Premier League's financial problems accelerated by coronavirus crisis
Accountancy group Deloitte has warned that Premier League clubs could be braced for a collective drop of £1billion in revenues this season, with half of that to be lost permanently. With outstanding rebate payments owed to broadcasters due to the cancellation of fixtures as well as the collapse of matchday revenue for sides with games played behind closed doors for the foreseeable future, these are unprecedented times.
Over the past few years, England's top flight has experienced exponential growth. Total revenue exceeded £5bn for the first time in 2018/19 which was an increase of 7% compared to the previous campaign. But soaring wages swallowed up a lot of the profits that were made as top-tier English clubs increased their wage spend by 11% to £10.6bn in 2018/2019.
Therein lies the fundamental problem. Wage growth has continually outpaced revenue growth and inevitably, the Premier League has sleepwalked their way into a crisis. Essentially, they were ill-prepared for the economic devastation that Covid-19 would cause.
Over-inflated transfer fees had also been a key feature of the Premier League's inexorable rise, but the transfer market will be depressed this summer as a result of Covid-19 and the tradition of big spending is likely to be stymied.
The coronavirus pandemic has brought into sharp focus the unsustainable business model of the Premier League and it seems only a matter of time before the bubble will burst.
The top clubs have not been immune to the financial chaos caused by coronavirus with Manchester United a prime example as they have already reported losses of £28m. While the Premier League has been perceived as being the richest league in the world, perhaps this suggestion needs to be re-evaluated. Compared to some of its European counterparts, the Premier League's elite clubs had seen their profits squeezed before the coronavirus pandemic kicked in.
The Premier League's suspension in March has proved to be very expensive and the onus has been on clubs to weather the storm. Owners have deep pockets, but getting on a more even financial keel remains the priority and the biggest challenge to date.
Nevertheless, there is a flicker of hope that Premier League clubs can recover from the crisis and still post strong revenue figures in 2020/21. Deloitte's head of sport, Dan Jones, is cautiously optimistic this might be the case.
He said: "We forecast that the restart plans for the Premier League and a number of its peers will cause a rapid recovery in financial results as some 2019-20 broadcast revenues are pushed into the 2020-21 financial year, which may result in a bumper revenue year.
"Much remains uncertain, particularly around the timing and scale of the return of fans to stadiums and the impact on commercial and broadcast partners' wider business.
"The football industry will be hopeful that a V-shaped recovery and a return to relative financial normality for the 2021-22 season is possible."
How and when football returns to some semblance of financial normality remains to be seen. The Premier League has been unable to paper over the financial fissures that have grown deeper and the coronavirus pandemic has only served to accelerate monetary worries.
Written by Charles Perrin
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