Counting the costs of COVID-19 on professional football clubs and their communities
Lead Research Organisation:
Sheffield Hallam University
Department Name: College of Business, Technology & Eng
Abstract
Many professional football clubs, particularly in the lower leagues of English football, face financial ruin and are on the brink of collapse. This situation is likely to be exacerbated throughout 2021 owing to the current COVID-19 global pandemic. Consequently, this project aims to analyse the financial impact of COVID-19 on professional football clubs in England and the wider impact on their communities. In the last year, one community has already lost its professional football club (Bury FC) and other communities have been affected by the demise of semi-professional clubs (e.g. Rhyl FC).
The project has three main research questions. First, what is the financial impact of COVID-19 on the professional football clubs? Second, what is the wider economic impact to the local community that a club is placed in given the distinct possibility of matches being played behind closed doors for a considerable amount of time? Thirdly, what are the wider effects on the community in football community trusts and social cohesion?
The project serves to provide a rapid analysis of the impact of COVID-19 on English football's finances. In relation to research question one, the focus will surround the financial situation of professional clubs including issues such as the distribution of wealth and financial disparity between clubs in the English football system that could lead to overspending and potential insolvency. It will also consider the impact of broadcast rights distribution, solidarity payments and parachute payments across the system and provide strategic direction for a collective recovery. The intention is to stimulate discussion, analysis, interest, and research on how football governing bodies can use the opportunities presented by the COVID-19 pandemic to reset the financial landscape in the English system. Such discussion provides a more balanced, competitive suite of competitions that collectively tackle financial inequality and put aside self-interest. COVID-19 allows us to revisit existing issues in how football leagues in England are governed. Existing structures have created a significant financial disparity between the professional leagues; a financial disparity that has grown since the formation of the English Premier League (EPL) in 1992/93 and which COVID-19 has laid bare.
Additionally, the pandemic has presented several financial issues that may threaten the sustainability and future of clubs and which are tied to the broader financial performance of clubs. These are the impact on non-playing staff (with regards to redundancies and pay cuts), the impact of having no fans in stadiums (from both a financial and social aspect) and the impact on businesses situated near football stadia that rely on matchday attendances to boost trade. All these issues are intertwined and they remind us that all these football partners are directly involved in the value creation process, and that their voice, influence and legitimacy extends far beyond turning up to a live game once or twice a week. For example, broadcasters are fully aware of their devalued product when there are no spectators sitting in the stands. The symbiotic nature of the relationship between fan, club and the wider community is one in which they co-create a product that is irreducible to either one alone. This biweekly co-created ritual is key to the sustainability of many football clubs, and the entire ecosystem of the sport.
This project will analyse the above issues and present an overview of the financial situation in English professional football in a post-COVID-19 climate. It will offer recommendations for governing bodies and national associations as to how they can collectively work together to secure the long-term financial viability of the entire league structure.
The project has three main research questions. First, what is the financial impact of COVID-19 on the professional football clubs? Second, what is the wider economic impact to the local community that a club is placed in given the distinct possibility of matches being played behind closed doors for a considerable amount of time? Thirdly, what are the wider effects on the community in football community trusts and social cohesion?
The project serves to provide a rapid analysis of the impact of COVID-19 on English football's finances. In relation to research question one, the focus will surround the financial situation of professional clubs including issues such as the distribution of wealth and financial disparity between clubs in the English football system that could lead to overspending and potential insolvency. It will also consider the impact of broadcast rights distribution, solidarity payments and parachute payments across the system and provide strategic direction for a collective recovery. The intention is to stimulate discussion, analysis, interest, and research on how football governing bodies can use the opportunities presented by the COVID-19 pandemic to reset the financial landscape in the English system. Such discussion provides a more balanced, competitive suite of competitions that collectively tackle financial inequality and put aside self-interest. COVID-19 allows us to revisit existing issues in how football leagues in England are governed. Existing structures have created a significant financial disparity between the professional leagues; a financial disparity that has grown since the formation of the English Premier League (EPL) in 1992/93 and which COVID-19 has laid bare.
Additionally, the pandemic has presented several financial issues that may threaten the sustainability and future of clubs and which are tied to the broader financial performance of clubs. These are the impact on non-playing staff (with regards to redundancies and pay cuts), the impact of having no fans in stadiums (from both a financial and social aspect) and the impact on businesses situated near football stadia that rely on matchday attendances to boost trade. All these issues are intertwined and they remind us that all these football partners are directly involved in the value creation process, and that their voice, influence and legitimacy extends far beyond turning up to a live game once or twice a week. For example, broadcasters are fully aware of their devalued product when there are no spectators sitting in the stands. The symbiotic nature of the relationship between fan, club and the wider community is one in which they co-create a product that is irreducible to either one alone. This biweekly co-created ritual is key to the sustainability of many football clubs, and the entire ecosystem of the sport.
This project will analyse the above issues and present an overview of the financial situation in English professional football in a post-COVID-19 climate. It will offer recommendations for governing bodies and national associations as to how they can collectively work together to secure the long-term financial viability of the entire league structure.
Organisations
| Description | Main findings: • Revenue growth in English football has been substantial since the early 1990s but much of that growth has exclusively benefitted English Premier League (EPL) clubs. This league has grown far more quickly than the English Football League (EFL) leading to a financial challenge in the lower leagues as clubs try to compete with this growth and gap between leagues. • This growth and financial disparity have caused problems with cost control, most notably in player wages. They remain the single biggest cost to football clubs and pose the most significant barrier to financial sustainability across the industry. • A high proportion of English football clubs make recurring losses and are financially unsustainable. This issue was present before Covid-19 but has been exacerbated by the pandemic. • A high proportion of clubs have high levels of debt, are over reliant on cash injections from club owners to fund day-to-day operations and have negative equity. Around 50% of League 1 and League 2 clubs were 'technically insolvent' in 2020. • Matchday attendances have increased in recent years and are expected to recover as we move out of the pandemic. The reliance on matchday attendance to drive revenue remains a critical success factor for clubs outside of the EPL. • Clubs have cited the need for improved internal business and operational strategies in response to the Covid-19 pandemic. • External support (e.g. Government furlough scheme and grant money provided by EPL and EFL) has been vital in managing club budgets through the pandemic, especially for lower league clubs, offering a lifeline for survival. • Communication and engagement with fans has been important to clubs to sustain financial commitments throughout the pandemic. This, in turn, has served to strengthen the bond between the club, the fans and the wider community. • Maintaining relationships with creditors at club level (especially those in the local community) has taken on increased importance during the pandemic. • Clubs are becoming more aware of the increased importance of the community trust arm of their operations. Building and maintaining a relationship between the club, the trust and the fans can hold real value if managed correctly and can promote a positive community impact. • Sustainability and financial planning are the most important aspects for clubs to focus on in the future. Clubs need to become self-sustainable, but they also require support from football partners to be able to achieve this in the short to medium term. |
| Exploitation Route | Key recommendations: • To re-visit the broadcasting distribution mechanism in English football with a view to addressing financial imbalance and reducing the financial cliff edges between leagues. • To make relegation reduction clauses mandatory in all player contracts to align with the financial resources available in each league competition. • The appointment of an independent regulator to oversee football club finance. • For clubs to target a model of becoming self-sustainable in the next 10 years, by increasing cash reserves, diversifying revenue streams, and removing the reliance on owner and external funding. This can be supported by the removal of permitted losses by the governing body, with clubs expected to break even as a minimum requirement. • For clubs to provide clear lines of communication and engagement across stakeholders with a particular focus on supporters as the key stakeholder. • For local authority organisations and stakeholders to connect with the Football Club Community Trusts (FCCTs) and provide clear lines of communication and resources to grow their network of support. • To increase the general awareness of FCCTs in the broader context of the industry and individual communities close to football clubs. • For football clubs across the board to strengthen their relationship with their FCCTs and provide them access to communication channels and any further resources required to showcase and support their work. The Covid-19 pandemic has shone a spotlight on the finances of English football. It has decimated revenue streams in the past two years and has put acute pressure on club management. This has been felt through all levels of the game with no club immune, but some better placed to ride out the storm than others. Our research presents a real problem. One of financial imbalance and financial mismanagement. It also places the emphasis on the importance of clubs to their wider community. Many may have lost that connection in recent years and if nothing else, the pandemic has served as a timely reminder that football without the fans and communities surrounding is nothing. A key question is that behaviours of club return to the status quo of pre-Covid-19. As we write this in March 2022, fans are back at grounds and the industry has yet to move on recommendations put forward by the Fan Led Review in November 2021. There is a real danger that the chance to change the industry for the better passes by again. We call strongly for a financial reset in football post Covid-19. The financial reset must benefit all clubs and seek balance, not just in the accounts, but the sporting playing field, too. Strong evidence exists that suggests there are considerable financial issues in football including governance, broadcasting distribution mechanisms, parachute payments, wage costs, the ability to generate and hold cash, an over reliance on football club owners and an increasing importance to engage better with fans and communities. A sensible starting point for future discussion would be to consider all these items and look to change the narrative. We have presented nine recommendations linked to these points and it is our strong belief that using some of our evidence presented in this report will help make better, more ethical decisions for English football clubs and their communities. The time to engage with the evidence and for collective action, not self-interest, is now more important than ever. We have presented strong evidence and practical solutions that we feel will benefit the game in the long-term. It's time that policymakers reacted to such evidence. |
| Sectors | Leisure Activities, including Sports, Recreation and Tourism,Other |
| Description | Research findings have been disseminated through media channels and some news outlets picked up on the findings. More wider, the work has been shared with relevant stakeholders in the football industry including league governing bodies and individual clubs. This has led to a number of non-academic engagement events where the PI has been asked to speak about the work (including two separate football matches and a football club conference looking at the future of the game). The work has also been used to feed into parliamentary committees on the fan-led review of football governance in England. The PI and one of the co-Is have been asked to be part of a parliamentary working group looking at the financial distribution within football and other research teams from parliament have been in touch with the PI to discuss the project further. This may lead to future funding to conduct other research projects in the future but that has not been decided at the time of this submission. The work has also been shared at academic conferences where there have been industry practitioners present. Hard copies of the report have been distributed at all events mentioned above. |
| First Year Of Impact | 2022 |
| Sector | Leisure Activities, including Sports, Recreation and Tourism |
| Impact Types | Societal,Policy & public services |
| Description | Press Release and Radio Interview |
| Form Of Engagement Activity | A press release, press conference or response to a media enquiry/interview |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Public/other audiences |
| Results and Impact | Press release to announce the awarding of the project. Press release was worked up jointly by Sheffield Hallam University and ESRC. Press release was circulated on Sheffield Hallam University news page and circulated by the institution and project team on social media channels (primarily Twitter). The tweet from the PI gained over 10,000 impressions on Twitter (number of times people saw the tweet) and it subsequently led to a regional radio outlet (Global Media) asking for an interview with the PI about the project. This interview then aired on Capital and Heart radio stations across the South Yorkshire region. |
| Year(s) Of Engagement Activity | 2021 |
| URL | https://www.shu.ac.uk/news/all-articles/latest-news/assess-financial-impact-covid-professional-footb... |