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Championship Clubs Must ‘Adapt To Survive’

EFL Championship clubs may be forced to “change and adapt to survive and succeed” in the post-pandemic world, according to a football finance expert.

 

Following analysis of accounts of 20 of the 24 clubs from the 2018/19 season*, Chris Winn, a finance academic at University Campus of Football Business (UCFB) and former co-author the Deloitte Annual Review of Football Finance, found that over reliance on parachute and broadcast payments, as well as a likely change in the valuation of players in the transfer market, means there will be an almost inevitable rethink of how clubs operate financially outside of the Premier League once football returns to normal.

 

 

Over the course of the 18/19 season, over half of the 20 Championship clubs analysed spent more on wages than the revenue they generated as they chased Premier League glory, with Reading being the worst culprits spending more than double their revenue on wages despite finishing 20th that season.

 

The research also found that of the c.£695m revenue generated by these 20 clubs over the course of the season, around one third –  c.£230m – represented parachute payments from the Premier League to seven Championship clubs. All seven clubs ranked in the top eight by revenue, with Leeds United being the exception to the rule in the absence of parachute payments, instead generating funds through an efficient match day and commercial operation.

 

Alarmingly, the numbers show that of the 20 clubs, only three clubs recorded an operating profit before player trading – Rotherham, West Bromwich Albion and Hull City, of which WBA and Hull were also in receipt of parachute payments. With player trading over the season culminating in profits of around £230m for these 20 clubs, offsetting their £225m of player contract amortisation, Chris says this shouldn’t be underestimated in the context of the current suspension of play and what it means for future transfer windows.

 

He said: “With clubs currently extremely sensitive to cash outflows, the dynamics of the 2020/21 transfer windows may be severely affected. If there is a general tightening of the purse strings or a diminishment in player valuations, what represents a major component of many Championship clubs’ income streams may diminish.”

 

This is further highlighted when looking at the overall pre-tax results for the league, which totalled a loss of c.£265m across these 20 clubs, with only four of them turning a profit.

 

Chris says that the position is simply “unsustainable”. Adding: “The current circumstances may lead clubs to reconsider their business models, with the majority of existing wage expenditure patterns clearly demonstrating no allowance for breakdowns in business continuity such as those now being experienced by all.”

 

*This analysis considers the 20 2018/19 Championship clubs to have either published accounts at Companies House, or announce abbreviated results at the time of writing (April 14th 2020). Derby County and Brentford have taken advantage of the government’s allowance to extend their filing deadlines by three months, Bolton Wanderers have not published accounts since the 2016/17 season, and Sheffield Wednesday are not due to file until May at the earliest. While accurate league financial totals are not yet possible, the emergence or continuance of trends and patterns should still hold true. Also note figures for Wigan relate to a 13-month reporting period.

 

Click here to read Chris’ full analysis of Championship finances from 2018/19.

 

Image: UDFB