Aug 19 2005
English and Scottish football clubs have managed to avert financial meltdown after the threat of a major crisis in recent years – but they must look to make further inroads into controlling costs through reassessing player wages and considering alternative revenue streams, as the increasing reliance on rocketing ticket prices can no longer be sustained. This was among the key findings of the fourth annual survey of football finance directors (FDs), published today by accountants and business advisers PKF (UK) LLP.

"Controlling Club Performance – the annual survey of football club finance directors 2005", found that fewer clubs reported increasing pressure from their banks, indicating that the financial crisis that many faced has been averted and that the industry is over the worst. This year only 21% of clubs felt under more pressure from their bank (compared to 33% last year and 38% in 2003).

However, there is no room for complacency – ticket revenues have soared and are responsible for the biggest revenue growth among 48% of clubs in the last year. The reliance on revenue growth from tickets (in which price hikes must play a major factor given the finite number of tickets available per stadium) overshadows the next highest growth winner, TV, which garnered just 14% of votes. Merchandising and sponsorship revenue each provided the biggest revenue growth in 7% of clubs.

Stuart Barnsdall, partner in PKF's football services group, said: "Football clubs can no longer ignore the issue of ticket revenues. There must be a tidal change in the attitude towards club funding in the next few years because there is simply no getting away from the fact that ticket prices cannot continue to rise at the rate they have. This means costs will have to be cut elsewhere and the development of other revenue streams considered. The most obvious place to rein in costs is player salaries."

There has been progress in making player salaries more related to performance on the field. However, 55% of the FDs surveyed rated player wage inflexibility as one of their major concerns in the next year – a significant increase on last year's 42% of respondents. 55% of clubs discussed wage capping in the last year, compared to 64% last year. Only 17% of English Premier League (EPL) clubs discussed this issue in the last year.

Worryingly, the costs incurred for players who are away on international duty are rising. Half of EPL and 20% of Scottish Premier League (SPL) clubs are paying more than £750,000 a year on salaries for players who are abroad, yet the clubs themselves receive no remuneration.

Stuart Barnsdall said: "The burden of high player salaries and clubs' continued reliance on competition-based revenue has shown the need for clubs to get the most value from the players they pay. It can't be long before clubs start to press for compensation from the football associations to mitigate this substantial and rising cost."

UEFA will be disappointed that a significant 45% of FDs do not believe that UEFA licensing will achieve its aims of helping to level the financial playing field in Europe. More worrying still, is that the EPL and SPL clubs, on whom this issue is likely to have the greatest impact, are least confident in the system – not one of the EPL clubs thinks it will help.

More than three quarters of clubs (79%) said the Government should put more funding back into football at grass roots level, to acknowledge the substantial contribution that the football sector makes to UK tax revenues. The clubs suggested this take the form of financial assistance for schools and community centres to increase facilities and encourage wider participation in the sport.

For the first time since PKF began this survey (in 2002), a majority of FDs felt that clubs should lose their status as "super creditors".

Highlights of PKF's "Controlling Club Performance – the annual survey of football club finance directors 2005":

Pre-tax profits stable
31% of respondents expect to make a pre-tax profit in their next accounting period – largely unchanged from last year's 33%.

Pressure from banks
21% of clubs received more pressure from their banks in the last 12 months (down from 33% in 2004 and 38% in 2003). A significant 38% felt under less pressure.

Ticket revenues soar
Ticket revenues were responsible for the biggest increase in revenue over the last year in 48% of clubs – far more clubs voted this the revenue growth winner than any other income stream. The second biggest revenue growth came from TV (14%) with merchandising and sponsorship each getting 7% of the votes.

Player costs
There has been progress in making player salaries more related to performance on the field. However, 55% of the FDs surveyed rated player wage inflexibility as their major concern in the next year, with a peak of concern shown by 75% of English Football League Championship clubs. The overall figure shows a significant increase over last year's 42% of respondents.

The cost of playing the international game
Half of EPL and 20% of SPL respondents indicated that they paid more than £750,000 in salary to players on international duty – up from 33% of EPL clubs and no SPL clubs in 2004.

UEFA licensing
A significant 45% of surveyed FDs believe that UEFA licensing will not achieve UEFA's stated aims in Europe. A resounding 83% of EPL clubs do not believe it will achieve its aims, whilst 60% of SPL clubs agreed.

Super creditor status
For the first time since this survey was started in 2002, a majority of club FDs (52%) felt that the clubs should lose their status as 'super creditors'. In 2002 only 26% were in favour of this change.

Free copies of the PKF survey "Controlling Club Performance - the annual survey of football club finance directors 2005" are available from the PKF Football Services Group via charley.gardner@uk.pkf.com. Back copies of previous surveys can also be ordered.