By Andrew Warshaw
September 13 – British professional clubs are cutting down on spending and battening down the hatches in anticipation of UEFA’s financial fair play rules according to a new outlook on the game’s financial viability.
The survey on the activities of finance directors at 41 clubs, conducted by accountancy firm PKF (UK) LLP, found that 60 per cent of them are aiming to implement a more closely aligned “wages to turnover ratio” compared to just 15 per cent last year.
Only a fifth of the clubs intend to increase the payroll this season and none plan to increase squad size, the company said in a statement.
Many opted for free transfers during the summer transfer window rather than pay huge fees.
Trevor Birch, former chief executive of Chelsea where he brokered Roman Abramovich’s takeover and now head of corporate recovery at PKF, explained: “Football clubs have realised they need to make tough choices with wage-related costs to get their finances back on track – albeit several years later than most other British businesses.
“We expect a similar story when the transfer window re-opens in January.”
The survey, entitled Open To Attack, covers the English Premier League, Football League and the Scottish Premier League.
Despite the EPL still being the most watched league in the world, taken as a whole the survey made clear that English and Scottish professional football was far less healthy than one might expect.
Fifty-one per cent of clubs surveyed said ticket sales fell last season, and 54 per cent that shirt and other merchandising income had declined.
Just 37 per cent of teams surveyed say they increased sponsorship revenue last season, PKF said, adding that “only a small number” of Premier League clubs are managing to attract major corporate sponsors.
Fans “are being forced to view the latest replica shirt as a luxury rather than a necessity” because of the economic outlook, Birch said.
UEFA is seeking to force clubs to break even from next year to stop them spending more than they earn.
Sixty seven per cent of Premier League clubs surveyed plan to comply with the regulations, compared with 75 per cent in the Scottish Premier league though no specifics were given as to why the rest were planning to opt out.
“The absence of a meaningful economic recovery and looming financial fair play rules are forcing clubs at all levels of the professional game to peg their costs more closely to revenues, which remain under serious pressure,” said Birch.
“Looking ahead, we do not expect any of the main revenue streams to show meaningful improvements, so clubs will have to continue to batten down the hatches for the foreseeable future.”
The survey revealed that fewer clubs had been late with tax payments than last year but 63 per cent of those who were late had not cleared the delay with the tax authorities beforehand.
John Cassidy, tax partner at PKF and a member of the firm’s Football Industry Group, said: “The rise in the number of clubs who have not made a late payment agreement with HMRC is a major cause for concern.
“I would urge any club, or any business for that matter, to open dialogue with HMRC straight away if it is apparent that there will be difficulty making a tax payment.”
On the question of image rights and whether they can be taxed, the survey found that only five per cent of respondents were concerned about HMRC’s plan to challenge tax-free payments made to some players for image rights.
Of the Premier League respondents – which are much more likely to have such deals in place – 44 per cent were unwilling to comment on this issue.
“This lack of transparency could indicate that Premier League clubs are concerned about a potential challenge from HMRC and are therefore playing their cards close to their chests at the moment,” said Cassidy.
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