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Special report: English soccer finances part one – a tale of FFP, state ownership and bending the rules

The Premier League continues to enjoy unprecedented popularity at home and abroad. However, as the financial disparity between the top flight and the lower tiers deepens, sweeping changes are on the horizon in a bid to address how the money flows through the sport. In the first instalment of a four-part feature assessing the financial landscape of English soccer, SportsPro takes a look at how we got here and what’s to come.

17 July 2023 Ed Dixon

For all the twists and turns of the 2022/23 Premier League campaign, there was an air of inevitability about last season’s final table.

Manchester City scooped a third consecutive top-flight title – their fifth in six years – on the way to a historic continental treble. It was only the second time an English outfit had won the Premier League, the FA Cup and the Uefa Champions League in the same season, after rivals Manchester United completed the set in 1999.

BT Sport commentator Darren Fletcher delivered a polarising line as the final whistle blew for last month’s Champions League final in Istanbul when he said: “The greatest story in club history has an ending.”

While it cannot be denied that City’s treble was a huge achievement, how they got there embodies the issues facing the wider domestic game and is one of the big reasons why change is afoot.

Manchester City’s treble triumph has been overshadowed by alleged breaches of Premier League financial rules

What are the issues?

For City specifically, it stems from their ownership. Since being acquired in August 2008 by the Abu Dhabi United Group, which is owned by Abu Dhabi royal family member Sheikh Mansour bin Zayed Al Nahyan, lavish spending has brought the club its most successful period in its 143-year history. That has also prompted plenty of scrutiny of City’s finances and whether the club has complied with financial fair play (FFP).

Having already succeeded in getting a two-season European competition ban from Uefa lifted by the Court of Arbitration for Sport (CAS), February saw City referred to an independent commission by the Premier League over alleged breaches of its financial rules. These will be covered in more detail in future instalments of this series but, for the moment, they can be summarised as the following: inflating income, deflating costs, and noncooperation.

There are very few English clubs that can consistently compete with City’s spending. Even those eager to loosen the purse strings are mindful of breaching Premier League financial regulations if they make an adjusted loss of more than UK£105 million (US$134 million) over a three-year period.

Everton are being investigated over a possible financial fair play breach

On paper, Newcastle United, now owned by Saudi Arabia’s Public Investment Fund (PIF), have pockets deep enough to challenge City. The sovereign wealth fund has estimated assets of US$620 billion. But the Premier League is under pressure to re-examine the assurances given that the Middle East state does not control Newcastle – something that given rise to numerous concerns, including accusations of sportswashing.

More broadly, the Premier League has never been richer thanks to lucrative broadcast contracts and overseas investment. However, the financial gap between English top-flight sides has widened, which becomes a chasm when factoring in teams from the lower leagues. Clubs pushing for a more level playing field know the Premier League’s ‘big six’ – City, United, Liverpool, Arsenal, Chelsea and Tottenham Hotspur – have little interest in compromise for fear of it threatening their place at the top of the food chain.

A notable casualty of chasing the dream were Leeds United nearly 20 years ago. Having overspent in an attempt to cement themselves as regular challengers in the Champions League, the Yorkshire outfit dropped down to the third tier after entering voluntary administration in 2007, only returning to the Premier League in 2020 after a 16-year absence.

Today, teams across the divisions continue to reach for the stars, which in some cases has coincided with financial recklessness. In the case of Everton, a Premier League ever-present, three-year losses of UK£371.8 million (US$476 million) under Farhad Moshiri’s ownership have seen the Toffees referred to an independent commission over an alleged breach of profitability and sustainability rules. Further down the pyramid, clubs with irresponsible owners have faced everything from uncertainty to insolvency.

Is it just the men’s game?

Women’s soccer is also at a crossroads, albeit in different circumstances. While the female game has continued to enjoy a period of growth, ranging from increased revenues to record attendances since England’s Uefa Women’s Euro 2022 win, the top-tier Women’s Super League (WSL) is still to decide on its best path forward.

According to Deloitte, WSL clubs saw aggregate revenue rise by 60 per cent in 2021/22, bringing in a combined UK£32 million (US$40.9 million), though a pre-tax loss of UK£14 million (US$17.9 million) was recorded. It was also reported in February that attendances during the first half of 2022/23 were up 267 per cent compared to the previous season. The league’s chair Dawn Airey sees “no reason” for the competition not to be worth UK£1 billion (US$1.3 billion) within a decade.

The WSL is currently controlled by the Football Association (FA), but the national governing body intends to establish it as a separate company that is run independently. Amid reports of teams angling for a quick split from the FA and private equity interest, the next ownership model will be crucial if the WSL is to realise its potential. If it doesn’t, the impact will be felt all the way down to grassroots level.

The WSL has benefited from increased attendances following England’s win at Euro 2022

“The most important thing is that whoever comes into partnership with clubs to develop the leagues is dedicated to the wide success and growth of the game [and] to developing the whole ecosystem so that we transform women’s football in this country,” says Maggie Murphy, chief executive of Lewes FC, whose women’s side play in the second-tier Women’s Championship

“I would be skeptical if anyone came in that is only looking at it from a return on investment perspective. I would be skeptical of anyone that was coming in that didn’t have a female lens on where the opportunities for growth are. And I would be skeptical about anyone who thinks that they know what the answers are already.

“What we’re doing right now is trying to figure out how to set up a league structure for 24 teams. But this has to be seen as the starting point. We should be thinking about this already being 48 teams.

“Whatever we set up has to have the capacity to grow because it’s the biggest growth area in sport right now. So let’s not create something that is overly restrictive to just two sets of 12 teams [in the WSL and Championship].”

What’s to come?

The biggest headline-grabber has been the proposal of a new independent regulator for English soccer, which was set out in February after the UK government acted on a recommendation from the 2021 fan-led review.

The main goal of the new body is to ensure clubs are run sustainably, as well as to stop teams from joining breakaway leagues. That stems from Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham trying to join the European Super League (ESL) in 2021. The prior year also saw Liverpool and United conceive ‘Project Big Picture’, which sought to reduce the top flight to 18 teams, give greater power to the big six, and scrap the League Cup and Community Shield.

On top of that, the regulator will be able to step in and force arbitration if the Premier League, the English Football League (EFL) and the FA fail to reach a new settlement on how money from the top tier supports lower-level soccer. An owners’ and directors’ test will also be run by the regulator, featuring greater due diligence and a stronger focus on the fitness and propriety of new owners, including where their money is coming from.

In terms of when the regulator will officially be in place, the 2024/25 season has reportedly been earmarked.

“I think it’s turning down the dial as far as the opportunities for misbehaviour are concerned,” soccer finance expert Kieran Maguire tells SportsPro.

“It’s a bit like a burglar alarm. Football historically has been one of those industries which is quite vulnerable. Where we’re seeing the most danger is separation of property from football club. It’s giving fans the responsibility to say ‘you need to persuade us that this is in the best interest of the club’.

“It’s not being conservative, it’s not being luddite. It’s just making sure that those people who are in charge of football clubs are acting as custodians.”

The proposed independent regulator emerged after fan backlash against the failed European Super League

Beyond plans for a regulator, the Premier League and the EFL remain locked in talks over financial distribution. In March, it was reported the top flight had offered the EFL UK£125 million (US$160 million) a year in additional funding in a bid to agree a ‘New Deal for Football’ covering distribution, cost controls, calendar issues and work permits. As it stands, approximately UK£450 million (US$576 million) will be provided to EFL clubs – excluding parachute payments – over the 2022 to 2025 broadcast cycle.

“I think there’s a far better solution to be found internally than the one that wants to be imposed,” says Shaun Harvey, a former chief executive of the EFL and Leeds United and now advisor to fourth-tier club Wrexham AFC.

“Ultimately, football’s probably not helped itself. But I don’t actually see what an independent regulator is going to be able to bring that football shouldn’t be able to resolve itself.

“The FA, for me, has to have a look at itself and its role because they are the governing body of the sport. They license and sanction the competitions of the Premier League and the EFL.

“If I was sat at the FA and seen the suggestion of an independent regulator, I’d be asking what more we could potentially have done to try and stop this from happening.

“It might be that the role was impossible to bridge.”

As for the legal case concerning City’s alleged financial breaches, be braced for a long and drawn out process that could last between two and four years. There has not been an indication on how long Everton’s hearing will take, given there is no precedent for an investigation of this kind being completed. Both clubs protest their innocence.

Banning front-of-shirt betting sponsors is the latest move by the Premier League to demonstrate it can self-govern

Why all this now?

Discussions between the Premier League and the EFL on the distribution of money is nothing new – it surfaces every time the former inks a new broadcast deal. Yet the problems experienced by lower-league teams during and post-Covid have added a sense of urgency for finding a resolution.

The proposed regulator, meanwhile, arrives following a wholesale review ordered in the wake of the ESL fallout. Perhaps ironically, that botched competition, which tried to torpedo the European soccer landscape, may have delivered a watershed moment by inadvertently putting the national game’s full workings under the microscope.

Time will tell when it comes to the effectiveness of a regulator. Still, the Premier League already appears wary. According to The Times, the top flight is considering a cap linking the amount any club can spend on wages to how much television money is paid to the lowest-placed team in an effort to drive greater competitiveness. Add that to the charges brought against City and Everton, as well as a ban on front-of-shirt betting sponsors and blocking those guilty of human rights abuses from owning clubs, and the Premier League seems anxious to demonstrate that it can manage its own affairs.

“I’m surprised at the ferocity of the reaction from the Premier League [to the regulator] because I don’t actually see what negatives there are,” says Maguire.

“The Premier League’s main concern is that the regulator is going to try to force through redistribution of funding. That’s not the purpose of the regulator. The regulator there would be operating in a similar manner to that of the Bank of England. It will be the decider of last resort.

“At present, we’ve got a lot of intransigence.”

This is the first instalment of a four-part feature looking into English soccer’s finances. Part two will be published on 24th July.

Part two: Where the money’s coming from

Part three: A ‘New Deal’ for the EFL, parachute payments and a “royally screwed” pyramid

Part four: Looming TV rights deals and the betting problem

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