Financial sustainability of men's football clubs: Bigger and better – but also riskier
Sports Sports Sports finance and governanceFootball revenue continues to grow, but rising losses and debt threaten many clubs’ financial stability.
Welcome to the second edition of our annual report on the financial sustainability of men’s football clubs in the English League pyramid.
For this edition, we have again reviewed the position of all 92 men’s clubs in the Premier League, the Championship and Leagues One and Two, based on the latest published accounts for each club (which typically relate to the 2022-23 season).
We've also reproduced the LCP Football Sustainability Matrix, using our bespoke methodology which compares clubs on both financial metrics and sporting achievements.
Changing landscape
Our analysis shows that men’s football in England is booming, with increased revenues and investor interest, but also becoming significantly riskier, with higher losses and greater reliance across the pyramid on wealthy owners to fund them.
Revenues were up by over 10%, crowds increased across all four leagues, and many potential new owners are keen to invest in clubs across the pyramid. This is in the wake of success being achieved following significant investments in some lower league teams - what might be termed the ‘Wrexham effect’.
But with that growth comes increased risk. The gambling for promotion culture previously seen primarily in the Championship now appears to be spreading to Leagues One and Two, where losses and debt levels have increased significantly. As a result, across the pyramid, clubs which operate sustainably are finding it increasingly difficult to compete for promotion – and are often pushed by their fans to spend more.
Over the next 12 months, the landscape of football governance is set for significant change, with the new Government committed to introduce a Football Governance Bill, which will “establish an independent football regulator to ensure greater sustainability in the game and strengthen protections for fans.” This will mark a pivotal step on the journey towards safeguarding the financial health of men’s football clubs.
It will be fascinating to see when we look again at the situation next year whether these trends are continuing, and to what extent the new legislation and the introduction of the IFR have had an impact.
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Key findings
The concentration of wealth among the traditional 'Big Six' remains clear, accounting for around half of industry revenue.
Despite increasing revenues (up by 11% to £7.2bn), clubs overall remain hugely loss-making – aggregate losses in 2022-2023 were £1.2bn, and over £3bn for the last three seasons.
Most clubs (85%) are loss-making and the scale of losses is accelerating at a faster pace for lower league clubs, which is a concerning trend. For example, in League One aggregate losses increased by 70% compared to the previous year, while in League Two, losses increased by 220% - compared to a 16% increase in the Premier League.
Clubs are significantly more indebted compared to previous years – across the four leagues, ‘Football Net Debt’ increased by 27% to £7.1bn. Football Net Debt is calculated as total borrowings, less cash, plus the net balance due on transfers, and is a key, industry-specific indicator of financial risk.
The increase in total revenues should not mask the fact that much of the football pyramid is highly and precariously geared (ie operating with high levels of debt compared to the scale of the football club), at around 300%, a level that most other capital-intensive industries would consider unduly risky.
Most clubs remain heavily reliant on their owners to provide regular cash injections to fund ongoing losses, be it through debt or equity.
Over half of clubs’ accounts disclose either a material uncertainty over their ability to remain operational for 12 months (17 clubs) or a dependence on non-legally binding owner funding to meet their obligations as they fall due (38). Only 37 clubs were able to sign off their accounts as a going concern without such disclosures.
Many clubs also owe other clubs significant amounts – resulting in a risk of a “house of cards” systemic failure. This scenario is especially concerning when the increased levels of football net debt are considered.
Football in numbers
Revenue
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£7.2bnTotal revenue, increased by 11%
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86%The Premier League clubs account for the vast majority of revenue across the pyramid
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49%The 'Big Six' clubs account for almost half the revenue across the pyramid, and 61% of its growth
Losses
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86%The vast majority of clubs make a loss
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£1.2bnAggregate losses across the pyramid
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89%Increase in losses in Leagues One & Two (combined)
Wages to revenue
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£4.9bnTotal wages, increased by 9%
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95%In the Championship, wages as a proportion of revenue fell from 102%
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25%The proportion of clubs in the Premier League & Championship operating below the UEFA 70% threshold
Debt
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£3bnTotal owner debt, increased by 8%
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£7.1bnTotal football net debt[1], increased by 27%
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99%Total football net debt as proportion of annual industry revenue, up from 86%
Going concern[2]
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17 clubsDisclosed a 'material uncertainty' on whether they could continue operating for another 12 months
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38 clubsClubs disclosed they are dependent on owner funding to continue
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37 clubsOnly 40% of clubs had neither of these disclosures
1. Football net debt is calculated as total borrowings, less cash, plus the net balance due on transfers.
2. Going concern is an accounting concept, which indicates whether a business, in this case a football club, is expected to be able to continue operating for at least another 12 months following the signing of their accounts.
LCP Football Sustainability Matrix - Best and worst financial scores
Contact a team member for the full report which contains the results of the LCP Football Sustainability Matrix, which compares clubs’ performance on both financial and sporting metrics.
Strongest financial scores by league
Manchester City*
Fulham
West Ham United
West Bromwich Albion
Coventry City
Rotherham
Cambridge United
Exeter City
Cheltenham Town
AFC Wimbledon*
Grimsby Town
Mansfield Town
Weakest financial scores by league
Nottingham Forest
Reading
Derby County
Salford City
*Manchester City is currently under investigation for 115 alleged misconduct charges from 2009-2018. Hartlepool excluded from League Two list as 2022-23 accounts still outstanding.
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