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
CONTENTS EXECUTIVE SUMMARY 2 METHODOLOGY 3 ANALYSIS OF KEY FINDINGS 4 BDO PROFESSIONAL SPORTS GROUP 32
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.
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.
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.
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
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
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.
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
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: 6710 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: 6712 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 sports14 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 find2014 | 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 payment2014 | 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 sports18 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 rules2014 | 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 workable20 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 league30. 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 sports24 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: 672014 | 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: 632 FD FOOTBALL SURVEY | 2014
BDO PROFESSIONAL SPORTS GROUP
Our Professional Sports Group Our team of sector experts which includes
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client base extends across major running top flight football clubs, can provide
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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
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key contacts
For more information on any of our services
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We have significant experience providing rules and treatments, including the place of if clubs are to be managed effectively by
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• Affinity card agreements
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• 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
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john barker stuart collins
020 7893 3980 020 7893 2604
john.barker@bdo.co.uk stuart.collins@bdo.co.ukYou can also read
