Regulation – why many football clubs are deluded

WHEN the financial crisis of 2008 hit the global economy, people were quick to blame banks and other institutions for bringing the world to its knees. The consequence for that industry was a wave of stricter regulation, some of which is still being rolled-out. Furthermore, compliance and regulatory jobs became one of the few growth areas in the financial services sector. The pandemic, like the crisis, has exposed certain shortcomings in the macro-economic environment and the football industry, for one, has appeared fragile and unable to provision for a rainy day. It has also opened up cracks in the structure of the world’s most popular game, from ownership to overspending.

The fan-led review of football, headed by UK Member of Parliament, Tracey Crouch, has called for an independent regulator to be established to bring about greater financial transparency as well as better management of clubs’ balance sheets. But there is resistance to the appointment of a regulator that is not affiliated to the footballing authorities and the clubs themselves. What have they got to worry about?

Simple. The game has been overspending for the past few decades and has rarely been held to task. At the same time, while revenues have grown, they clubs have continued to push boundaries when it comes to wages and they have depended on broadcasting income far too much. Clubs have mortgaged their futures and gambled on success. With most clubs struggling to make a profit and many paying out more than they earn, the health of English football is decidedly shaky. Little wonder they do not welcome scrutinisation by a standalone regulator.

The problem with football is in pursuing most clubs’ objective of winning matches, the business element of the game often comes second in the list of priorities, yet a bankrupt club is not in a position to challenge for points and goals. If it was a chicken and egg situation, football has to be financially sound before it is successful on the pitch. The get-out for football, going right back to the game’s origins, has been the owner bail-out to ensure clubs can continue. Invariably, the game has not paid its way naturally, the concept of wealthy owner paying the bills is not a new idea, it is just the scale that has changed. It is no longer the local butcher or mill-owner that foots the cost of football, it is now nation states, oligarchs and e-commerce billionaires.

Yet the financial stability of football is the single most important factor in the modern game and the implementation of an independent regulator would help change the way clubs operate, at least that is the hope. But, be warned – as with all restrictive governance, a sub industry always emerges to exploit loopholes, so we can realistically expect a response if and when the regulator comes into force.

The biggest surprise during the pandemic has been the lack of clubs that have actually folded. Derby recently went into administration and poor old Bury folded, but mostly, it has been a tale of crisis, temporary solutions and hand-to-mouth existence for many small clubs. Meanwhile, the reduced income at every club has meant their wage bills have rockets in terms of the amount of income they have consumed. The Championship in England has long been a basket case in this context and it appears to be getting worse.

Over the past decade, the top two divisions in England have earned more than £ 40 billion, but over £ 28 billion of that has been paid out in wages. Around a dozen of the top 44 clubs have generated a wage-to-income ratio of over 100%, a truly worrying picture. Only 11 of the 44 have made an overall profit during the decade.

There’s also concerns that clubs do not report their finances with much explanation or reason and those that can get away with providing opaque minimal accounts do. As one academic said, financial reporting within football is designed to appease shareholders rather than the fans.

So it is quite ludicrous that big-time football should resist change and the desire to prevent another Bury or Derby. It also reveals how little they respect their supporters who are their emotional stakeholders, economic customers and “investors”. Sadly, the fans never vote with their feet, the FOMO (fear of missing out) aspect of football means they are too fearful of life without their football fix. This addiction has been taken for granted for too long, it is time to call a halt to the easy-win virtue signalling and really take note of what some progressive, far-sighted clubs are doing for the benefit of their fans and the broader community. 

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