UEFA have issued their Club Licensing Benchmark Report for 2022 and the impact of the covid-19 pandemic is there for all to see. UEFA forecasts the full year 2021 will reveal losses among the continent’s top flight clubs of more than € 4 billion. Furthermore, the report shows that despite the dramatic loss in [matchday] income, player wages have still increased, albeit at a lower rate.
While revenues will recover, one worrying aspect of the pandemic is the rise in debt, with around € 750 million of new debt taken on by clubs. Larger clubs, in particular, were able to access bank funding to restructure their financing, as a result, the ratio of external debt to owner debt has creased from 3.7 to one in 2019 to 6.6 to one at the end of 2021. Only the largest clubs are able to access money at attractive rates, so interest charges will certainly impact future profitability.
UEFA believes the route out of the pandemic demands better cost control related to wages and transfer fees. In addition, long-term investment in infrastructure and youth development is a pre-requisite. The return of matchday revenues in 2021-22 should provide some relief – 88% of matchday earnings disappeared during the height of the crisis.
With leagues feeling the pressure, the bigger competitions have attempted to become more innovative in raising money. La Liga, for example, has an agreement with private equity firm CVC that will earn them € 2 billion in exchange for 8.2% of commercial rights. The leagues have identified that their broadcasting rights are gold dust for investors and Serie A, the Bundesliga and Ligue 1 have all explored possible deals. It may take time to get universal buy-in, indeed in Italy the clubs were reluctant to go down this route. In Germany, fans will undoubtedly block any move to sell the family silver.
The Premier League’s financial power is highlighted once more by the UEFA report. In the transfer market, the summer of 2021 saw over € 2 billion of activity involving the league, which represented 27% of the market. The Premier clubs spent € 1.4 billion themselves. The Premier was the only major league to be anywhere near pre-pandemic peaks.
The Premier’s TV revenues are far more democratically distributed than any other league. The ratio between top and bottom is just 1.2x, which compares very favourably with the other leagues, most notably Portugal, where the ratio is 9.2x due to the top three clubs (Benfica, Porto and Sporting) negotiated their broadcasting deals individually.
The difference between English clubs and their peers is very clear when it comes to TV money. The average received per club in the Premier is € 117 million, far greater than Spain (€ 70m), Germany (€ 66m), Italy (€44m) and France (€ 22m), and multiples of countries like Portugal (€ 9.2m) and the Netherlands (€ 4.2m).
All over Europe, however, club losses area hitting new highs, although UEFA believes if the pandemic had hit a decade ago, less stringent governance would have seen more clubs encountering serious, far-reaching problems. Only two clubs among Europe’s elite, RB Leipzig and Valencia, saw their revenues increase, while clubs of the status of Barcelona (-14%), Manchester United (-18%), Inter Milan (-19%), Paris Saint-Germain (-15%) and Juventus (-14%) all saw significant drops in revenue. The pandemic has left around 25% of top division clubs with negative equity.
As mentioned, UEFA sees infrastructure investment as crucial as football attempts to mount a recovery, so stadium construction will be on the agenda. A total of 18 new stadiums have been built during the pandemic and in 2021, there were six new arenas and four rebuilds. Predictably, the number of stadium renovations has decreased in the past two years as clubs have cut back on investment in fixed assets.
The pandemic did not stop ownership activity and in 2021, there were 30 top-division takeovers, an increase on 2020. However, acquisitions slowed in the second half of 2021. US investors were especially active, securing minority stakes in European clubs including Crystal Palace, Liverpool, Wolverhampton Wanderers, Augsburg, Atlético Madrid and Club Brugge. Across Europe, 52% of clubs are privately-owned, 48% have public ownership models.
UEFA is aware of requirement for some adjustments across the industry. Andrea Traverso, their director for financial sustainability and research, commented: “The report clearly demonstrates the need for change in club football finances…strong balance sheets are important for attracting new owner investment and supporting third-party financing arrangements.”
A special report on women’s football will follow.