Finance & Business

City overtaking neighbours on and off the pitch

MANCHESTER CITY are the most valuable club in the Premier League according to a new study by the University of Liverpool Management School’s Centre for Sports Business. City’s valuation of  £ 2.4 billion is around £ 300 million higher then neighbours Manchester United (£ 2.1 billion).

The paper, led by leading football finance expert Kieran Maguire, underlines how the so-called big six clubs are way ahead of the rest of the pack. The overall value of the division, £ 14.7 billion, is heavily dependent on the six, who contribute £ 10.9 billion to the total.

Further investigation reveals that the leading half dozen clubs – Manchester City, Manchester United, Tottenham, Liverpool, Chelsea and Arsenal –  account for 57% of total revenues but also pay around 51% of overall wages in the league.

Wages as a percentage of revenue, which declined in 2016-17 at the start of a broadcasting cycle (a typical scenario), increased to 58.9% in 2017-18 and are expected to go up to around 60% in 2019-20.

The same group of clubs secured 94% of UEFA broadcasting revenues for the Premier, 80% of all commercial income and 74% of matchday revenue.

With such an emphasis on the big six, it is little wonder that these are the only £ 1 billion-plus  clubs in the Premier. There is a huge gulf between sixth-placed Arsenal’s valuation (£ 1.4 billion) and Burnley in seventh position (£ 400 million). Nine clubs do not even reach £ 300 million and Bournemouth and Swansea are below £ 200 million.

Manchester City’s first place reflects the upward trajectory of their revenue generation over the past 10 years, from £ 87 million in 2009 to £ 500 million in 2018. Although the club made an operating loss of £ 22 million in 2017-18, it would have been more but for the £ 39 million the club accrued on player sales.

City’s rivals, United, saw their value decline by £ 350 million in 2017-18 as revenues only increased marginally. At the same time, wages were up by 13% and the club had additional costs in the form of financing and dividends.

Tottenham (value £ 1.8 billion) have the lowest revenue total – £ 381 million – among the top six, but they are in third position, largely due to their temporary relocation to Wembley and good cost management. The outlook is positive for Spurs with their new stadium now open. The club posted record operating profits of £ 157 million in 2017-18, the total being boosted by player sales. Spurs’ wage bill is less than half of Manchester United’s, suggesting the club is getting value for money from its playing resources, with a wage-to-revenue ratio of 39%.

Spurs’ has the best wage control in the Premier. It is worth noting that the clubs with the highest wage-to-revenue ratio are outside the top six clubs. Crystal Palace (78%) has the highest and seven other clubs breach the 70% mark.

Chelsea are fourth by value (£ 1.6 billion), but the report suggests their value will drop in 2018-19 due to the club being absent from the UEFA Champions League. The club is still constrained by its relatively limited stadium capacity of 41,000 – a scenario that is unlikely to change in the near future given the redevelopment of Stamford Bridge is on hold.

Conversely, Liverpool, fifth with a valuation of £ 1.6 billion, have increased the capacity of Anfield, which has brought in higher matchday income. The club made a record £ 131 million profit in 2017-18, enhanced by the sale of Coutinho to Barcelona.

The final member of the top six, Arsenal, saw their value drop by almost a quarter (to £ 1.4 billion), the result of no Champions League football in Arsene Wenger’s final year at the club. Wages increased despite lower revenue streams and Arsenal had to rely on player sales to limit operating losses.

The report outlines that the Premier League’s top clubs are in a healthy condition, but the gap between the rich and also-rans is a worrying sign of ongoing competitive imbalance. There’s little denying that the rich have always dominated British football – with a few exceptions – but the chasm has arguably never been so marked.

Photo: PA

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