Are you sitting comfortably?
Let me try to change that.
Or at least, to paint a familiar picture in some more vivid colours.
In a discussion on another forum about pay cuts and furloughing staff, I gently ventured the view that some Premier Clubs were in a different position from others. I was promptly jumped on:
“All Prem clubs are the same”
“You’re all rolling in money”
“Tell Delia to spend a few of her millions”
I beat a diplomatic retreat, but nagged by the sense that I had a point: some PL clubs are financially very strong, others much more fragile. If true, perhaps it should colour how we think of their options, and what might be reasonable for us to expect of them.
Now I’ve done a little research and few calculations, that nagging sense was more right than I imagined.
Let me share some figures with you. As my financial adviser recently said about updates of my investments he was about to send me: you might want to pour yourself a stiff drink before getting started.
I’ve worked with three sets of figures. Two of them are straightforward and well documented: the wealth of each Premier League club’s owners, and each club’s annual wage bill.
The third is the potential financial cost to each club of Covid-19 and the disruption it’s brought to the season. These figures are less clear-cut, of course: they depend on how the season plays out (or not), and the deals struck with broadcasters.
However, some assessments can be made, and I’ve used a “best estimate” calculation from The Times. Its figures are close to those since revealed by clubs (including Norwich) in their planning assumptions.
The Times puts a figure on the potential cost to Norwich of £28.2m.
Even if the actual figures turn out a bit differently – hopefully less severe – we know the relative ‘hits’ to different clubs will be about the same, so the gist of my calculations below will still hold true.
Let me share two main calculations: each club’s annual wage bill as a proportion of its owners’ wealth, and the potential Covid-related financial loss as a proportion of the owners’ wealth.
The wage bill obviously takes on new significance when revenue falls off a cliff, as it has.
For half of Premier League clubs, the annual wage bill is no more than 5% of their owners’ wealth. For another chunk, it’s between 5% and 15%. For one, Sheffield United, it creeps up just above 20% – a worrying thought, but under control.
Three clubs stand out as very different.
For Watford, the annual wage commitment is 90% of its owners’ net wealth. For Burnley, it’s an alarming 142%.
For Norwich, it’s 220%. Our annual wage bill is more than double the wealth of our owners.
In case you’re a worried fan of Manchester City, the situation is a little more reassuring. Yes, the wage bill is a gigantic £316m (compared to Norwich’s £50m) – but it’s merely 1% of the owner’s wealth.
What about that potential financial hit from Covid-19?
Fans of the Manchester clubs, Arsenal, Spurs and Chelsea will point out that their estimated shortfalls – ranging from £78m to £112m – are far higher than Norwich’s. But that’s surely not the relevant way to look at it.
For 16 of the 20 Premier League clubs, the estimated financial hit represents less than 5% of their owners’ wealth. Again, Sheffield United and Watford are more vulnerable: the hits represent 20% and 33% respectively. I’d worry if I were them.
For Burnley, the figure rises to 58%.
For Norwich, it’s 122%.
Before you start picking at these figures, I hasten to recognise their limitations. Some owners are much readier than others to put their wealth at their club’s disposal. Some clubs are simply better run than others, and more resilient as a result.
Crucially, we don’t yet know the extent of financial damage to clubs from the present crisis.
That said, the figures are surely important. We know there’ll be a substantial financial hit, far more significant and challenging to a club like Norwich than to a Man City, or even to a Southampton.
Should we be criticising our club taking steps to give itself some protection (at the same time making sure none of its employees loses any income)?
I’ll leave that answer to others.
But surely – surely – the figures provide a response to one of those first comments directed at me.
All Prem clubs are the same?
I don’t think so.