Finance & Business

GOTP Notepad: A dose of reality – League Two

THE gap between the Premier League and the lower reaches of the Football League is growing to such an extent that the long-term future of the game at the lower professional levels has to be questioned.

In the latest BDO Financial Directors’ Football Survey, the stark reality of life in League One and Two was outlined. As Premier League clubs enjoy healthy profitability – some 70% expect they have made a profit in 2017-18 – that sort of financial stability can only be dreamed of lower down the food chain.

Without player trading and amortisation, every single League Two club surveyed said they would not make a profit. Even after trading, 83% said they would still fail to break into profit, compared to 70% in 2016-17.

That said, the biggest concern for FDs was relegation, although a third of clubs continue to be worried about rising player wages.

Around two thirds of League Two clubs use the wage to turnover ratio as a key performance indicator. In L2, around 50% of respondents said their ratio was below 50% (versus 14% in the Premier, 0% in the Championship and 10% in League One).

Some indication of the pressures on League Two clubs is highlighted by the fact that 80% of survey participants said in budgeting for the new campaign, the squad size would be lower in 2018-19 than the previous season. Moreover, 40% said they will spend less on the payroll.

In the survey, 50% of League Two clubs said they had been approached by new investors over the past 12 months, notably from US and Middle East parties. At present, the clubs revealed that their investors are 100% domestic.

Interestingly, one club commented that fan-owned clubs are not really sustainable as there are not the principal shareholders who can make capital injections when required, leaving funding challenges.

Photo: Jon Lord CC-BY-2.0

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