March 2022 Football Distress Survey: Almost half of EFL clubs see ongoing financial distress as high levels of debt and rising player wages choke English clubs
US investors eye ‘discounted’ investments as football clubs grapple with rising overheads
The March 2022 Football Distress Survey, conducted by business recovery specialists Begbies Traynor since 2012, reports that a total of 32 (44%) of the 72 clubs in the English Football League (up from 34 in October) are now in financial distress are 2021), still twice as many as before the pandemic.
Player wages rising ahead of inflation and high levels of debt continue to hit English Football League clubs harder than those in Scotland, where only six clubs (14%) are similarly affected by financial hardship.
The combination of financial hardship and a struggling pound has made British clubs an attractive investment opportunity for US investors and just like Chelsea, Leeds United and lower division clubs like Wrexham, more clubs are likely to see North American investment or full ownership of the clubs next Year.
“The government’s Covid measures helped clubs survive during the lockdown but with rising inflation and rising player salaries, many clubs continue to tumble. Goals and season ticket sales for next season are likely to be significantly impacted by lower consumer spending as a result of rampant inflation.
“This comes at a time when player wages are rising so much faster than regular fan earnings. It’s a clearer trend in the top flight of English football but these trends can be seen in the lower leagues as well,” commented Begbie’s Traynor partner Julie Palmer.
“The bottleneck preventing clubs from building a war chest and cash flow resilience presents foreign investors with an opportunity, especially when Brexit has so discounted the pound against the US dollar. For some clubs this is proving to be a welcome lifeline, preventing financial collapse and the legacy of point deductions,” she added.
Since March 2021, the number of English clubs showing signs of financial difficulties has remained relatively constant, rising from 33 in England and Wales to 34 in October 2021 and back to 32 in the most recent period to 31 March 2022.
“In 2012, when we started this report, the average Premier League player was making £1.6m and that figure has almost doubled to £3.1m. Over the same period, average wages in the UK have risen by just 18%. With wages like this, players are a large part of a club’s expenses and the area with the most room for negotiation, this is the natural place to make cuts and change a situation that is now threatening the very existence of many clubs,” added Gerald Krasner, partner of Begbies Traynor, added.
“In some cases, the tremendous financial firepower of US investors can help cushion the downward blow and financial hardship, but in any business with rising non-wage labor costs outstripping the overall sales trend and with a looming consumer crisis likely, there will be problems later.” , he added.
Krasner, who was part of the team of three administrators who successfully sold Wigan Athletic FC out of administration last year, was previously chairman of Leeds United and is one of the leading experts on the restructuring of football in Britain.