Investor interest in UK football clubs remains high despite financial losses, BDO says

Over half (59%) of professional English football clubs reported that they received formal or informal investment enquiries in the last year, despite 90% of clubs in the top two leagues reporting financial losses for the 22/23 season, BDO revealed.

The firm’s latest Football Investment Survey found that only three Premier League clubs and one Championship club reported a profit before tax in the 22/23 season, a decline compared to the prior year. 

However, when asked in a survey about the state of their club’s finances, half (50%) of respondents from Premier League clubs and a third (33%) from Championship clubs said their finances were “very healthy”.

The report’s authors concluded that club owners in the top four English leagues are favouring financial sustainability over profitability, and prioritising player spend in order to gain a competitive edge. This is encouraged, in part, by the Profitability and Sustainability (P&S) rules which allow significant operating losses.

The report also identified that the business models operated by clubs tend to reflect their position in the football hierarchy. While the richest clubs seek to maximise spending on players within the allowable loss parameters, clubs with fewer available resources will seek to balance player trading for financial reasons with remaining competitive.

Despite many clubs being loss-making, institutional investors, particularly from the US, are seeing opportunities to achieve a return on their investment via two main routes. 

The first is to invest in a lower league club with a view to exiting once the club achieves promotion to higher leagues. The second is to take a stake in an established Premier League club and optimise commercial opportunities. Either way, institutional investors are highly likely to be entering into football club ownership with a clear exit strategy.

One of the report’s more surprising findings is that Premier League players are not overpaid in the context of their club’s revenues. While three clubs (Leicester City, Nottingham Forest and Everton) did pay a relatively high level of wages in proportion to revenues in the 22/23 season (all over 80%), many Premier League clubs spent much more modestly with Arsenal, Manchester United and Tottenham Hotspur all among those with the lowest wage to revenue ratios of below 50%. 

In contrast, the report found that Championship players are taking home a disproportionate percentage of their club’s revenues, with a staggering 55% of clubs paying more in wages than they receive in revenue.

Ian Clayden, head of professional sports at BDO, said: “It’s clear that football clubs are not run for profit like typical businesses. For perfectly rational reasons, owners seem to accept that football club finance is more about sustainability than profitability and that investment in players is of paramount importance if you want to be competitive.

“Despite the lack of profitability, investors are still queueing up to invest in English football clubs, lured in part by the promise of the exit opportunities that come from promotion to the Premier League.”

Clayden added: “While there remains a gulf between the Big 6 clubs and the rest, our analysis suggests that clubs that make smart investment decisions have the potential to eventually trade places with the super-rich clubs which can sometimes make decisions that don’t always give the desired levels of return on investment.”