English football clubs heading for “financial nightmare” in pursuit of Premier League riches
English football clubs are risking ruin in a bid to reach the Premier League’s riches, according to a new report by financial analysts.
The analysis found that 18 of 19 clubs who were promoted to the top tier between the 2008/09 and 2015/16 seasons made a loss during their promotion season.
And playing in the Premier League was no insurance against future financial difficulties, according to analysts Vysyble, as just one in four were making a profit after four years while the majority were dumped back out of the league having over-spent in order to compete with England’s biggest clubs.
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The findings concur with a diagnosis made in Deloitte’s annual review of football finance which reported that in the 2015/16 season Championship clubs spent more on wages than they generated for the third time in four seasons.
“Clubs that financially overexert themselves to survive in the Premier League usually struggle to survive in the longer-term and incur significant damage to balance sheets as they suffer economic exhaustion,” said the Vysyble report’s co-author Roger Bell.
“This then renders any parachute payment ineffective and usually brings with it a prolonged tenure in the Championship or below. Therefore, staying in the Premier League is not a ‘wealth creation’ scheme, or a solution to a club’s financial woes.
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“English Football League clubs who spend beyond their means are, in fact, risking their futures by chasing a dream that is just that – a dream, and one that is actually more likely to end up as a financial nightmare.”
The Football League introduced financial fair play rules in 2012, limiting how much a club can loss can lose each season without punishment, while TV money and Premier League parachute payments have increased.
“Reports of this nature inflame the position and confuse the reality of the situation for supporters,” said an EFL spokesperson in response to the report.