoid Top Tax Rate

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Premiership footballers are hoping to avoid the new 50p income tax rate by asking clubs to pay their salaries as interest free loans. This would allow top players to pay as little as 2.5 per cent tax on some of their earnings. HM Revenue and Customes treat loans as a ‘benefit in kind’ and taxes only 5 per cent of the amount borrowed. If a future Conservative government cut the top rate of income tax back to 40 per cent, a club could write off the loan and it would be treated as income with the player ending up paying a rate of tax equivalent to 42.5 per cent instead of 50 per cent.

Football League Wants A Bigger Share Of The Pot

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The Football League wants the Premiership to increase its handouts to lower division clubs in proportion to wage rises at the top level. The League would like to receive a yearly income based on a percentage of Premiership clubs’ total wages bill as part of the ‘solidarity’ payment that the top tier already contributes for youth and community development and as parachute payments to relegated clubs. Last season those were worth £31.8m.

Footballers To Strike Back Against 50p Tax Rate

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Premiership clubs are braced for a wave of pay demands from star players in anticipation of the new 50p tax rate on higher earners. Figures from HSBC Private Bank and tax experts Saffery Champness suggest that, if most Premiership players are in the £50,000-£70,000 a week bracket, players at the top end of the range face a £330,000 increase in their tax bills to £1.7m from next year. Manchester United’s Christiano Ronaldo is reputedly paid £125,000 a week.

Money Still Available To Buy Football Clubs

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The money is there to buy football clubs, but valuations will have to be more realistic. That is the view of Keith Harris, the executive chairman of investment bank Seymour Pierce. In the case of Liverpool, this means that the owners will have to slash 20 per cent from the asking price if they want to sell the club. Last year they failed to achieve a sale with an asking price of £500m.

The Costs of Relegation from the Championship

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Considerable attention is given to the costs of relegation from the Premiership to the Championship, but relegation from the Championship to League 1 can be equally traumatic. This is particularly the case if you have recently been in the Premiership and it is possible that all three clubs relegated tomorrow (Charlton, Norwich, Southampton) could be in that category. Relegation could cost Norwich City between £5 and £7m. There will be big reductions in television income and probably in gate receipts, although Norwich fans are known for their loyalty.

New Investment Fund For Clubs

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At least six Football League clubs have begun negotiating with a City-based investment fund in the hope of borrowing money for the close season. The majority are believed to be Coca-Cola Championship clubs. Hero Global Football Fund has been set up to invest in football without taking equity in clubs. Backed by Emirates Bank, Hero plans to raise up to £100m based on minimum subscriptions of £100,000. The money will be made available for buying players and will be secured across the squad rather than against individual players.

Wenger Hits Out At Tax Changes

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Arsenal manager Arsene Wenger has said that the era of foreign domination in the Premiership will ‘soon be over’ due to the declining value of the pound, which makes transfer fees more expensive, and the imposition in last week’s Budget of a 50 per cent tax rate on high earners. All Premiership players fall into the £150,000-a-year bracket subject to the highest tax band and Wenger believes this will lead to an exodus of foreign players this month. They could end up paying an extra 16 per cent in tax when one takes account of the elimination of personal allowances for higher earners.

Interest Payments Keep Manchester United in the Red

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Manchester United set a record for a British football club for full year sales in the year to June 2008. Turnover was up sharply in its three main areas of activity. Matchday receipts rose by 10 per cent to £101.5m. Commercial income – sponsorship, merchandising and licensing agreements – rose by 14 per cent to £64m. The biggest increase was in TV revenue which, on the strength of United’s Champions League truimph, surged 48 per cent to £90.7m. Even so, matchday revenue from the enlarged Old Trafford stadium makes a bigger contribution to turnover.