The catalyst for modern football? The financial crisis of 2008

IF ever a sport reflected a certain disconnect with its audience, it is surely football. Wages continue to climb, the big clubs remain cash cows and the competitive imbalances that have plagued the game for the past decade show little sign of levelling out. In contrast, most of professional football’s client base enjoy very modest lives.

When the global financial crisis broke in 2008, some experts undoubtedly contemplated the end of the period of growth, less wage inflation and a lack of willing investors looking to boost the financial power of Europe’s most prestigious clubs. While it did not impact the gargantuan clubs too much over the medium term, indeed it added to their number, the financial crisis did make life more difficult for smaller clubs.

Since 2008, we have seen the creation of an elite band – a bulge bracket, to use financial market terminology – that is standing astride domestic football – Real Madrid, Barcelona, Bayern Munich, Juventus, Paris Saint-Germain, Manchester United and City, Chelsea, Liverpool, Arsenal and Tottenham.

The post-crisis environment has created new giants in the form of PSG and Manchester City and due to the soaring TV fees enjoyed by the Premier League, a cluster of English clubs have also joined the upper echelons.

In 2008, Manchester United generated € 324 million in revenues and nine years’ later, with many corporates struggling to maintain profitability and importance, their revenues were € 676 million – more than double. Just consider that US insurance giant, AIG, who were United’s shirt sponsor in 2008, have seen their revenues drop by 40% in a comparable period. United’s neighbours, Manchester City, have gone from €102 million in 2009 to € 528 million in 2017.


Deloitte, at the time of the crisis, commented that, ”the unique nature of the football industry will enable major clubs to be relatively resistant to the economic downturn.” Most analysts felt that football’s business models were unconventional and always laden with debt. Like most businesses, they relied on bank lending but when the banks rolled into trouble, access to credit became a problem.

Who won what in 2008… and 2018

  2008 2018
UEFA Champions League Manchester United Real Madrid
England Manchester United Manchester City
Spain Real Madrid Barcelona
Italy Inter Juventus
France Lyon PSG
Germany Bayern Munich Bayern Munich
World Cup 2010 – Spain France

Football has always had a certain “bread and circuses” value to it. Certainly, politicans and businessmen try to avoid sending a club to the wall. While many went into administration, very few have been allowed to go bankrupt. The fall-out of a club failing could be catastrophic for individuals pushing a club into extinction. In Spain politicians, both local and national, do everything in their power to ensure they are not connected to a club that may go bust.

Spain, who in the eye of their own storm won the European Championship twice (2008 and 2012) and World Cup (2010), went to extraordinary lengths to assist its illiquid clubs. In the national’s team’s golden period, 20 clubs in the top division received € 332 million in direct public aid and € 476 million in indirect (tax and social security debts) support. The Valencia region, for example, pumped some € 169 million into its four clubs.

Spain’s economic woes – trade deficit reaching 10% in 2008 and GDP retracting for the first time in 15 years – may have been frightening, but their teams lifted the gloom. Nevertheless, some of their clubs were in dire straits. Valencia, from Spain’s third most important city, became a symbol of excess spending and their new stadium was all but abandoned because they could not afford to complete the structure.

The country’s big two eventually rose from the crisis stronger and more defined than ever before. Spanish football has since become the dominant force in European club football – since 2008-09, La Liga clubs have won 13 out of 20, including nine of the last 10 European prizes. And in money terms, Real Madrid and Barcelona are consistently at the top of any studies on football finance. It should be recalled, though, that both clubs run high levels of debt, over half a billion euros between them.

New money

The Premier League, however, remains the most lucrative competition, although the top bracket has become a league within a league. One club that certainly went through some angst during the period was West Ham United, whose owner, Bjorgolfur Gudmundsson, was chairman of the troubled Icelandic bank, Landsbanki, at the height of the crisis. The club was put up for sale and while a new owner was sought, no further money could be pumped into West Ham. In 2011, the Hammers were relegated from the Premier.

With Europe suffering more than other areas of the global economy, new sponsors and owners from regions classed as emerging markets would help to provide fresh financial impetus, rather like Roman Abramovich had with Chelsea in 2003. In England, Manchester City were bought by the Abu Dhabi United Group in August 2008, which elevated one of the country’s under-achieving clubs and created the City Football Group, an organisation that represents the controversial multi-club ownership model. As with Abramovich at Chelsea, City were in a precarious financial position before being taken over. In 2011, the Middle East also invested in Paris Saint-Germain in the form of Qatar Sports Investment, creating a wealthy, successful club in the French capital.

While Spain became stronger and France had its first international club for some years, Italy was going through mixed experiences. Serie A, once the model envied by all other leagues, continued its decline, but Juventus developed into a club with a very modern outlook. As the Milan duo fell away from their long-time position at the head of Italian and European football, Juventus recovered from scandal to reinvent themselves. They made the right decision in owning their own new stadium, which allowed them to benefit from revenue streams that had previously been restricted. Juventus have dominated Italian football over the past seven years and are currently the only Italian club that can compete on a European scale.

For a long time, Italian football was proud that its clubs were owned by local companies and families. But as Italy’s financial crisis deepened (high employment and 5.5% shrinking of GDP in 2009), the seal was broken. Thomas Di Benedetto, a US private equity investor, became the first foreign owner of a Serie A club in 2011 when he bought Roma.

All over other parts of Europe, there were signs of deep problems. Greece, one of Europe’s most stressed countries, and the symbol of the sovereign debt crisis, saw attendances drop from an average of 6,200 to 4,000 and witnessed the bankruptcy of AEK Athens. Clubs could no longer be relied upon to pay their players – in 2011, 70% of Greek footballers surveyed said they had not been paid at some point. Other clubs, such as Panathinaikos and Olympiakos have also had their financial problems.

We need football

Ten years on, though, the so-called “big five” appear in robust shape. Crowds in England France, Germany and Italy are higher than they were in 2008. Clubs, out of necessity, have created global “franchises” that have embraced new supporters and developed brands that are instantly recognisable across the continents. This is a reflection of the shift in the global economy but also of a determination to build dominant clubs that can extract maximum value from a more diverse audience. In the past six years, Europe has been the property of PSG in France, Bayern in Germany, Juventus in Italy, Real and Barca in Spain and Chelsea and City in England. It’s not particularly healthy, but it does prove the law of the jungle prevails in football.

In some ways, football – thanks to technology, social media and the rise of a new generation of fans – has become even more vital to the population than it was in 2008. The percentage of disposable income that fans spend in support of their team has, arguably, increased over the past decade. In many parts of the world, the financial crisis continues to affect the daily lives of people, so football, which has been described as “the most important of unimportant things”, remains the great distraction. But with many smaller clubs struggling for their existence, the question remains about imbalances and whether at the highest level, football could overheat and burst the bubble. No industry is immune from excessive behaviour that can threaten its long-term success and as the financial crisis told us, no longer can we take anything for granted. At some stage, this theory may get tested once more.

Photo: PA

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