Post by Macmoish on Aug 31, 2010 6:41:46 GMT
Digger/Matt Scott - The Guardian
Championship clubs hit by drop in summer transfer income
• Reduction in player sales causes £52m year-on-year deficit
• Figures show that League One also has much to fear
Championship clubs are facing a net year‑on‑year drop of up to £52m in their transfer income as the summer window closes at 6pm today.
The figures have been laid bare in analysis by Grant Thornton's forensic and investigation services partner, Geoff Mesher, in his Football Transfer Tracker. During the 2009 summer transfer window Championship clubs' gross expenditure on new players was £41m. Against that were the £102m of receipts from player sales, ensuring second-tier clubs were together £61m better off as a result of their transfer activity.
Mesher's figures for this year – taken at close of business on Friday, with four days' possible transfer trading still to be done – show a picture that is starkly different from 12 months ago.
A more frugal approach to this year's transfer market has seen Championship clubs spending £21m – about half the previous year's total – but the savings have been offset by a collapse in transfer income to £30m. The slide from £61m net transfer income last summer to £9m could have a devastating effect on the delicate financial ecosystem in the Football League.
Unlike those in the uppermost tier of the football pyramid, whose turnovers exceed £300m a year, the gross annual incomes of those Championship clubs not benefiting from Premier League parachute payments have tended to be around £10m. The Premier League's solidarity package, which ensures a £2.2m windfall for every Championship club, will this year have an effect on that £10m benchmark but the £50m cash black hole is set to be equivalent to stripping out the entire annual revenues of four or five Championship clubs.
The figures suggest that the principal cause of the falling incomes is a more thrifty approach from top-flight clubs. Whereas last year the Premier League collectively spent £449m, by last Friday afternoon there had been £258m committed.
With Premier League clubs each benefiting from an uplift of £20m – up to 66% – in broadcast revenues as against last season, the news that transfer spending has been cut in half is unexpected. But Mesher believes this is due to clubs favouring investment in wages to capital expenditure.
"To look at the revenues alone is to lose focus on the expenditure side of the business," said Mesher. "With the top-line increase in broadcast rights clubs also have a cost increase in player wages to attract players to keep them in the division or to get them in the Champions League. These are the associated costs and in the last few years the cost in player-wages has outstripped revenues. It is why clubs are being more careful in terms of what is spent."
There is another possible cause: a withdrawal of bank finance. Not only have macroeconomic circumstances led to lenders being more judicious in their support for football clubs but the HM Revenue & Customs challenge to the football-creditors rule will also make them more circumspect.
Whereas player-sale contracts are guaranteed income – since even in the event of insolvency debtor clubs must pay 100p in the pound on their debts to football creditors – the rule risks being ripped up by the courts in the coming months.
And it is not only the Championship that is set to suffer. The figures show that League One also has much to fear. The £1m spent in that division was far outweighed by £6m recouped from transfers. But when that apparently healthy picture is set against last year's performance, when transfer activity led to £12m in net income, it is clear there is a deteriorating landscape for all lower-league clubs.
"With Premier League squad rules insisting on a minimum of eight home-grown players you might have expected more domestic transfer activity," said Mesher. "If they had the desired effect you would see more of a trickle down to the lower leagues but that hasn't happened this time. Without the first bit of expenditure from the Premier League to the Championship there is no trickle down. The problem is, these clubs budget for this income to survive."
The Football League chairman, Greg Clarke, has repeatedly stressed the importance of fiscal prudence for his League's clubs and his dark prophesies could soon become a reality. "These figures make for interesting reading," a Football League spokesman said. "We are always looking at ways to help clubs control their costs in a challenging economic environment."
....
Sullivan's shrewd dealings
David Sullivan and his co-chairman at West Ham United, David Gold, have increased their stakes in the club by more than 5% each over the past month, as revealed by this column last week.
Sullivan must be a happy man. In building his stake to 30.6% from the 25% he had held since the former Birmingham City owners' part takeover of the Upton Park club, Sullivan has spent only a little over £2m. That is a lot of money to you and me, but not Sullivan.
In the latest stake-building exercise the 61-year-old has not spent even half of the £4.165m he received for the 4.9% of the club's shares he sold to Bjorgolfur Gudmundsson in November 2006.
www.guardian.co.uk/football/2010/aug/31/championship-transfer-window-income
Championship clubs hit by drop in summer transfer income
• Reduction in player sales causes £52m year-on-year deficit
• Figures show that League One also has much to fear
Championship clubs are facing a net year‑on‑year drop of up to £52m in their transfer income as the summer window closes at 6pm today.
The figures have been laid bare in analysis by Grant Thornton's forensic and investigation services partner, Geoff Mesher, in his Football Transfer Tracker. During the 2009 summer transfer window Championship clubs' gross expenditure on new players was £41m. Against that were the £102m of receipts from player sales, ensuring second-tier clubs were together £61m better off as a result of their transfer activity.
Mesher's figures for this year – taken at close of business on Friday, with four days' possible transfer trading still to be done – show a picture that is starkly different from 12 months ago.
A more frugal approach to this year's transfer market has seen Championship clubs spending £21m – about half the previous year's total – but the savings have been offset by a collapse in transfer income to £30m. The slide from £61m net transfer income last summer to £9m could have a devastating effect on the delicate financial ecosystem in the Football League.
Unlike those in the uppermost tier of the football pyramid, whose turnovers exceed £300m a year, the gross annual incomes of those Championship clubs not benefiting from Premier League parachute payments have tended to be around £10m. The Premier League's solidarity package, which ensures a £2.2m windfall for every Championship club, will this year have an effect on that £10m benchmark but the £50m cash black hole is set to be equivalent to stripping out the entire annual revenues of four or five Championship clubs.
The figures suggest that the principal cause of the falling incomes is a more thrifty approach from top-flight clubs. Whereas last year the Premier League collectively spent £449m, by last Friday afternoon there had been £258m committed.
With Premier League clubs each benefiting from an uplift of £20m – up to 66% – in broadcast revenues as against last season, the news that transfer spending has been cut in half is unexpected. But Mesher believes this is due to clubs favouring investment in wages to capital expenditure.
"To look at the revenues alone is to lose focus on the expenditure side of the business," said Mesher. "With the top-line increase in broadcast rights clubs also have a cost increase in player wages to attract players to keep them in the division or to get them in the Champions League. These are the associated costs and in the last few years the cost in player-wages has outstripped revenues. It is why clubs are being more careful in terms of what is spent."
There is another possible cause: a withdrawal of bank finance. Not only have macroeconomic circumstances led to lenders being more judicious in their support for football clubs but the HM Revenue & Customs challenge to the football-creditors rule will also make them more circumspect.
Whereas player-sale contracts are guaranteed income – since even in the event of insolvency debtor clubs must pay 100p in the pound on their debts to football creditors – the rule risks being ripped up by the courts in the coming months.
And it is not only the Championship that is set to suffer. The figures show that League One also has much to fear. The £1m spent in that division was far outweighed by £6m recouped from transfers. But when that apparently healthy picture is set against last year's performance, when transfer activity led to £12m in net income, it is clear there is a deteriorating landscape for all lower-league clubs.
"With Premier League squad rules insisting on a minimum of eight home-grown players you might have expected more domestic transfer activity," said Mesher. "If they had the desired effect you would see more of a trickle down to the lower leagues but that hasn't happened this time. Without the first bit of expenditure from the Premier League to the Championship there is no trickle down. The problem is, these clubs budget for this income to survive."
The Football League chairman, Greg Clarke, has repeatedly stressed the importance of fiscal prudence for his League's clubs and his dark prophesies could soon become a reality. "These figures make for interesting reading," a Football League spokesman said. "We are always looking at ways to help clubs control their costs in a challenging economic environment."
....
Sullivan's shrewd dealings
David Sullivan and his co-chairman at West Ham United, David Gold, have increased their stakes in the club by more than 5% each over the past month, as revealed by this column last week.
Sullivan must be a happy man. In building his stake to 30.6% from the 25% he had held since the former Birmingham City owners' part takeover of the Upton Park club, Sullivan has spent only a little over £2m. That is a lot of money to you and me, but not Sullivan.
In the latest stake-building exercise the 61-year-old has not spent even half of the £4.165m he received for the 4.9% of the club's shares he sold to Bjorgolfur Gudmundsson in November 2006.
www.guardian.co.uk/football/2010/aug/31/championship-transfer-window-income