The cost of Covid-19 to the football pyramid

The Coronavirus pandemic has had an enormous effect on our lives over the last year. Whilst day to day we are slowly beginning to get back to normal, for those interested in sport, particularly football, it is still unclear as to when large numbers of supporters will be allowed back on the terraces.

Whilst elite sport was able to secure concessions from the government, to allow play to continue, the pandemic has had a huge effect on the finances for teams across the world, at all levels.

For us fans it has been challenging, we have had a stop / start football season, players suffering from the effects of the virus, the deferment of last year’s Euro’s, artificial crowd noises and awful commentary from Martin Keown.

The current football season will be coming to a close shortly and so attention is being turned to what the game will look like once the next season starts and, hopefully, attendance levels are back to pre Covid-19 numbers?

Have clubs somehow been able to survive the pandemic?

We all know it must have been tough, many of us keep an eye on our smaller local teams as well as the teams in the top tier leagues, and whilst there have been football casualties over the last year, namely Macclesfield Town admittedly who’s troubles started before the pandemic and Bolton who avoided liquidation last year at the 11th hour, we are thankfully yet to hear of any Covid-19 related insolvencies. Does this mean that the handouts provided by the government have worked? Have clubs been able to get through the storm or have they been slowly using up reserves and additional funding leaving them in a more precarious position going forward?

empty stadium lower league

Drop in matchday revenues

Whilst we are all aware that the elite football clubs are relying less and less on matchday revenue, the lack of ticket sales has had significant financial implications for teams throughout the football pyramid

Numbers released in January this year report that the top 20 clubs in Europe had seen a 12% drop in revenue down from €9.3bn to €8.2bn due to the impact of the pandemic in the final months of the last campaign. The likely effect of the pandemic during this current season will undoubtably see even more dramatic outcomes. For the quarter ended March 2021 Manchester United would have usually expected to see £33m in matchday revenue for the period, this year it stood at just £1.5m. That will only cover 5 weeks of Paul Pogba’s (alleged) wages.

Elite teams aided by TV rights

Consumers have generally kept their sport subscription services during the lockdowns and for the elite teams in the Premier League this is where their majority of their revenue comes from. As an example, in 2019 Chelsea’s matchday revenue stood at £66m compared to the £200m they received from broadcasting rights.

Revenue streams affected throughout the football pyramid

While it seems that those at the top of the football food chain may be able to ride out the storm, the lower down the football pyramid you travel the more drastic the lack of matchday revenue becomes as the TV money gradually disappears. You only need to travel down to the Championship to see for a club like Bristol City in 2019 its matchday revenue of £6m was almost as much as the broadcasting funds it received at £8m.

Further down the pyramid a number of clubs were already struggling, and the pandemic will make these matters worse, bringing key issues forward. These clubs will have had next to no revenue this season apart from what they have been able to secure from their own streaming platforms.

Keep going down and you are faced with clubs being locked out of their ground, the inability to train with public facilities being closed and a lack of sponsorship due to private companies pulling back on marketing budgets.

Grassroots is at an all-time low, there has been a distinct lack of financial support. Ever increasing costs/overheads, parents now unable to afford the subscriptions and kits is resulting in players leaving and fewer teams. A recent study has found that more than 5,000 grassroots football clubs will cease to exist as a result of the Covid-19 pandemic, despite £180m of funding being made available by the government and commitments to help clubs with fees and funding for football in deprived communities.

The failed Super League

Whilst hugely unpopular with supporters, it is clear to see why the failed Super League format was favoured by the Galactico teams. It was one of their opportunities to repair their terrible balance sheets, with Barcelona having to find a way out of £1bn in debt. This unfortunately coming at a time where the Spanish super clubs need to rejuvenate their aging squads.

football clubs insolvency

What is the future of our game after Covid-19?

What does this mean for the future of football? Personally, I think this will be an issue mostly centred around inflated player wages. The amount of funds needed by the larger clubs to meet the demands of players is a perpetual beast that has to eventually be reined in or Clubs will collapse.

Clubs being owned by a local businessman is a thing of the past with many of the top tier owners now being billionaires from all around the world looking for a return on their investment. In order to achieve this, whilst still securing the top players, there is a constant requirement to grow income, as the Super League proposal demonstrated.

To combat this there may need to be a hard reset throughout the game in how clubs at all levels operate. Potentially salary caps may need to be introduced and financial fair play restrictions tightened. Players and agents will have to lower their expectations, and hopefully we will see fewer instances of football clubs being held to ransom over contracts. This pandemic has shown us that even the richest football clubs in the world are not infallible and this may start to affect the investment placed into our clubs.

Whilst further down the pyramid we will likely see clubs have smaller squad numbers, however, we may also see a reversal on the recently declining desire for club academies and therefore, more effort put into home-grown players coming through the system.

The lack of football insolvencies over the last year has been welcomed news, but as the current season is coming to an end the lower league clubs are now facing the quiet months and already stretched cashflows will be put to the test with the hope that grounds full of paying supporters are just around the corner.

AUTHOR: Stewart Goldsmith (Associate Director)