It’s that time of year again, isn’t it – where the combinations of a bad run of form, the Club’s annual accounts, together with the forthcoming Annual General Meeting, that’s left many fans questioning the direction in which the Club is going?
Many of my fellow writers have already alluded to the need, in their opinion, for new investment, as to their preferred direction of travel. It’s a debate which is likely to rumble on, irrespective of the majority shareholders previous statements, back in late 2016, whether we’re in the Premier League or Championship.
However, with no immediate sign of change, I guess we can only go with the hand we’re currently dealt – self funding and, importantly, whether it’s sustainable within the environment in which the Club is currently competing?
The basic tenet of spending whatever you’ve got is, from a business perspective, fundamentally sound. However, football really isn’t like any normal business.
For starters, the Championship’s own Financial Fair Play (FFP) rules – originally implemented with the intention of trying to make all clubs operate with minimal financial losses – doesn’t actually do anything of the sort.
The first incarnation of FFP, introduced when City were in the Premier League, aimed to reduce annual losses incurred by clubs, from a maximum allowance of £8 million each year, to just £3 million a year, over a three year implementation period.
However, before being fully implemented, too many clubs, mainly the Championship’s “big guns”, who were spending extravagantly on both transfers and wages, were struggling to be compliant. Unsurprisingly, as a consequence, all Championship clubs then voted to revise their rules, thereby enabling losses of £39 million but now over a rolling three year period.
Financial irresponsibility was, effectively, fully endorsed by Championship clubs. And, as a consequence, Championship clubs subsequently operated (and still do) with wages bills at, or around, 90% of their turnovers, consequently incurring significant financial losses.
Put simply, no Championship club can remain debt free if remaining at second tier level for several seasons. And, I remain unconvinced City will be any different.
If the rigours of competing in the Championship with a self-funding model aren’t challenging enough, then the financial consequences arising from Premier League relegation are equally significant, as City are now finding.
For while City didn’t enjoy the £100 million now on offer, the seismic gulf in TV monies, down to just £7 million a year in the Championship once the second season of parachute payments disappear, means, even with relegation clauses in most players contracts, that there’s an almost irreconcilable difference, given the significant reduction in overall income.
The problem is compounded by the events of the January 2016 transfer window. Giving out three-and -half year contracts to the likes of Naismith, Jarvis, Klose and Pinto, while knowing you’ll only have two seasons of parachute payments, didn’t look terribly clever at the time; even with the benefit of hindsight.
The recent annual accounts have highlighted City’s current financial predicament – a wage bill that’s reportedly the second highest ever recorded in the Championship’s history (it will probably soon become the fourth highest once Newcastle and Villa release their figures) certainly proves big wages doesn’t guarantee success.
But, beneath the unedifying headlines, assuming City don’t secure promotion next May, there’s a double-whammy on the horizon – the prospect of turnover reducing by half, to around £30 million per annum, while struggling to remove unsustainably high earners off the wage bill.
Player sales are therefore inevitable. To be fair, we’ve already been warned of this by the Club. Nevertheless, the biggest issue is likely to be that the ones we’d most like to keep (those who’re most likely to enhance our promotion chances – Maddison, Pritchard and Oliveira) are the players most likely to attract suitors, while those offering little to the cause will still be on the training fields (or treatment rooms) of Colney, rather than making meaningful contributions at Carrow Road, running down their expensive contracts.
And here, for me, is the nub of the issue; whatever your individual overall view of the Club’s self-funding modus operandi, whether it be good, bad, or indifferent, the whole concept seems to be currently dependent upon regular doses of Premier League cash.
The whole dynamic of the Club – whether it’s the acquisition of first team players, or the development of the academy – in terms of coaching, youth players and infrastructure – and, longer term, the redevelopment of the City Stand, are all wholly dependent upon being in the Premier League.
There is, of course, a currently unspeakable alternative.
Interesting, not to mention challenging, times ahead.
This being Norwich City, would we have it any other way?