Financial Regulation is Ruining Football – Liberal Article

By
Luca Boyd, Peter Pearce and Joseph McLaughlin
-
0
1681

Financial Regulation is Ruining Football – Liberal Article

Financial regulation and super clubs are ruining football. What was once the ‘beautiful game’ has become a financial minefield where only the super-wealthy can succeed. The Financial Fair Play (FFP) regulations that were introduced to combat this have completely failed. If anything, they have made the sport more unfair.

FFP states that clubs can only spend as much as they earn. This profit is garnered through  tickets, television rights, and sponsorship. The regulations were intended to level the playing field. But in reality, they effectively capped the amount that smaller clubs can spend to catch the larger clubs. These established larger clubs, such as Manchester United and Liverpool, were previously able to spend as much as they could to get to where they are now. On the way, they took out huge loans, racking up enormous debt. Debt that they were able to repay once they achieved on-field success. 

These super clubs are now in a profit-maximising cycle by virtue of their initial high financial cap. A higher financial cap allows them to challenge for more on-field success resulting in more sponsorship and prize money resulting in an even higher financial cap.

Smaller clubs, meanwhile, can’t invest as much in their team resulting in less on-field success; less sponsorship and prize money; and a lower financial cap. These two cycles are increasing the gap between super clubs and everybody. Such poorly designed financial regulation is sucking the competitive soul out of football.

A quick look at the sponsors of UK football clubs shows how big clubs with higher brand value can attract bigger and better sponsors. Manchester United, for example, have 24 total sponsors/partners including major international companies such as Adidias, DHL, and Chevrolet. Everton’s sponsors, on the other hand, include an Italian meat company, Carling, and TGI Fridays. They also have ten fewer sponsors than United. It is clear without having to look at financial reports who is earning more from sponsorship, and who, therefore, is able to spend more.

This article breaks down the turnover, wage bill and profit/loss margins of the 20 Premier League clubs in the 2017/8 season. The clubs in the ‘Big Six’ had an average turnover of £462m. The remaining 14 clubs had an average turnover of only £146m. Tottenham Hotspur, who were the lowest of the ‘Big Six’ had a turnover of £381m whilst Everton, the highest of the remaining clubs, had a turnover of only £189m. There is a substantial gap between the ‘Big Six’ and the other clubs which can’t be closed any time soon thanks to FFP. Gone are the days of mass loans to catch the other clubs and years of racking up debt which the ‘Big Six’ capitalised on.

Now, it goes without saying that the global situation has changed significantly since the 2017/8 season. Covid-19 has massively slashed the turnovers of all clubs. Yet the point remains. In the recent summer transfer window, Arsenal spent £156.8m and both Manchester clubs also broke the £100m barrier with Chelsea close behind spending £97.5m. On the other hand, five clubs spent less than £20m. The gap couldn’t be much larger.

Despite what I wrote earlier about how spending more allows more on-field success, Arsenal, at the time of writing, are last in the Premier League having not scored a goal yet. However, the capability to spend £156.8m in a single transfer window is something their relegation rivals, Norwich, could only dream of. 

This problem isn’t isolated within England. Super clubs are appearing across Europe and the top clubs in the major domestic leagues appear all but fixed. These clubs are the ones that were either historically successful (and therefore have larger fanbases and more income opportunities) or clubs that are owned by extraordinarily wealthy Middle-Eastern states (like Manchester City or PSG.) This allows the super clubs to buy world-class talents that ordinary clubs can’t come close to affording. Although Lionel Messi was signed by PSG for free, his salary is an estimated £1m per week. For comparison, Leicester City, last season’s highest non-Big Six finisher in the Premier League, have a total weekly salary bill of only £1,038,000. 

The current financial regulation is unfair. They essentially ringfence the big European clubs. This summer transfer window exemplified this. Super clubs spent a fortune either on transfer sums, wages, or sign-on bonuses. Smaller clubs, meanwhile, are prohibited from catching up.

The solution isn’t to remove FFP. Financial regulation is necessary within football to prevent clubs racking up obscene amounts of debt and collapsing. This has happened to numerous clubs in the lower leagues of English football in the last 20 years, most recently Bury FC. However, football needs to become competitive again, both in domestic and European competitions. 

The gap between super clubs and everyone else is only growing. The miracle that was Leicester City’s shock Premier League win in 2016 seems increasingly like a fever dream with each passing year. 

Written by Senior Liberal Writer, Luca Boyd

Follow me on Twitter!

Point of Information

Is football even a ‘game’ anymore? – Conservative response

Whilst I have no strong love for the sport in terms of the major tournaments and clubs, I did enjoy playing it back in the day at secondary school. My colleague believes that financial regulation is ruining the ‘beautiful game’, however, it appears to be more of an entertainment industry than a sport.

Look at America’s WWE which describes itself as “sport entertainment” as opposed to professional sport. Compare America’s NFL, which is increasingly being debated as to whether it remains a professional sport. English football appears to be following a similar trend.

The significant difference between “sport entertainment” and professional sport is that the former can legally pre-determine winners of matches, competitions etc., whilst the latter has to facilitate a fair competition with equal chance of winning.

The WWE is officially a “sport entertainment”, allowing it to rig matches, as it is not real sport. This was decided in a court case as to prevent legal actions and regulations being put in place.

Whilst the NFL is still a professional sport (at least legally), many of fans question this . Currently, however, our English Premier League is not quite as far gone as the NFL. Yet the economic divide between the top clubs and the grassroots is still astronomical.

Looking wider to the European clubs, it appears it is slowly becoming “sport entertainment” because of the cyclical nature of the few clubs which continuously place high up in their respective leagues and competitions. Whilst the results are not predetermined, they are also restricted to the few top-earners.

Overall, it is clear that the significant economic divides within the sport are impacting upon the game. Since only the most affluent clubs are able to circumnavigate the regulations described in my colleague’s article, it is those who are able to survive, succeed, and continue to make money.

As this becomes more continuous and cyclical, the very game itself comes into question. Are fans paying to see fair fights between the team they support and their rivals? Or are the big boys destined to continue as the top dogs (as long as the money does not run out)?

Written by Co-Chief of Conservatives, Peter Pearce

Follow me on Twitter!

Working Class Games Need Working Class Ownership – Labour Response

My colleague shows us a certainly worrying truth; that the divide in football doesn’t just exist between small town clubs and the clubs in the Premier League anymore. The divide now exists between 6 Premier League teams and every national club in football. 

Financial regulation incites the heated debate about bringing politics into football. Even before the toxic climate that followed the Euros this summer. However, football might be the best vehicle for understanding and advocating for common ownership of an entity by the people. 

Unlike American Football like my conservative colleague talks about, which started in the hands of wealthy landowning colleges, football is undoubtedly a working class game. If you look all across Europe you can see a pattern. The biggest teams are usually not those based in the capital; they’re usually based in working class hubs in second cities. Football clubs grew from community organisation, cultural identity and working class power.

Even Leon Trotsky recognised the power that football had over the working class, noting that ‘artificial channels’ such as football that “the revolution will inevitably awaken in the British working class”.

When fans talk about football clubs they’re not talking about a company that sells them a product to consume, they’re talking about a societal entity that they feel is a part of them and their lives. So how do we go about bringing back football to the working class?

A good example to look to is Germany. Any Bundesliga team seeking to compete, the club – and by extension the fans – must own 50% + 1 of the shares of the company. This protects companies from the influence of external investors for at least 20 years. Such an ownership model is key to keeping the ticket costs for the league low, despite the incredibly large revenue brought in by clubs.

However, the 50 + 1 ownership model was introduced as a compromise. Before its introduction in 1998, every team in the German league was owned by members associations and were run as non-profits. While this ownership model is a sensible solution, many countries such as Sweden still operate on a non-profit ownership model.

Private ownership is only one part of the problem. It would go far to heal the divide between the clubs in small cities and the clubs. But, petro-state billionaires buy and sell to amuse themselves. There is more to be done. Reform is needed in advertising rules, public money being used to finance stadiums and even how FIFA operates. Football is marred across the world by greed, elitism and corruption. A better world with a more beautiful game is possible. 

Written by Senior Labour Writer, Joseph McLaughlin

Follow me on Twitter!

Luca Boyd
Peter Pearce
Deputy Chief of Conservatives | Website

I am going into my second year at the University of Exeter studying a flexible combined honour in Geography and Politics. My interest in politics and geography stems from an interest in current events and the wider world, with geography being the study of all world processes.

Joseph McLaughlin
Guest Labour Writer

RELATED ARTICLESMORE FROM AUTHOR

Leave a Reply