New analysis by LCP shows English men’s football club losses hit £1.2bn in the 2022-23 season

New analysis from financial and sports consultancy LCP highlights that, while overall revenues across English football clubs increased by 11% to £7.2bn, clubs remained hugely loss making: 85% of clubs lost money with total losses standing at £1.2bn.

LCP analysed the financial position of all 92 men’s clubs in the Premier League, and in the Championship and Leagues One and Two, based on the latest published accounts for each club (which typically relate to the 2022-23 season).

The report, titled “Bigger and better – but also riskier”, highlights that revenues were up by over 10% and that there is greater interest in investing in clubs across the pyramid. This is in the wake of success being achieved following significant investments in some lower league teams. This might be termed the ‘Wrexham effect’, with the acquisition of the club by Ryan Reynolds and Rob McElhenney and the associated Disney+ series, adding a touch of Hollywood glamour to lower league football.

However, LCP believes that this has led to the “gambling for promotion” culture, previously seen primarily in the Championship, now becoming a feature of Leagues One and Two, leading to spiralling losses and debt levels. With increased growth comes increased risk, and many clubs who aim to operate sustainably are now finding it hard to compete for promotion and are often pushed by their fans to spend more.

Losses rose over the year by 70% in League One and a staggering 220% in League Two. LCP are warning that there could be a risk of a systemic failure given many clubs also owe other clubs significant amounts.

The relative level of debt compared to net assets remains very high across each league. Across all four leagues, total football net debt now exceeds £7bn, compared to total net assets of just over £2bn. This means English club football is highly geared, at over 300%. For some context, in many capital-intensive industries, a gearing ratio over 100% is often considered to be high and financially risky.

Seventeen clubs disclosed there was serious doubt that they would be able to continue to trade for another 12 months after signing their most recent accounts, while a further 38 disclosed that they are reliant on support from owner funding to continue to trade. Only 37 clubs (40%) were able to sign off their accounts as a going concern without such disclosures.

The clubs with the weakest financial scores by league are:

On a positive note, LCP’s Sustainability Matrix analysis shows that there are a number of clubs operating successfully, both financially and on the pitch – demonstrating that this is still possible with good financial management and governance. The clubs with the strongest financial scores were:

*Manchester City is, however, currently under investigation for 115 alleged misconduct charges from 2009-2018. Hartlepool was excluded from League Two list as 2022-23 accounts are still outstanding.

Other findings in the report include:

• The concentration of wealth among the traditional 'Big Six' remains clear, accounting for nearly half of total industry revenues. 
• Clubs are significantly more in debt 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. 
• Total owner debt sits at £3.0bn, an increase of 8%.

John Parnis England, Principal in LCP’s Financial Analysis team, commented: “There is a risk that the decreasing financial stability we are seeing across the sport could result in a ‘house of cards’ systemic failure. Given the increased football net debt figures highlighted in this analysis, it is worth considering what would happen if the music stops – if owners and investors were, for whatever reason, to cease seeing English football as an exciting place for them to risk losing significant amounts of money.

“It’s really important that there are steps taken to mitigate the risks. Over the next year the landscape of football governance is set for significant change as we will see the establishment, through the Football Governance Bill, of the Independent Football Regulator. This will be a pivotal step when it comes to safeguarding the financial health of men’s football clubs.

“A revamped and enhanced Owners and Directors’ test should include regularly assessing both the financial ability and the legal obligation of owners to fund losses. In recent years, we’ve seen several owners walk away from clubs when the going has got tough – even though they still had the resources to support them. Reading is the most recent example.”

Bart Huby, Head of LCP’s Sports Analytics team, added: “It will also be important to address the issue of financial flow in the game, and we believe this can most effectively be done by incentivising and rewarding ‘good behaviour’ by clubs. A New Deal between the Premier League and the EFL for a revised funding package is still to be agreed, and this is needed. However, more money passing down the pyramid without significant cost controls could simply result in EFL clubs spending more and losing more.

“Linking part of the distribution to how each club performs in various key areas (such as financial sustainability and good governance), would incentivise and reward clubs acting prudently and could limit the need for penalties such as points deductions to control excess spending. Extending this to include positive societal elements, such as fan engagement, equality standards and environmental sustainability, could help the English game to become a real beacon for world football.”