Financial Planning

Premier League leads a record breaking European football market

By Deloitte
Financial Planning
Published: 8 June 2018

Euro stars: European football sees record financial growth
The European football market is now worth a record €25.5 billion (£21.9bn), according to the 27th Annual Review of Football Finance from the Sports Business Group at Deloitte. The growth was primarily driven by the ‘big five’ European leagues who saw combined revenues increase by 9% in 2016/17, with new broadcasting arrangements in England, Spain and France having a considerable impact. Growth was not restricted to those biggest leagues, however, with non-big five leagues also seeing revenue growth.

Tim Bridge, a Director in the Sports Business Group at Deloitte, explained: “The financial position of European football appears healthier than it has been for a long time, reflecting the global popularity of the game, the professionalism of leading clubs and the strength of the regulatory environment in which they operate. Whilst the Premier League is the clear market leader, we expect to see continued growth and interest across Europe’s leagues in the years to come.”

Premier League clubs: in a league of their own
The 92 Premier League and Football League clubs recorded combined revenues in excess of £5.5bn for the 2016/17 season. With a new broadcast cycle commencing in 2016/17 for Premier League clubs, the 20 clubs generated record revenues of £4.5bn, 25% higher than in the previous season and the benefit was felt further down the football pyramid, with record revenue for the 72 Football League clubs of almost £1bn.

In previous years, any increase in revenue would have been expected to lead to a proportional increase in wages but in an era of regulatory controls, clear market leadership and stronger financial self-discipline, wage costs rose only 9% to £2.5bn. Whilst this is still a record high, the Premier League’s wages/revenue ratio fell to just 55%, its lowest level since 1997/98 (52%). Most notably, no Premier League club reported an operating loss, the first time that this has ever happened. Following their title-winning season, Leicester City’s Champions League campaign helped them deliver the highest-ever pre-tax profit for a Premier League club of £92m.

Dan Jones, partner in the Sports Business Group at Deloitte, explains: “The financial results of the class of 2016/17 are the most impressive we have ever seen. Just a decade ago, 60% of Premier League clubs were making an operating loss whereas in the 2016/17 season, all clubs were profitable. In addition, and for the first time ever, Premier League clubs’ revenues have grown at a faster rate than wages over a ten-year period.

“The recent announcement that the Premier League’s domestic rights selling process for 2019/20 – 2021/22 did not deliver the uplift that followers have become accustomed to over recent years should not be a cause for concern. The fact that the Premier League has once again shown its resilience and strength by retaining the vast majority of its audience and value has provided market leading financial security to clubs for at least the next four years, providing they are not relegated. Indeed, once the sales process for the remaining international rights is completed, we expect the league will have delivered overall increases in television revenue.”

Championship sees revenue records tumble
In the Championship, revenues grew 30% to a record £720m in 2016/17. However, the trend for almost all of any revenue growth to be spent on wages has continued, with the Championship’s wages/revenue ratio of 99%, albeit down from 100% last year. There is a greater revenue disparity than ever between clubs that are receiving parachute payments and those that do not. Those clubs relegated from the Premier League in 2015/16 – Newcastle United, Aston Villa and Norwich – received £41m each, which in itself was more than the total revenue of all bar one of their competitor clubs in the Championship.

League 1 clubs increased revenue by 7% to 146m, while League 2 clubs’ revenue increase by 6% to £91m.
Bridge added: “Financially speaking, the three leagues below the Premier League are now considerably larger than their peers at equivalent levels in the football pyramid, anywhere in the world. In no small part, this is due to the financial success of the Premier League and the filtering down effect in the form of parachute and solidarity payments. Parachute payments to Championship clubs made up almost a third of that division’s revenue.”