Focusing on the polarisation of football finances and the impact of ffp - the annual survey of football club finance directors 2014

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Focusing on the polarisation of football finances and the impact of ffp - the annual survey of football club finance directors 2014
focusing on the
polarisation of
football finances and
the impact of ffp
the annual survey of football club
finance directors 2014
Focusing on the polarisation of football finances and the impact of ffp - the annual survey of football club finance directors 2014
CONTENTS
EXECUTIVE SUMMARY               2

METHODOLOGY                     3

ANALYSIS OF KEY FINDINGS        4

BDO PROFESSIONAL SPORTS GROUP   32
Focusing on the polarisation of football finances and the impact of ffp - the annual survey of football club finance directors 2014
FOREWORD
In many areas we continue to see divergence     Play (in its many guises) and globalisation,      The top six or seven clubs in the English
between the English Premier League and          effectively locking-in this differential?         Premier League will be able to consolidate
the Football Leagues and, at the same time,                                                       their superiority whilst the rest of the league
increased polarisations within the English      • loss of income through relegation is            are in a relegation battle.
Premier League and within the Football            the primary concern for English Premier
League Championship:                              League clubs whereas the other leagues          Similarly, the impact of high parachute
                                                  are more concerned with inflexible player       payments and FFP may have the same
• 94% of respondents believe the gap              salaries (presumably impacting on their         polarising effect in the Football League
  between larger and smaller clubs is             ability to invest in search of promotion),      Championship as we see in the Premier
  widening; 79% of English Premier League         attendances and their ability to attract        League.
  (EPL) respondents and 76% of Football           sponsorship revenues
  League Championship (FLC) respondents                                                           However, the number of clubs reporting
                                                • 90% of respondents say they have
  see the gap within their own league                                                             an interest from third party investors has
                                                  complied with Financial Fair Play (FFP)
  widening                                                                                        increased from 21% last year to 29% this
                                                  requirements, and the Scottish clubs
                                                                                                  year, with the Football League Championship
• economic recovery has had an overall            believe the Scottish Premiership should
                                                                                                  and Football League 1 clubs having had
  positive impact across all revenue              adopt something similar.
                                                                                                  the most approaches (41% and 43%
  streams for English Premier League
                                                                                                  respectively).
  clubs whereas Championship clubs have
                                                However, is an unexpected consequence of
  experienced an overall negative impact                                                          Financial performance is improving, and
                                                improved financial security/performance
  across all revenue streams                                                                      there is still demand for football clubs,
                                                that owner investment is being stifled?
• there is a wide variation in confidence                                                         though the preference still seems to focus
  levels between leagues – ranging from         • 21% of English Premier League                   on taking on Football League clubs and
  the English Premier League and Scottish         respondents believe that their owners           investing in seeking promotion to the English
  Premiership (SP), where 86% and 83%             are considering a full or partial exit in the   Premier League rather than investing in a
  of respondents respectively are expecting       next 12-18 months compared with none            English Premier League club. Possible reasons
  to make a profit (before player trading),       in 2013                                         for this might be the combination of the
  to the Football League where 35% of           • 57% of English Premier League and               lower initial capital outlay, the revenue gap
  Football League Championship, 21%               almost half (47%) of Football League            and the application of FFP rules preventing
  of Football League 1 (FL1) and 19% of           Championship respondents would be               investors from buying success.
  Football League 2 (FL2) expect to make          prepared to invest more were it not for
  a profit                                        FFP                                             We would like to thank all our contributors
                                                                                                  for taking the time to participate and wish
• 79% of English Premier League clubs are       • where clubs are expecting to reduce             every club a prosperous season ahead. For
  seeing sponsorship revenues increasing          or hold constant playing squad payroll          every completed survey we have made a
  whereas in all other leagues the majority       costs in the next season, 43% of                donation to the PFA Benevolent Fund.
  of clubs are either seeing decreasing           Football League 1 respondents’ and
  sponsorship revenues or no change.              35% of Football League Championship
                                                  respondents’ decisions have been                CHARLES BARNETT, TREVOR BIRCH
As this disparity widens, are we seeing other
                                                  influenced by FFP to some or a                  and IAN CLAYDEN.
factors, such as enhanced TV revenues,
increased parachute payments, Financial Fair      considerable extent.
Focusing on the polarisation of football finances and the impact of ffp - the annual survey of football club finance directors 2014
02 FD FOOTBALL SURVEY    |   2014

EXECUTIVE SUMMARY

financing the club                                • Finance directors are cautiously               player costs, transfers and youth
• For the third year running, a third of            optimistic that a strengthening economy        development
  respondents consider their club’s current         will positively affect revenue streams in      • More than half (57%) of respondents
  financial position to be very healthy; 42%        the forthcoming 2014/15 season                   have a higher budget for youth
  say that their situation could be better        • Almost half (49%) of respondents are             development this year while 39% will
  but is not bad while 25% of respondents’          using the wages to turnover ratio as a KPI       maintain the same level as last year
  finances need attention or are a cause for        of their club’s financial health this year –   • Over half (58%) of respondents do not
  grave concern                                     up slightly from 44% in 2013.                    think that liquidity in the transfer market
• While more than eight out of ten                                                                   has changed and only 13% think that it
  (84%) respondents deny that owners              club operations                                    has improved
  are considering an exit, 21% of EPL             • The two top concerns of football finance       • The trend for clubs to put clauses in
  respondents believe that their owners             directors are the same as in previous            players’ contracts stipulating a wage cut
  are considering a full or partial exit in the     years - the loss of income if the club is        if the club is relegated continues to rise
  next 12-18 months compared with none              relegated and the inflexibility of players’      – 89% of respondents in 2014 up from
  in 2013                                           salaries – albeit the order has changed          84% in 2013 and 79% in 2012
• 29% of clubs have been approached in              from 2013                                      • 41% of respondents will be reducing the
  the last 12 months by external parties          • More than six out of ten (61%) of                size of the first team squad compared
  with a view to taking an equity stake – up        respondents think that the wealth gap            with 53% last year. Almost a quarter
  from 21% in 2013. The FLC and FL1 clubs           in their division is widening with the gap       (23%) of EPL clubs are increasing squad
  have had the most approaches (41% and             being most evident in the EPL and FLC            size whereas for FLC and FL1 this falls to
  43% respectively).                                clubs (79% and 76% respectively)                 only 6% and 0% respectively.
                                                  • Confidence among respondents that their        • Seven out of ten EPL respondents will
club revenue and profitability trends               tax position on payments to players was          be spending more on their first team
• 40% of respondents expect to make                 robust and defendable to HMRC rose               payroll next season – up from 42% in
  a profit after player trading and                 slightly from 77% in 2013 to 82%                 2013. Conversely, nearly 6 out of 10 FLC
  amortisation compared with just 29% in          • The percentage of respondents who were           and FL1 respondents will be reducing first
  2013.                                             late making their tax payments fell to           team payroll.
• There is an overall increase in confidence        13% from 20% in 2013.                          • Over half (52%) of respondents will keep
  this year with 43% of respondents                                                                  their transfer budget the same as last
  expecting to the make a profit before           financial fair play                                year compared with 64% in 2013. Only a
  player trading and amortisation in their        • There were high levels of compliance this        quarter (27%) of respondents will reduce
  next accounting period – up from 36%              year – 90% - with the requirements of            their transfer budgets this year compared
  in 2013                                           the financial fair play and cost control         with 24% in 2013. SP has the most stable
• There is clear evidence that the                  and sustainability rules (collectively           transfer market with 83% citing no
  resurgence of the UK economy over                 FFP) during the season. All respondents          change year on year.
  the last 12 months has had a positive             will comply in 2014/15 – up from               • More than two thirds of respondents who
  impact on all revenue streams. The                85% in 2013 with only 9% needing to              are reducing or keeping their transfer
  EPL is the biggest beneficiary of this            make significant changes to achieve              budget the same deny that their decision
  improvement. However, for all revenue             compliance.                                      has been driven by the fair play rules.
  streams investigated, the majority of FLC       • Only 38% agree that FFP regulations
  respondents have seen a decline rather            meet their principal objective of
  than no movement or an increase.                  promoting sustainability but a further
                                                    46% say they are a step in the right
                                                    direction.
Focusing on the polarisation of football finances and the impact of ffp - the annual survey of football club finance directors 2014
2014   |   FD FOOTBALL SURVEY 03

governance and propriety
                                              methodology
• One in five respondents has a
                                              BDO UK’s Professional Sports Group
  remunerated non-executive independent
                                              commissioned an independent researcher
  director on their club’s board, a slight
                                              in May and June 2014 to undertake
  increase on the 2013 figure of 15%
                                              structured telephone interviews with
• Nearly three quarters (73%) of              finance directors of football clubs.
  respondents - up from 64% in 2013 -
  agreed that they manage with a higher       A total of 67 interviews were completed
  level of corporate governance than they     with finance directors in the English
  would for a similar sized non-football      Premier League (EPL), English Football
  business.                                   League Championship (FLC), Football
                                              Leagues One (FL1) and Two (FL2) and the
national and international issues             Scottish Premiership (SP).
• Over half (51%) of respondents have a
                                              Throughout this survey, results are
  policy to support international teams by
                                              presented as column percentages
  making their players available
                                              rounded to the nearest whole and
• More than half of respondents do            arithmetic means, unless otherwise
  not feel appropriately compensated          stated. League abbreviations are used in
  for the disruption caused by players’       the report to aid brevity.
  international duty
• Preferred means of compensations
                                               league                                    number of clubs        % respondents
  for disruption caused by players’
  international duties were insurance          English Premier League                                 14                    70%
  for injuries (80%) and full salary           Football League Championship                           17                    71%
  reimbursement (54%)
                                               Football League 1                                      14                    58%
• There appears to be little support for
  the FA Commission’s proposals for a          Football League 2                                      16                    67%
  Football League 3 (populated with EPL B      Scottish Premiership                                   6                     50%
  teams) and an increase in home-grown
  player requirements with 42% saying
  that they will have a negative financial
  impact; 28% saying that they will have
  no impact; 13% saying that they will
  have a positive financial impact; and 14%
  believing that the proposals will not be
  implemented.
Focusing on the polarisation of football finances and the impact of ffp - the annual survey of football club finance directors 2014
04 FD FOOTBALL SURVEY   |   2014

analysis of findings

01: FINANCING THE CLUB

1.     How would you rate your club’s current financial                                                                          a grave cause
                                                                                                                                   for concern
       position?                                                                                                                       9%
 %                                   ALL LEAGUES       EPL     FLC      FL1      FL2       SP
 Very healthy                                   33      57       35       21      20       33
 Could be better but not bad                    42      29       41      50       47       50
 In need of attention                           16      14       18        7      20       17
 A cause for grave concern/on                    9       0        6      22       13        0
 the verge of administration
Base: 66

For the third year running, a third of           Four out of ten (42%) say that their situation
respondents consider their club’s current        could be better but is not bad while 25% of
financial position to be very healthy but the    respondents’ finances need attention or are a
variation in fortunes has narrowed slightly      cause for grave concern. FL2 and FL1 leagues
– ranging from 57% of EPL respondents            have the weakest finances with 33% and
(83% in 2013) enjoying good financial health     29% respectively citing problems.
compared with 20% of FL2 respondents.
                                                 22% and 13% of FL1 and FL2 clubs                               75%              16%
With the exception of the EPL, a higher          respectively stating that their finances are a               very healthy;       in need of
percentage of respondents in the other           cause of grave concern is an indicator of the               could be better      attention
leagues say that their finances are ‘very        continued pressure clubs in these leagues are                 but not bad
healthy’ this year.                              under to push for promotion.

2. Is your club dependent on the principal shareholder(s)
   to finance annual revenue shortfalls or operating
   losses?
 %                                   ALL LEAGUES       EPL     FLC      FL1      FL2       SP
                                                                                                       EPL                      SP
 Yes                                            60      29      88       64       69       17
 No                                             40      71       12      36       31       83
Base: 66
The percentage of respondents dependent          We can see here the marked difference in the
on the principal shareholder(s) to finance       financing positions of the EPL and the FLC
losses has reduced slightly this year from       and to a lesser extent FL1 and FL2. Owners
65% in 2013 to 60%. With the exceptions of       are subsidising FLC clubs in marked contrast
FL1 and FL2, the leagues have reduced their      to the majority of EPL owners who have the           29%                      17%
dependence - EPL down to 29% from 50%,           luxury of large TV revenues to fund the clubs.       2014                     2014
FLC down to 88% from 94% and SP down to                                                               a reduction              a reduction
17% from 40% in 2013.                                                                             of 42% from 2013         of 58% from 2013
Focusing on the polarisation of football finances and the impact of ffp - the annual survey of football club finance directors 2014
This result is very encouraging with 75%
of respondents saying they are relatively
happy with their financial position,
reflecting the continuing effect of
financial regulation rules, the impact of
an improving UK economy and the more
responsible view taken by many owners
in operating clubs in the last few years.
                                      trevor birch
                        partner, professional sports
Focusing on the polarisation of football finances and the impact of ffp - the annual survey of football club finance directors 2014
06 FD FOOTBALL SURVEY    |   2014

analysis of findings

01: FINANCING THE CLUB

3. Has your club used funding from a secondary source
   (i.e. not main bankers) secured on any of the following
   in the last year?
 %                                     ALL LEAGUES         EPL     FLC       FL1     FL2       SP
 Advance on season tickets –                    Yes: 3       0       12       0        0        0
 one year                                      No: 97      100       88     100      100      100
 Advance on season tickets –                   Yes: 0        0        0       0        0        0                                           Only
 two or more years                            No: 100      100      100     100      100      100
 Player transfer fee receivables                Yes: 3       0        0      14        0        0
                                                                                                                                           3%
                                                                                                                                       of clubs used
                                               No: 97      100      100      86      100      100                                    secondary source
 Other receivables                              Yes: 7      21       12       0        0        0                                    funding on player
                                               No: 93       79       88     100      100      100                                       transfer fee
                                                                                                                                      receivables and
Base: 67                                                                                                                               season tickets
The use of funding from secondary sources            and 12% of FLC respondents are securitising
continued to reduce in 2014 with only 3% of          ‘other receivables’ to secure their debt.
clubs taking an advance on season tickets, all
of which were in FLC, and only 3% of clubs           These numbers again add weight to the view
securitising player transfer fees receivable; all    that clubs are increasingly showing financial
of whom were in FL1. However, 21% of EPL             restraint.

4. Are the current owners of the club considering a full or
   partial exit within the next 12-18 months?
 %                                     ALL LEAGUES         EPL     FLC       FL1     FL2       SP
 Yes                                                16      21       18       29        6       0
 No                                                 84      79       82       71      94      100
Base: 67

While the overall picture is the same as             It might be likely that there will be some EPL        0%                        21%
2013, with more than eight out of ten (84%)          owners seeking to maximise the return on              2013                       2014
saying that owners are not considering an            their investment with the new TV deal and              EPL respondents who believe that
exit, the significant change is that 21% of          taking the view the club’s performance last              their owners are considering a
EPL respondents believe that their owners            season was as good as it is going to get.        full or partial exit in the next 12-18 months
are considering a full or partial exit in the
next 12-18 months compared with none in
2013.
Focusing on the polarisation of football finances and the impact of ffp - the annual survey of football club finance directors 2014
2014   |   FD FOOTBALL SURVEY 07

5. As far as you are aware, within the last 12 months has                     29% of clubs have been approached by
                                                                              external parties – up from one in five in 2013.
   the club been subject to an informal or formal approach
                                                                              The FLC and FL1 clubs have had the most
   from interested external parties with a view to taking                     approaches (41% and 43% respectively).
   an equity stake in the club?                                               There is still demand for football clubs
                                                                              and the preference remains to take on
 %                                ALL LEAGUES   EPL   FLC   FL1   FL2   SP    Football League clubs and invest in seeking
 Yes                                       29    8     41   43     31    0    promotion to the EPL.
 No                                        71   92    59    57    69    100
Base: 67

6. Has your club given a fixed charge over the stadium as a                   Just over a quarter (28%) of clubs have given
                                                                              a fixed charge over the stadium as security
   security for a loan?                                                       for a loan. There is little change this year in
                                                                              the overall picture and little variation in the
 %                                ALL LEAGUES   EPL   FLC   FL1   FL2   SP    responses across the leagues.
 Yes                                      28    29    29    29    25    33    28% of clubs leveraging their stadium
 No                                        72    71    71    71    75    67   has always been a concern. However, it
Base: 67                                                                      is encouraging that this position has not
                                                                              worsened.

7.     If the club has given a fixed charge over the stadium as               Of the 19 clubs who have given a fixed
                                                                              charge over the stadium as security, 12 of
       a security for a loan, what was the purpose of the loan?               them have used the loan to provide cash
                                                                              flow for the club while the other seven have
 %                                ALL LEAGUES   EPL   FLC   FL1   FL2   SP    used the money positively to build or expand
                                                                              their stadium.
 Build or expand the stadium                7    0      2     1    3      1
 Provide cash flow for the club            12    4     3     3      1     1
Base: 19
Focusing on the polarisation of football finances and the impact of ffp - the annual survey of football club finance directors 2014
08 FD FOOTBALL SURVEY    |   2014

analysis of findings

02: CLUB REVENUE AND PROFITABILITY
    TRENDS

8. Do you expect to make a profit before player trading
   and amortisation in your next accounting period?                                                            profit before
                                                                                                     player trading and amortisation?

 %                                    ALL LEAGUES        EPL      FLC      FL1      FL2      SP
 Yes                                              43      86       35       21       19      83
 No                                               49      14       59       72       63       17     43%                     86%
                                                                                                      ALL                      EPL
 Don’t know                                        8       0        6        7       18        0
Base: 67

The overall results reveal an overall increase     The greatest increase in confidence is from
in confidence this year with 43% of                FLC finance directors with 35% expecting to
respondents expecting to make a profit in          make a profit – up from just 17% in 2013.         83%                     35%
their next accounting period – up from 36%                                                            SP                       FLC
in 2013.                                           Overall these results are encouraging
                                                   with the EPL understandably showing the
However, there is a wide variation in              greatest confidence on the back of increased
confidence levels between leagues – ranging        TV revenues. However, the FLC and FL1
from the EPL (86%) and SP (83%) expecting
to make a profit compared with just 21% of
                                                   continues to be a cause for concern which is
                                                   why FFP rules have been embraced by these
                                                                                                     21%                     19%
                                                                                                      FL1                      FL2
FL1 and 19% of FL2 respondents.                    divisions.

9. Do you expect to make a profit after player trading and
   amortisation in your next accounting period?                                                                 profit after
                                                                                                     player trading and amortisation?

 %                                    ALL LEAGUES        EPL      FLC      FL1      FL2      SP
 Yes                                              40      42       29       43       31      83
 No                                               42      29       65       43       38       17     40%                     83%
                                                                                                      ALL                      SP
 Don’t know                                       18      29        6       14       31        0
Base: 67

The profit outlook for the next financial          The 83% of SP expecting to make a
year is brighter than 2013 with 40% of             profit seems very high and encouraging,
respondents expecting to make a profit after       particularly when it is not reliant on transfer   43%                     42%
player trading and amortisation compared           fees. Overall the responses to this and the        FL1                      EPL
with just 29% in 2013.                             prior question suggest that transfer fees have
                                                   no marked impact on profits in the FLC or SP,
The percentage of respondents not expecting        unlike all other divisions.
to make a profit has fallen sharply from 65%
to 42%.                                            However in the EPL we can see that
                                                   around half of profits before player trading
                                                                                                     31%                     29%
While two thirds (65%) of FLC respondents                                                             FL2                      FLC
                                                   and amortisation convert to losses after
expect to make a loss, this is still a decrease    player trading and amortisation. Despite
from 88% in 2013.                                  profitability and sustainability rules in the
                                                   EPL there is clearly still a need and scope
                                                   for shareholder support (through allowable
                                                   losses of up to £35m per season).
2014   |   FD FOOTBALL SURVEY 09

10. What has been the impact of the economic conditions
    on the following revenue streams in the current
    financial year?
 %                                 ALL LEAGUES   EPL   FLC   FL1   FL2   SP   The polarisation of the game between the
                                                                              EPL and the rest is clearly shown in these
 Match tickets                                                                numbers. The strength of the league means
 Reduced                                   39     0    64    65    26    33   customers and sponsors alike are still willing
                                                                              to pay a premium to be associated with it.
 No impact                                  27   42     18    7    44    17
 Improved                                  34    58     18   29     31   50   The most noticeable trend seen in these
 Merchandising                                                                results is that for all revenue streams
                                                                              ‘improved revenues’ was the most common
 Reduced                                   30     14    47   35    25    17   response from the EPL clubs whereas
 No impact                                 36     22   35    36    50    33   ‘reduced revenues’ was the most common
 Improved                                  34    64     18   29    25    50   response from FLC clubs.

 Match day catering                                                           Improved economic conditions have driven a
 Reduced                                   30     0    42     21    12   66   very positive impact on corporate hospitality
                                                                              revenues in the EPL (64% seeing an increase
 No impact                                  45   42    36    50    69    17   with no respondents seeing a decrease).
 Improved                                  30    58     18   29     19   17   However, this appears to be at the expense
 Corporate entertaining packages                                              of other leagues, each of which is reporting
                                                                              reduced revenue as the most common
 Reduced                                    39    0     53   50    44    50   response.
 No impact                                 30    36     24    21   38    33
                                                                              Sponsorship revenue is increasing within the
 Improved                                   31   64     24   29     18   17   EPL (58% reporting an increase with only
 Season ticket sales                                                          14% showing a decrease). However, this is
 Reduced                                    27    0     53   35    25     0   unique to the EPL as the highest positive
                                                                              response of the other leagues was FL1 with
 No impact                                  37   50     18   29    56    33   only 36% and the least positive response
 Improved                                   36   50     29   36     19   67   was the FL2 with only 19%.
 Sponsorship
 Reduced                                    31    14    59    21    31   33
 No impact                                  34   28     17   43    50    33
 Improved                                   33   58     24   36     19   34
Base: 67
10   FD FOOTBALL SURVEY   |   2014

analysis of findings

02: CLUB REVENUE AND PROFITABILITY
    TRENDS

11. What effect do you expect the state of the economy to
    have on your 2014/15 revenue streams compared with
    the season just ended?
 %                                   ALL LEAGUES   EPL   FLC   FL1   FL2   SP   Finance directors appear to be cautiously
                                                                                optimistic that a strengthening economy
 Match tickets                                                                  will positively affect revenue streams in the
 Reduced                                      24    14   42    28     19   0    forthcoming 2014/15 season with EPL and
                                                                                FL2 and SP respondents anticipating net
 No impact                                    51   50    42    50    62    50
                                                                                improvement across all revenue streams.
 Improved                                     25   36     18   22     19   50
 Merchandising                                                                  FLC respondents are expecting a net decline
                                                                                in match day and season ticket revenues but
 Reduced                                      15     7    24   14     19   0    no major changes in other revenue streams.
 No impact                                   49    43     47   57    56    34
                                                                                On balance, FL2 respondents are not
 Improved                                    36    50    29    29    25    66   expecting any major changes to their
 Match day catering                                                             revenues in the forthcoming season.
 Reduced                                      13    14    24   14     6     0
 No impact                                   60    50    58    64     75   34
 Improved                                     27   36     18   22     19   66
 Corporate entertaining packages
 Reduced                                      20     7   30    29     19    0
 No impact                                   46    43     35   50    50    66
 Improved                                    34    50     35    21    31   34
 Season ticket sales
 Reduced                                      25    14   42    35     19    0
 No impact                                    45    57    29   29    56    66
 Improved                                    30    29     29   36    25    34
 Sponsorship
 Reduced                                      18     7   36    14     19    0
 No impact                                    45    22    29   64    56    66
 Improved                                     37    51    35   22     25   34
Base: 67
£
                                                                                  2014   |   FD FOOTBALL SURVEY   11

12. Do you use the wages to turnover ratio as a key               Almost half (49%) of respondents are using
                                                                  the wages to turnover ratio as a KPI of their
    performance indicator of the club’s financial health?         club’s financial health this year – up slightly
                                                                  from 44% in 2013. Given the increased
 %                     ALL LEAGUES   EPL   FLC   FL1   FL2   SP   impact of financial regulation rules, we may
                                                                  have expected a more significant increase in
 Yes                           49     57    41   64    38    50   focus on this ratio.
 No                             51   43    59    36    62    50
                                                                  The percentage of FL1 respondents using
Base: 67
                                                                  wage to turnover as a KPI has risen markedly
                                                                  from 43% in 2013 to 64% this year.

13. If ‘yes’ in which range is your benchmark?
 NUMBER OF CLUBS       ALL LEAGUES   EPL   FLC   FL1   FL2   SP   While 18 of the 33 clubs have a benchmark
                                                                  of not more than 55% this year – an increase
 66%                            7     1     5    0      1   0    revenues remain comparably low.
Base: 33

14. What wages to turnover ratio do you currently operate         A smaller percentage of clubs are operating
                                                                  below 55% - down from 42% in 2013 to just
    in?                                                           23% in 2014. However, the percentage of
                                                                  clubs operating above 61% has also fallen
 %                     ALL LEAGUES   EPL   FLC   FL1   FL2   SP   sharply from 38% to just 17%.
 66%                           14    14   29     0     6    0    for their clubs rather than taking a gamble on
                                                                  either promotion or maintaining their place
 Not applicable                 51   43    65    36    63    50
                                                                  in their leagues.
Base: 67
12   FD FOOTBALL SURVEY   |   2014

analysis of findings

03: CLUB OPERATIONS

15. What is the projected level of your non-player capital
    spend during the next two years?
 %                                      ALL LEAGUES           EPL      FLC        FL1   FL2    SP
 £25m-£50m                                            3         0        0        7     6      0        spending less            spending more
 More than £50m                                        8       22        12        0     0      0         than £2.5m                than £50m
                                                                                                       (down from 75%)            (up from 1.5%)
Base: 67

While the majority of clubs continue to                respondents in 2013 to 61% this year – and   while a quarter (24%) of FLC respondents
spend less than £2.5 million on non-player             a small handful of clubs are spending more   plan to spend between £2.5 million and £10
investment, there is some evidence of                  than £50 million compared with just one      million (up from 6% in 2013). Two FLC clubs
increasing levels of investment.                       club last year.                              are planning to spend more than £50 million
                                                                                                    which represents significant long term
Fewer respondents are spending less than               One in five (22%) EPL clubs plans to spend   investment at that level.
£2.5 million – down from three quarters of             more than £50 million (up from 8% in 2013)

16. What are your two biggest concerns for your club over                                           The top two concerns of football finance
                                                                                                    directors are the same as in previous years -
    the next 12 months?                                                                             the loss of income if the club is relegated and
                                                                                                    the inflexibility of players’ salaries – albeit
 % OF MENTIONS                          ALL LEAGUES           EPL      FLC        FL1   FL2    SP   the order has changed from 2013, most
 1. Loss of income due to                                                                           likely due to the widening gap in central
 relegation                                       43 %           1        2        2     1=         league revenues between the leagues.
 2. Inflexible players’ salaries                   38%           2            1   3=           2=   Falling attendances due to the current
 3. Falling attendances due to                                                                      economic environment is the main concern
 current economic environment                      28 %                             1    3      1   for FL1 and SP clubs for the second year
                                                                                                    running. The ability to attract sponsorship is
 4. Ability to attract sponsorship                 28 %          3                       1=    2=   a major concern for FL2 clubs.
 5. Ability to raise new capital                   21 %                   3       3=
                                                                                                    Compliance with fair play regulations was
 6. Other                                          21 %                                             only mentioned by 9% of respondents while
 7. Potential fall in TV income                    11 %                                             season ticket pricing was only an issue for
                                                                                                    3%.
 8. Compliance with financial
 fair play regulations                              9%                                              Again we see the spectre of relegation
 9. Season ticket pricing                           3%                                              haunting EPL clubs which reflects the gulf
                                                                                                    in revenues between the EPL and FLC, even
Base 67: (The numbers 1-3 relate to the ranking of each league’s concerns.)                         with parachute payments.
2014   |   FD FOOTBALL SURVEY   13

The
concern
over
falling
attendances
in the Scottish
Premiership is
almost certainly
due to the continuing
impact of Rangers being
out of the top division,
exacerbated by Hearts
and Hibs both having
been relegated at the
end of last season.
The teams in the
Scottish Premiership
may actually have lower
match attendances
than the second tier in
Scotland next season.
                charles barnett
     partner, professional sports
14 FD FOOTBALL SURVEY   |   2014

analysis of findings

03: CLUB OPERATIONS

17. Are your revenues from key commercial contracts such
    as sponsorships:
 %                                   ALL LEAGUES       EPL      FLC      FL1     FL2      SP
 Increasing                                      39      79      35       14      31      33
 Largely unchanged                               40       7      41      64       44      50
 Falling                                         21      14      24      22       25       17
Base: 67

                                                                                                  L

                                                                                                                        1
                                                                                                EP

                                                                                                                        FL
Although four out of ten (39%) of                 Only 14% of FL1 respondents reported
respondents report increasing revenues            an increase. Outside of the EPL the SP is           79%                     14%
from sponsorship, the EPL is the only league      showing the least instances of declining        increasing revenues    increasing revenues
where a large majority (79%) of respondents       commercial revenues. The polarisation          from key commercial    from key commercial
have increasing revenues from sponsorship         continues. Sponsors want to be associated            contracts              contracts
contracts.                                        with success and large multinational                the polarisation continues
                                                  brands, seeking to target a wider and more
                                                  accessible international audience.

18. Do you think suitable sponsors are:
 %                                   ALL LEAGUES       EPL      FLC      FL1     FL2      SP
 Becoming easier to find                          7      14      18        0       0       0
 Becoming harder to find                         63      57      58      64       56     100
 No real change                                  30      29      24      36       44       0
Base: 67

Nearly two thirds (63%) of respondents            Sponsors are becoming more discerning
think that suitable sponsors are becoming         and sophisticated moving more towards a
harder to find, including 100% of SP              partnership arrangement with omnichannel
                                                                                                      63%                 0%         0%
respondents. Only 14% and 18% of EPL and          brand activation.                                                          FL1      FL2
FLC respondents think that sponsors are                                                         of all respondents think   think suitable
becoming easier to find, albeit this is better                                                   suitable sponsors are sponsors are becoming
than the experiences of FL1, FL2 and SP.                                                        becoming harder to find    easier to find
2014   |   FD FOOTBALL SURVEY   15

19. Do you think the wealth gap in your division is:                                                   the wealth gap in my division is:
                                                                                                        widening           narrowing
 %                                     ALL LEAGUES       EPL      FLC      FL1      FL2       SP
 Widening                                          61     79       76       50       38       66
 Narrowing                                         12     14         6      14        13       17
 Unchanged                                         27       7      18       36       49        17
Base: 67
                                                                                                         61%                       12%
More than six out of ten (61%) of                  Even though the EPL as a whole is a global
respondents think that the wealth gap in           success, we see here that within the league
their division is widening with the gap being      clubs believe the gap between top and
most evident in the EPL and FLC clubs (79%         bottom is widening which might ultimately
and 76% respectively).                             be detrimental to the overall quality of the
                                                   league.

20. Do you think the wealth gap between larger clubs and
    smaller clubs in general is:
 %                                     ALL LEAGUES       EPL      FLC      FL1      FL2       SP         the wealth gap in general is:
                                                                                                                  widening
 Widening                                          94    100       82       93      100      100
 Narrowing                                         0        0        0        0        0           0
 Unchanged                                          6       0      18         7        0           0
Base: 67

More than nine out of ten (94%) of                 Responses to questions 17 to 20 raise the
respondents think that the wealth gap              question as to whether FFP regulations
between larger and smaller clubs is widening       limit the opportunity for FL1, FLC and the
with 100% agreement from the EPL, FL2 and          smaller of the EPL clubs to bridge the gap?
SP.                                                A locking in of this differential could be an
                                                                                                                   94%
                                                   unintentional consequence of FFP rules,
This polarisation will continue to have a          combined with the highest commercial
major impact on the smaller clubs who will         revenues tending towards the largest club
face increasing difficulties in attracting fans,   brands.
investors and sponsors.
16   FD FOOTBALL SURVEY   |   2014

analysis of findings

03: CLUB OPERATIONS

21. HMRC has major on-going projects challenging                                                   Clubs who are confident in their robust
                                                                                                        and defendable tax position
    complex salary structures including certain image rights
                                                                                              2014
    payments and employee benefit trusts. This could lead                                     82%                                      77%
    to a potentially large PAYE bill for affected clubs. Which                                                                          2013
    of following statement best reflects your view?
 %                                   ALL LEAGUES    EPL     FLC      FL1      FL2       SP
 Not concerned, the tax position                                                              Confidence among respondents that their
 on payments to our players is                                                                tax position on payments to players was
 robust and very defendable                  82      57       88       71     100      100    robust and very defendable to HMRC rose
                                                                                              slightly from 77% in 2013 to 82% this year.
 Somewhat uncertain give
 the pace of change of HMRC                                                                   However, only 57% of EPL respondents
 enquiries                                     5     22        0        0       0        0    are confident that their tax position is
 Somewhat concerned that a                                                                    defendable with 22% somewhat uncertain
 sizeable challenge could create                                                              and 21% concerned that a sizeable HMRC
 a problem                                    13     21       12      29        0        0    challenge could create a problem.
 Very concerned that a sizeable                                                               Almost a third (29%) of FL1 respondents
 challenge would create a                                                                     are also concerned that an HMRC challenge
 problem                                      0       0        0        0       0        0    would create a problem.
Base: 67

22. Was your club late on more than one occasion during
    the year with payment of any tax (i.e. corporation tax,
    PAYE/NIC, VAT) due to HMRC?
 %                                   ALL LEAGUES    EPL     FLC      FL1      FL2       SP
 Yes                                          13      0       29        7      19        0
 No                                           87    100       71      93       81      100
Base: 67

The percentage of respondents who were        Of the clubs which paid late, six of them
late making their tax payments fell from      had taken a risk in not formally agreeing the
20% in 2013 to 13%. FLC clubs are most        delay with HMRC in advance.
likely to be late (29%) – compared with no
EPL or SP clubs.                                                                                                  13%
                                                                                                      More than one late tax payment
2014   |   FD FOOTBALL SURVEY   17

23. Have you noticed any changes in HMRC’s attitude to
    pressing for the collection of tax due?
                                                                                               the percentage of clubs which have been
 %                                  ALL LEAGUES      EPL     FLC     FL1     FL2      SP       contacted earlier or more often by HMRC
 Yes, it is contacting us earlier
 and/or more often                              39    29      29      50      44      50
 Yes, it is taking them longer to
 get in touch                                   4       7      12      0       0       0
                                                                                             2013
 No                                             57    64      59      50      56      50
                                                                                             52%
Base: 67                                                                                     39%
                                                                                             2014
There has been a fall in the percentage of      Only 4% of clubs said that HMRC was taking
clubs that have been contacted earlier or       longer to get in touch.
more often by HMRC from 52% in 2013 to
39% this year. However, this is still a clear
indication that the football sector remains a
high interest area for HMRC.

     We will continue to see HMRC
     focus on player remuneration
     and broaden this to include
     examining the tax position on
     agents fees paid by clubs. This
     is a complex area and the tax
     position is not always clear, as
     demonstrated by the decision
     in the Glasgow Rangers appeal
     which, whilst lost by HMRC, is
     not the end of the matter. The
     general hardening in attitude
     towards perceived tax evasion
     and increased Government
     focus on tax planning in general
     may lead to respondents seeing
     increased activity in this area.
                                     shawn healy
     employment tax principal, professional sports
18   FD FOOTBALL SURVEY   |   2014

analysis of findings

04: FINANCIAL FAIR PLAY

24. Financial sustainability rules are now in force in UEFA
    club competitions and the top four tiers of English
    football. Do you believe that similar rules should be
    introduced by the SPFL?
All six SP clubs who responded to the survey
believed that the SPFL should introduce
similar rules.

25. Did your club comply with the requirements of
    applicable financial fair play and cost control and
    sustainability rules (collectively FFP) in the 2013/14
    season?
 %                                             ALL LEAGUES   EPL   FLC   FL1   FL2
 Yes                                                   90    86    94    93    100
 No                                                     10    14    6     7     0
Base: 66

There were high levels of compliance – 90%
- with the requirements of the FFP rules
during last season.

              no          yes
              10% 90%
       compliance with the requirements
               of the FFP rules
2014   |   FD FOOTBALL SURVEY    19

26. Domestic and/or UEFA fair play rules are in operation.
    Do you expect that for next season your club will:
 %                                 ALL LEAGUES       EPL      FLC      FL1     FL2       SP
 Comply with these rules with                  91     93       88       86     100       83
 minimal change to the business
 model
 Only manage to comply by                       9       7      12       14        0       17
 making significant changes to
 the business model
 Will not comply, but plan to be               0       0        0        0        0        0
 compliant within the next 2-3
 years
 Will not comply and have                      0       0        0        0        0        0                100%
 not yet addressed the steps                                                                            all clubs will comply
 necessary to become compliant                                                                           with the FFP rules
Base: 66

More than nine out of ten (91%) clubs will     Clearly there is transition required for some
comply with the FFP rules in 2014/15 with      clubs in order to achieve compliance with
only minimal changes to their business         FFP rules. However, on the basis of these
model – up from 85% in 2013, with only         responses we can say that very positive
9% needing to make significant changes to      progress is being made.
achieve compliance.

27. Do you believe FFP rules to be broadly workable as they
    currently stand?
 %                                 ALL LEAGUES       EPL      FLC      FL1     FL2       SP
 Yes                                           86     86       76       93       87     100
 No                                            14     14       24        7       13        0
Base: 66

Almost nine out of ten (86%) respondents       Although clubs are broadly complying and
believe that the FFP rules are broadly         think they are workable, as seen from this
workable as they currently stand. However, a   and the two previous questions, the real
quarter of FLC clubs do not agree.             cause for concern is the FLC where clubs are
                                               divided as to whether the rules are workable.
                                                                                                  86%                        24%
                                                                                                believe that the           of FLC clubs
                                                                                                 FFP rules are             do not agree
                                                                                               broadly workable
20 FD FOOTBALL SURVEY    |   2014

analysis of findings

04: FINANCIAL FAIR PLAY

28. Do you believe the structure of the financial fair play
    rules, applicable to your division, to be appropriate?
 %                                    ALL LEAGUES     EPL     FLC      FL1     FL2       SP   There is a reasonably high level of concern
                                                                                              amongst clubs, particularly FLC clubs, that
 Yes                                            56     50      29       71      75       50   the rules are not appropriate.
 Not yet, some refinement
 required                                       30     22      47       21      19       50   The effect of parachute payments, which
                                                                                              are not caught by the rules, has a distorting
 No, a lot needs to change                      14     28      24        7       0       0    effect on the relative revenue levels of the
Base: 66                                                                                      clubs in the FLC and this, together with some
                                                                                              club owners not wanting to be fettered by
Over half (56%) of the respondents agree        However, 71% of FLC respondents think that    what they can spend in order to achieve
that the structure of the financial fair play   either some refinement is needed or a lot     promotion to the EPL, is causing tensions.
rules, as applicable to their division, are     needs to change. Significantly 28% of EPL
appropriate.                                    clubs say that a lot needs to change.

29. Do you feel well represented by your league with
    regards to financial fair play/sustainability rules?
 %                                    ALL LEAGUES     EPL     FLC      FL1     FL2       SP
 Yes                                            76     64      65      93       96       50
 No                                             24     36      35        7       6       50
Base: 66

More than three quarters (76%) of               More than a third of EPL and FLC
respondents feel well represented by their      respondents, however, do not feel well
league regarding the FFP rules with the         represented.
FL1 and FL2 respondents being the most
satisfied (93% and 83%).
                                                                                                      76%                    36%
                                                                                                feel well represented    of EPL teams do not
                                                                                                   by their league      feel well represented
                                                                                                                            by their league
30. Do you believe that the FFP regulations meet the
    principal objective of promoting sustainability?

 %                                   ALL LEAGUES       EPL      FLC     FL1     FL2       SP
 Yes                                              38     14      41      43      53       34
 No, but they are a step in the
 right direction                                  46     50      24      57      47       66
 No , there are better ways to                                                                    38%             46%              15%
 ensure sustainability                            15     29      35       0        0       0         Yes         No, but they    No, there are
                                                                                                                  are a step      better ways
 Regulation is not necessary                       1      7       0       0        0       0                     in the right      to ensure
Base: 66                                                                                                          direction      sustainability

Opinions are split on whether FFP                 Only 14% of EPL respondents agree that the    These responses show that clearly there is
regulations meet their principal objective of     objective has been met compared with 53%      some work to do on the rules to ensure that
promoting sustainability. Overall, 38% agree      of FL2. Just under a third (29%) of EPL and   the majority of clubs are satisfied that they
that it does and a further 46% say they are       35% of FLC respondents think that there are   operate effectively.
a step in the right direction. There is varying   better ways to ensure sustainability.
opinion across the leagues.
22 FD FOOTBALL SURVEY   |   2014

31. In the absence of FFP regulations, would you or your                                       significantly: 7%

    owner invest more money into trying to realise the
                                                                                               to some extent:
    club’s ambition?                                                                           26%

 %                                  ALL LEAGUES        EPL     FLC      FL1     FL2       SP
 Yes, to a significant degree                     7      0      18        0      13        0   yes
 Yes, to some extent                             26     57      29       14       0       34
 No, the amount we are allowed                                                                 no
 to invest is sufficient                         38     29      41       50      40       17
 No, there is no more to invest                  29     14       12      36      47       50
Base: 66

While a third (33%) would be prepared to         These responses seem to reflect the view      the amount we are
invest more money, the remaining two thirds      that with some further revisions reflecting   allowed is sufficient:
are split between saying that the amount         the ability of owners to increase their       38%
they are allowed to invest is sufficient (38%)   subsidies the rules may be acceptable to a
                                                                                               there is no more to

                                                                                                                        £
or that there is no more money to invest         majority of the clubs. The debate continues   invest: 29%
(29%).                                           on how to promote sustainability without
                                                 stifling investment.
However, 57% of EPL and almost half (47%)
of FLC respondents would be prepared to
invest more.
The threat of sanctions is going a long way to ensuring
compliance with FFP rules. However, our research suggests
that this should not be confused with wide-reaching levels of
satisfaction, particularly within the EPL and FLC.
Almost half of all clubs (44%) do not believe the rules to be
appropriate, a quarter of clubs do not feel well represented by
their league, only 38% believe the rules meet the objective
of sustainability (albeit most that do not, admit that they are
a step in the right direction) and a third feel that the rules are
stifling the investment of ambitious owners.
                                                               ian clayden
                                               partner, professional sports
24 FD FOOTBALL SURVEY   |   2014

analysis of findings

05: YOUTH DEVELOPMENT

32. For financial year 2014/15, how does your youth                                              Youth development budget 2014/15 vs 2013/14

    development budget compare to financial year
    2013/14?
 %                                  ALL LEAGUES       EPL     FLC      FL1      FL2      SP
 Significantly higher                           18     22       12      14       19      34
 Higher                                         39     50       29      50       31      33
 The same                                       39     28       47      36       44      33
 Slightly lower                                  1      0        0       0        6          0
 Significantly lower                             3      0       12       0        0          0
Base: 67

More than half (57%) of respondents have        A larger percentage of the premier leagues
a higher budget for youth development           (EPL 72% and SP 67%) will be spending
this year while 39% will maintain it at the     more on their youth development budgets
same level as last year and 4% have a lower     than last year.
budget.                                                                                           57%             39%              4%
                                                                                                   Higher         The same         Lower

33. If there is a change in the youth development budget,
    is this directly due to financial fair play/cost control and
    sustainability rules?
 %                                  ALL LEAGUES       EPL     FLC      FL1      FL2      SP
 Yes                                            6       0        0      14       12          0
 No                                             55     78       53      50       44      66
 Not applicable                                 39     22       47      36       44      34
Base: 67

More than half (55%) of respondents deny        The new Elite Player Performance Plans
that any changes in the youth development       (EPPP) are driving this increased investment.
budget are directly due to FFP, rising to 78%   It is hoped that these will lead to better
                                                                                                   6%             55%             39%
                                                                                                     yes             no        Not applicable
of EPL respondents.                             coaching and improved quality of players.
2014    |   FD FOOTBALL SURVEY 25

                                                                                                             analysis of findings

                        06: PLAYER COSTS AND TRANSFERS

34. Is liquidity in the transfer market?                                                     More than half (58%) of respondents do not
                                                                                             think that liquidity in the transfer market
                                                                                             has changed and only 13% think that it has
 %                                 ALL LEAGUES      EPL     FLC      FL1      FL2      SP    improved.
 Improving                                    13     22       18      14        6        0
                                                                                             More than half (57%) of FL1 respondents
 Worsening                                    29     14      29       57       19       17   think that liquidity has worsened.
 Unchanged                                    58     64      53       29       75      83
Base: 67

35. Do any of your players have clauses in their contracts                                   The trend for clubs to put clauses in players’
                                                                                             contract stipulating a wage cut if the club is
    stipulating that their wages will be cut if the club is                                  relegated continues to rise – up to 89% of
    relegated?                                                                               respondents in 2014 from 84% in 2013 and
                                                                                             79% in 2012.
 %                                 ALL LEAGUES      EPL     FLC      FL1      FL2      SP    The FLC, FL1 and FL2 clubs continue to be
 Yes                                          89     83      94       93       94      66    the most likely leagues to have relegation
 No                                           11     17        6        7       6      34    clauses in players’ contracts.

Base: 65

36. In your budget for 2014/15 will your first team squad
    size be larger, the same or smaller than the season just
    ended?
 %                                 ALL LEAGUES      EPL     FLC      FL1      FL2      SP
 Greater                                      11     23        6       0       12       17
 Same                                         48     69      35       57       38      66
 Smaller                                      41      8      59       43       50       17
                                                                                                   41%                          59%
                                                                                              planning to reduce            FLC clubs reducing
Base: 66                                                                                     the numbers this year         squad size compared
                                                                                                                              with last year
The trend towards reducing the size of the    The FLC has the highest percentage of          Half of respondents (48%) will maintain
first team squad appears to have slowed       clubs (59%) that will reduce their squad       their squads at the same level as last year
this year with only 39% planning to reduce    size and the FL1 is the only league where no   – including 69% of EPL and 66% of SP
the numbers compared with 53% last year.      respondents will be increasing the size of     respondents.
Almost a quarter (23%) of EPL clubs will be   their first team squad.
increasing the size of their first team.
26 FD FOOTBALL SURVEY   |   2014

analysis of findings

06: PLAYER COSTS AND TRANSFERS

37. In your budget for 2014/15 will you spend more, the
    same or less on the payroll cost of the first team squad
    than the season just ended?
 %                                  ALL LEAGUES        EPL      FLC      FL1      FL2       SP
 More                                            30     70       18       14       25       34
 Same                                            30     15       24       29       44       50          30%                       17%
                                                                                                       clubs will be           compared with
 Less                                            40     15       59       57       31       17        spending more              last year
Base: 66

Across all the leagues, almost one in            The most budget conscious leagues                The percentage of clubs planning to spend
three (30%) clubs will be spending more          are the FLC and FL1 with 59% and 57%             less has fallen from 56% in last year’s survey
compared with 17% last year. This figure is      respectively spending less on payroll. This is   to 40% this year.
distorted however by seven out of ten EPL        a continuation of the trend seen in previous
respondents who will be spending more on         years and would appear to be a result of the
their first team payroll next season - up from   bedding in of FFP and further pressures on
42% in 2013. This is unsurprising given the      league and commercial revenues.
increase in TV revenues. However, clubs will
need to manage this carefully in order to
comply with FFP rules.

38. If your club plans to spend the same or less on payroll                                       Over a third (35%) of respondents admit
                                                                                                  that their decision to spend less on first team
    costs of the first team squad in the 2104/15 season, to                                       payroll costs has been partly or largely driven
    what extent has this decision been driven by FFP rules?                                       by the FFP rules.

                                                                                                  Overall, 65% the respondents have not
 %                                  ALL LEAGUES        EPL      FLC      FL1      FL2       SP    taken FFP into consideration when spending
                                                                                                  the same or less on payroll.
 Not at all                                      65     67       60       46       75      100
 Yes, to some extent                             22     33       34       18       17        0    However, 54% of FL1 respondents’ and
                                                                                                  40% of FLC respondents’ decisions have
 Yes, to a considerable extent                   13      0        6       36        8        0
                                                                                                  been influenced by the FFP to some or a
Base: 45                                                                                          considerable extent.
2014   |   FD FOOTBALL SURVEY 27

39. Will you increase/reduce your transfer budget this year?
 %                                 ALL LEAGUES       EPL      FLC      FL1      FL2       SP
 Increase                                      21     24       41        0       19       17
 Same                                          52     38       35       64       56       83
 Reduce                                        27     38       24       36       25           0
Base: 66

Responses to the above question are largely    Only a quarter (24%) of FLC respondents            The percentage of clubs increasing their
mixed with around one in five increasing       will reduce their transfer budgets this year       transfer budget has risen from 12% in 2013
transfer budgets and one in three reducing     compared with 44% in 2013.                         to 21%. The most notable increase is in the
transfer budgets. Around half have an                                                             FLC where 41% are increasing their transfer
unchanged budget.                                                                                 budgets compared with 6% in 2013.

40. If your transfer budget for 2014/15 will reduce or
    remain the same, to what extent has this decision been
                                                                                                                              80%
    driven by FFP rules?                                                                                                      deny that their
                                                                                                                              decision has been
 %                                 ALL LEAGUES       EPL      FLC      FL1      FL2       SP                                  driven by the FFP
                                                                                                                              rules
 Not at all                                    80     70       70       79       92     100
 Yes, to some extent                           18     30       30       14        8           0
 Yes, to a considerable extent                  2      0        0        7        0           0
Base: 51                                                                                                                      20%
                                                                                                                              claim FFP rules have
This year’s results are very similar to last   Only 20% say that FFP rules have had an                                        had an impact on
year’s. 80% of respondents who are reducing    impact on their decision.                                                      their decision
or keeping their transfer budget the same
deny that their decision has been driven by
FFP rules.
28 FD FOOTBALL SURVEY   |   2014

analysis of findings

07: GOVERNANCE AND PROPRIETY

41. Does your board include remunerated non-executive                         One in five (20%) respondents have
                                                                              remunerated non-executive independent
    independent directors?                                                    directors on their club’s board, a slight
                                                                              increase on the 2013 figure of 15%.
 %                                 ALL LEAGUES   EPL   FLC   FL1   FL2   SP
                                                                              Governance continues to be an issue within
 Yes                                       20    30     18    21    13   17   the game but reflects the ownership model.
 No                                        80     70   82    79    87    83   An increase in paid independent non-
Base: 66                                                                      executive directorships is a positive move
                                                                              however.

42. Do you regard yourself as a public interest business                                   Almost all (90%) respondents
                                                                                           regard their football club as a
    with higher degrees of scrutiny?                                                       public interest business with
                                                                               90%         high degrees of scrutiny.
 %                                 ALL LEAGUES   EPL   FLC   FL1   FL2   SP
 Yes                                       90    100   88    93    87    66
 No                                         10    0     12    7     13   34
Base: 67

43. Does the level of public interest in your club lead you to                             Nearly three quarters (73%)
                                                                                           agreed that the level of public
    manage the club with heightened corporate governance                                   interest in their club leads
    in comparison to similar sized companies outside of the                    73%         them to manage the club with
                                                                                           a higher level of corporate
    football sector?                                                                       governance than they would
                                                                                           for a similar sized business
 %                                 ALL LEAGUES   EPL   FLC   FL1   FL2   SP                outside the football sector.
 Yes                                        73   86    65     71   69    87                The findings of our survey
 No                                         27    14   35    29     31   13                suggests a high level of
                                                                                           governance in the sector.
Base: 67
2014   |   FD FOOTBALL SURVEY 29

                                                                                                                     analysis of findings

                   08: NATIONAL AND INTERNATIONAL
                                            ISSUES

44. As a club, do you have an explicit or implicit policy to                                         Just over half (51%) of respondents have
                                                                                                     a policy to support international teams by
    support international teams through availability of                                              making their players available. The FLC has
    players?                                                                                         the highest percentage of respondents with
                                                                                                     a positive support policy (72%). Half of EPL
                                                                                                     clubs do not have a policy either way.
 %                                   ALL LEAGUES           EPL     FLC      FL1      FL2       SP
 Yes                                                 51     50       72      36       38       66
 No                                                   7      0       12       14       6        0
 No policy either way                                27     50       18      29       13       34
 Not applicable                                      15      0        0       21      44        0
Base: 67

45. As a club, do you feel appropriately compensated for
    the disruption caused by players’ international duty?
                                                                                                             71%                  inappropriately
 %                                   ALL LEAGUES           EPL     FLC      FL1      FL2       SP                                 compensated for
                                                                                                             EPL                  international call ups
 Yes                                                 23     29       24       21      13       33
 No                                                  52     71       65      50       31       50
 Not applicable                                      25      7       12      29       56       17
Base: 67

More than half of all respondents do not             FLC clubs are most affected by international
                                                                                                            65%                   inappropriately
                                                                                                                                  compensated for
feel appropriately compensated for the               call ups, this rises to 71% of EPL and 65% of          FLC                   international call ups
disruption caused by players’ international          FLC respondents.
duty. Not surprisingly, given that EPL and

46. Do you think appropriate compensations should                                                    Whilst salary reimbursement is a popular
                                                                                                     choice amongst respondents, clearly the
    include:                                                                                         greater concern is the medium/long term
                                                                                                     impact of injuries. Better security in this
 % OF RESPONDENTS                                                                  ALL LEAGUES       area would not appear to be an unreasonable
 Full insurance for injuries on international duty                                             80    request.

 Full salary reimbursement for period of international duty                                    54
 Fixed fee per day of international duty                                                       41
 Partial salary reimbursement for period of international duty                                 28
Base: 39 (52% who said ‘no’)
30 FD FOOTBALL SURVEY    |   2014

analysis of findings

08: NATIONAL AND INTERNATIONAL
    ISSUES

47. What impact do you expect the World Cup to have on
    your summer 2014 player trading?

On average we expect like-for-like player prices to be:
 %                                   ALL LEAGUES        EPL      FLC      FL1      FL2       SP
 Higher                                           34     50       47       29        6       50
 Lower                                            0       0        0        0        0        0
 No change                                        66     50       53       71       94       50
Base: 67
                                                                                                    one third
                                                                                                    anticipate higher player prices
A third anticipated higher player prices during   Clearly a world cup year is expected to cause     during the 2014 trading period
the 2014 player trading period while two          some player inflation pressure, increasingly so
thirds thought there would be no change.          at the higher league levels.
2014   |    FD FOOTBALL SURVEY   31

                                                                                                                    do not believe
                                                                                                say they will             that the
                                                                                              have a positive     proposals will be
                                                                                            financial impact         implemented

                                                                                                     13%                   14%

48. Greg Dyke recently announced English FA Commission
    proposals for the introduction of a newly created
    League 3, populated with Premier League B teams,
    and an increase in the minimum home grown player
    requirement for match day squads.
                                                                                  42%                     28%
                                                                                  saying that             say they will
For English clubs: What do you expect to be the net financial                     they will have          have no impact
impact of these proposals on your club?                                           a negative
                                                                                  financial impact

 %                                      ALL LEAGUES   EPL   FLC   FL1   FL2   Based on the financial impact alone, the
                                                                              results indicate little support for Greg Dykes’
 High negative impact                            14    5     6     0    44    proposals with 42% saying that they will
 Low negative impact                            28    50     18   36     19   have a negative financial impact and 28%
                                                                              say they will have no impact. Only 13% say
 No impact                                       28   29     41   29     19
                                                                              they will have a positive financial impact.
 Small positive impact                           8     0     18   14     0    Interestingly 14% do not believe that the
 High positive impact                             5    0     6      7    6    proposals will be implemented.
 Proposals won’t happen/work                     14    14    6     21    13   Almost two thirds (63%) of FL2 respondents
 No views                                         3    0     12     7    6    say that the proposals will have a negative
                                                                              financial impact, clearly a response to the
Base: 61
                                                                              proposed new League 3 including Premier
                                                                              League B teams and the perceived impact
                                                                              that this will have on their league award,
                                                                              attendance, and other commercial revenues.

For Scottish clubs: Would you welcome similar proposals
from the Scottish FA?
 %                                                                      SP    Two thirds of SP clubs surveyed welcomed
                                                                              similar proposals from the Scottish FA.
 Yes, similar                                                            17
 Yes, in principal but with variation                                   50
 No                                                                     33
Base: 6
32 FD FOOTBALL SURVEY      |   2014

BDO PROFESSIONAL SPORTS GROUP

Our Professional Sports Group                         Our team of sector experts which includes
                                                      partners with experience of managing and
client base extends across major                      running top flight football clubs, can provide
professional sports including                         football clubs with a complete range of
football, horse racing, rugby,                        business advisory services including:
golf, cricket, and motor racing, as                   • External and internal audit
well as other health and fitness                      • Corporate tax
businesses.                                           • Corporate finance and financial modelling
In professional football we have worked for           • Business restructuring
an array of high profile football clubs and           • Specialist VAT consultancy
governing bodies providing specialist services        • Employment tax
ranging from audit and accounting to tax
                                                      • Corporate governance
advice on image rights and agents’ fees to
insolvency assignments.                               • Forensic and fraud investigations.

professional sports group
key contacts
For more information on any of our services
for the football industry, contact the relevant
BDO expert in your region.

scotland                                                                                         south

charles barnett      brian lovie      andy mcnamara        bryan jackson                         james roberts        stuart lisle    jim gee
Audit/Corp Finance   Tax              Audit                Business                              Audit/Corp Finance   Tax             Forensic
                                                           Restructuring
0141 249 5233        0131 347 0366    0141 249 5249        0141 249 5203                         01293 591 087        023 8088 1861   020 7893 2830

LONDON                                                                                           NORTH

ian clayden          trevor birch     ian cooper           tim ferris         andy goodman       julien rye           billy cairns    chris heatlie
Audit                Business         Corporate Finance    Corporate Tax      Employment Tax     Audit                Tax             Corporate Finance
                     Restructuring
020 7893 3612        020 7893 3733    020 7893 2678        020 7893 2372      020 7893 3437      0161 817 7505        0113 204 1306   0161 833 8362
2014   |   FD FOOTBALL SURVEY 33

our specialist services include:                We have produced a VAT overview guide            corporate governance
Corporate finance and financial modelling       for clients in connection with a number of       Good corporate governance is essential
We have significant experience providing        rules and treatments, including the place of     if clubs are to be managed effectively by
transaction advisory and investigative          supply of goods & services, plus certain VAT     executive directors and legal obligations
services across professional sports and         reporting requirements and a matrix relating     discharged properly by non-executive
professional leagues to a number of clubs for   to the key income streams.                       directors. Procedural issues include:
both vendors and acquirers. Our specialist
transaction services team performs due                                                           • Transfer policy – aquisitions and disposals
                                                employment tax
diligence for potential investors and for FFP                                                    • Disciplining regulations and rules –
                                                Over the last twelve months our team of
planning and compliance, and our advisory                                                          players and directors
                                                specialists has provided advice in connection
team specialises in leading sale processes                                                       • Fraud protection
                                                with the complex area of reward. This is in
and procuring investment.
                                                the light of heightened HMRC interest into       • Anti-money laundering
Business restructuring                          the use of complex remuneration structures,      • Cost control regulation
We have been appointed administrators of        sometimes involving Employer Financed
                                                                                                 • Transparency measures
a number of clubs including Motherwell,         Retirement Benefit Schemes (EFRBs),
                                                Employee Benefit Trusts (EBT’s), contracts       • Diversity and community.
Oldham Athletic, Dundee, Portsmouth,
Dunfermline and Hearts. All completed           for difference and the use of Image Rights
appointments have led to a successful           Companies. We have also assisted clubs with
                                                investigations into the use of such structures   forensic and fraud investigations
outcome whereby a dividend was accepted
by creditors under a Company Voluntary          by HMRC Specialist Investigations.               We provide forensic accountancy,
Arrangement (CVA). All companies survived       Obviously, in their day to day business, many    investigatory and expert witness services to
following the CVAs and are continuing to        clubs make payments to sports agents and         a number of clubs. Working in a partnership
trade.                                          we have advised clubs on how these should        with the ‘Centre for Counter Fraud Studies’
                                                be correctly dealt with for income tax and       at the University of Portsmouth, we are
Specialist VAT consultancy                      national insurance purposes.                     also able to help organisations to measure
Some of our recent assignments have                                                              and reduce the cost of fraud. We deliver
included providing extensive VAT input on                                                        real financial benefits often achieving a 12:1
the following:                                                                                   return on the cost of the work.

• Affinity card agreements
• Overseas sponsorship issues
• Testimonial/benefit games for current
  and former players
• Stadium refurbishments and alternative
  uses, catering issues, retail sales
• Agents’ fees.
34 FD FOOTBALL SURVEY   |   2014

BDO LEISURE AND HOSPITALITY

Alongside the Professional Sports   betting & gaming                                  hotels
Group, our team works with          BDO has acted as auditors, tax advisers and       Our expertise covers the entire spectrum of
                                    consultants to many UK and international          investment and operating activities and our
international businesses across     betting and gaming businesses, both               involvement brings credibility, competence
the leisure industries, including   private and publicly quoted. Our clients          and independence to any project. In short,
betting & gaming, hotels,           range from many of the major ‘bricks &            if you are active in the hotel industry then
                                    mortar’ bookmaking and casino operators           you should be talking to BDO, the industry
restaurants, bars & pubs, and       to major offshore telephone and internet          experts.
travel & tourism.                   sports books, casinos, poker and other
                                    online gaming activities. As well as the more     Specialist advice we can provide to the
                                    traditional forms of betting and gaming, we       sector includes:
                                    also act for FCA regulated businesses in the
                                                                                      • Audit and assurance
                                    financial trading, financial spread betting and
                                    CFD sector.                                       • Feasibility studies
                                                                                      • Business valuations
                                    Specialist advice we can provide to the
                                                                                      • Litigation support and expert witness
                                    sector includes:
                                                                                        services
                                    • Audit and assurance                             • Mergers and acquisitions including MBOs,
                                    • International tax planning and structuring        MBIs and flotations
                                    • Corporate financing and flotations              • Fund raising and refinancing
                                    • Property and corporate acquisitions and         • Financial investigations and dispute
                                      disposals                                         resolutions
                                    • Financial Services Act regulations and          • Systems reviews
                                      compliance                                      • Turnaround and distressed situations.
                                    • Installation of management reporting and
                                      controls and internal audit functions
                                    • IT controls, environment reviews and
                                      systems improvement advice.

                                                       john barker                                      stuart collins
                                                       020 7893 3980                                    020 7893 2604
                                                       john.barker@bdo.co.uk                            stuart.collins@bdo.co.uk
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