Are you sitting comfortably?
Yes?
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.
Some are much more equal in life, for the average Joe the first prayer is ‘don’t let me or mine get this virus and die’. The second is ‘let me have a living income when this is over’. The mega rich can insulate themselves and protect their investments, it truly is a different world and will be even more so with the consequences of this virus taking years to overcome. I think most football clubs will survive but it won’t be business as usual for a long time. The clubs at the grass roots never had much so haven’t got much to lose, the mega clubs will be okay, those in between will struggle the most and some will fold, and the gap will widen. Norwich stand a better chance than the Binners but who knows?
When this is all over, it’s going to be a VERY different world that we inhabit and not just for football and the fans.
As someone said yesterday, what happens to the remainder of the games in the PL, for which NCFC (and all the other clubs) fans have paid good money – are we likely to see any refunds?? IMO, it’s unlikely, certainly for NCFC fans, mainly because we’re already going to see a shortfall of somewhere north of £30M and to refund 20,000 an average of >£50 each is a lot of money and not forgetting the fact that we’ve sold our allocation for the now unlikely FA Cup game against Man Utd.
You very rightly make the point that people would like to have an income when things return to something even near normal and sad to say, I’m sure 1,000s won’t, because many businesses will cease to exist and the hit to tourism is going to take .years to recover. I’m sure I’ve heard that in Norfolk alone it’s in the region of £10Bn and that’s a HUGE amount of mo
Another sad fallout from the lockdown is the increase in requests for help to both domestic and child abuse helpline and the longer this situation exists, the worse it will get.
I’ll end on a more cheerful note and it will be a year ago on Tuesday that we clinched the Championship title at Villa Park – there’s a thought!! 🙂
Good comments – thanks.
I’m certainly not arguing for the season to be completed – that clearly can’t be done with any semblance of integrity, either to the game or its participants. But we need to be aware of the potential consequences, even for a relatively successful and well-run club like Norwich.
It amazes me that given the current uncertainty over whether this season will finish (in one way or another), whether a new season will start in the summer or the autumn, and what happens with players who are out of contract from July 1st, that the transfer talk still goes on, and silly money is still being quoted. I have seen figures in excess of 100 million quoted, and more in the multiple tens of millions. It does seem to be confined to a small number of clubs, those with the mega-rich backers. It’s time for a reality check for those with their heads buried in the sand. There is no equality in the Premier League.
Hi Ed
Good article and should start a lively debate.
Firstly there was no equality in the Premiership at the outset nor in the old league 1 you always had a few richer clubs that would buy the best players for other clubs.
TV reimbursement may not happen if they get to play behind closed doors so city could still get that money and more if all games goes live as suggested by Sky’s Neville so the short fall could just be the game day revenue at £1.5m a home game.
I am possibly being over optometrists or had 1 to many last night but the transfer markets will never be the same and the richer clubs will nit pick the best players for less money so clubs like city really need to hold their nerves in negotiations.
Onwards and upwards
OTBC
Keep safe and well
Thanks.
I suspect it’s no more than 50-50 that the season will be completed. I’m honestly not convinced there’s either the ability to hold matches safely, or the consent of players, to make it happen. Fans certainly don’t feel right about it.
We’ll see.
Hi Stew.
I’ve never seen your figures presented before but now I have I think they’re pretty much spot on. A very interesting read – I had to go through it twice – but I’ve never found anything morally wrong with putting our non-essential staff on furlough. The 20% top-up won me over tbh. NCFC is after all a business just the same as those businesses not involved in football. With our well-publicised approach to running the club we should not be subject to criticism in this instance.
I wonder what dear Marcus will do along the A140?
Thanks, Martin.
There’s obviously uncertainty around the Covid loss figures. But I can see many obstacles to Project Restart. If it doesn’t happen, the shortfalls will be at least as great as the figures I’ve used.
I feel very sorry for Stuart Webber!
Not on topic but this opinion piece by Robert Sainty, over at the Pinkun Integrity is in Danger of Flying out the Window, is spot on. I have not agreed with an article about football more in my life.
Agreed – I was going to make a link to Robin’s excellent piece. Thanks
I can’t believe any sane person really thinks all Prem Clubs are the same, or all are rolling in cash. The ‘unlevelling-up’ started I’ve always thought when home clubs kept all receipts from home matches, I think they used to share them 50/50 with the away club.