Independent Study Reveals Alarming Financial Health of UK Football Clubs, Urges Corrective Actions

Independent Study Reveals Alarming Financial Health of UK Football Clubs, Urges Corrective Actions

(IN BRIEF) An independent study co-authored by a Management School, published alongside the UK Government’s response to the ‘A sustainable future – reforming club football governance’ White Paper, reveals concerning findings regarding the deteriorating financial health of football clubs. The report, titled ‘Still ill? Evaluating the Financial Sustainability of Football,’ authored by Dr. Christina Philippou and Kieran Maguire, analyzes various metrics to assess the financial stability of football clubs. It shows that despite pandemic-induced financial support, financial sustainability remains distant, particularly among Premier League and Championship clubs. Negative Operating Cash Flows (OCF) and overreliance on owner funding are major contributors to the financial challenges faced by many clubs.

(PRESS RELEASE) LIVERPOOL, 8-Sep-2023 — /EuropaWire/ — Amid escalating concerns, an independent study co-authored by our Management School published today (7 September) alongside the Government’s response to ‘A sustainable future – reforming club football governance’ White Paper delivers a stark reality check on the worsening financial health of football clubs.

The report, ‘Still ill? Evaluating the Financial Sustainability of Football’, authored by Dr Christina Philippou, from the University of Portsmouth and Kieran Maguire from the University of Liverpool, paints a grim picture of the current financial state of football clubs.

Commissioned by the Department for Culture, Media and Sport (DCMS), the report analyses a spectrum of metrics to assess club financial stability.

Building on last year’s pre-pandemic club data analysis (2018-19), this year’s report, the first since the pandemic-induced financial support, reveals that financial sustainability remains distant.  The scope was broadened to encompass all top five tiers of professional men’s football, including the National League.  This expansion also incorporated new metrics namely the Operating Cash Flows (OCF) and owner funding contributions, unmasking a comprehensive view of the looming financial crisis.

OCF emerges as a pivotal factor in club financial woes.  While typically a positive measure for businesses, indicating resources for future growth, football clubs often face negative OCF due to precarious financial management.  Astonishingly, only 55% of Premier League clubs generated positive OCF in the 2021/22 season, while the Championship could only muster one club in the positive territory.

Dr Christina Philippou, Principal Lecturer in Accounting and Financial Management at the University of Portsmouth, said: “The financial sustainability of English football remains at a precipice, with the majority of clubs in the top 5 tiers technically insolvent, almost half the Premier League and almost all the Championship having negative cash flows at the end of the 2021-22 season, and a strong dependency on owners being exhibited across clubs.”

The report also casts a spotlight on the dangerous overreliance on owner funding.  With traditional banks hesitant to lend to football due to the risk, clubs often depend on owner capital.  This dependency amplifies insolvency risks, evident in cases like the abrupt exit of Roman Abramovich from Chelsea FC.

Kieran Maguire, Senior teacher in Accountancy, Finance and Accounting at the University of Liverpool, said: “The football authorities did come together in the main during Covid and lockdown, providing, along with broader financial assistance such as furlough, the funds to see the industry through the pandemic. However, structural imbalances remain, especially in relation to financial gaps that encourage clubs to overspend to achieve on pitch success.

“Third party funding is rare due to the risks associated with professional football such as poor cost control (Premier League wages have increased by 3,600% since it started in 1992, compared to a 94% rise in the CPI).

The report highlights the significant losses being made in the industry, negative operational cash generation, and reliance on credit that is the modern funding model”.

Dr Philippou said: “Our study sends a distress signal – UK football is in poor financial health.  The report is a wake-up call for corrective actions to safeguard the sports future.”

Media Contacts:

Catrin Owen
Media Relations Manager – Humanities and Social Sciences
T: +44 (0)7721 834238
E: catrin.owen@liverpool.ac.uk

Sarah Stamper
Media Relations Manager – Science and Engineering
T: +44 (0)7970 247396
E: sarah.stamper@liverpool.ac.uk

Jennifer Morgan
Media Relations Manager – Health and Life Sciences
T: +44 (0)7775 547589
E: J.L.Morgan@liverpool.ac.uk

Alison Cornmell
Media Relations Manager – Health and Life Sciences
T: +44 (0) 7771 700680
E: Alison.Cornmell@liverpool.ac.uk

SOURCE: University of Liverpool