Bury Football Club was expelled from League One of the English Football League on August 27 2019. This expulsion resulted from the club’s financial troubles- massive overspending that had led to unpaid debts- and a failed takeover bid by C&N Sporting Risk. The club was founded in April 1885, won the FA Cup in 1900 and 1903, and is held in high regard by locals who are keen to resuscitate the club. The Shakers may yet re-emerge as attempts to revive the club continue. Given the high financial stakes, it is surprising how the majority of top-flight British football (soccer) clubs continue to survive in such a challenging economic climate.
The major football leagues in Europe are dominated by a few elite clubs, based in major cities, which have priced out all potential competitors. Top players command astronomical transfer fees on a global market, often closely approaching the GDPs of the poorest countries of the world. A mismatch between the demand for and the supply of star players has meant that football agents can secure lucrative contracts for their clients and become wealthy in the process. These players are supposed to increase the chances of success on the field, along with a decent haul of silverware.
Increased television coverage and higher sales of merchandise may partly justify the high levels of financial investment in elite football. High wages require continued investment in the various revenue streams of clubs. The income of these clubs is derived from broadcasting rights, sponsorship deals, merchandising, match day revenues, transfer fees, and non-sporting income that is obtained by renting out stadium facilities and hosting club tours. Sponsorship deals are the most visible of the revenue streams, with sponsors providing their logos to football kits, shirts and stadium advertising.
There appears to have been little visible attempt at cost containment in the world of football in recent years. The in-season £20 maximum wage cap was abolished as far back as 1961 in response to a threatened strike. Since then, the rate of wage-inflation of players’ fees has risen to as much as 165 per cent. Add to this a shortening transfer window and a bidding war for a few players in high demand, and it s easy to understand how top players can command such unbelievably high transfer fees.
There is at present no statutory salary cap in UK football, although the English Football League introduced Financial Fair Play rules in 2013, restricting spending on wages to each club’s turnover. To ensure the continued funding of high-level football, more and more foreign owners, with deep-lined pockets and undocumented sources of wealth, have been buying up prestigious English Premier League clubs. The costs of investing in infrastructure and players mean that most clubs can only just break even Some of these acquisitions appear to be nothing more than prestige or vanity projects for the new owners-with one or two notable exceptions.
The current financing model in top-level football is unsustainable. There is only so much money that continued foreign investment, TV companies and supporters’ loyalties can provide. Bury FC might only be an early example of rising debt leading to the demise of a football club. Every other financial bubble in recent history has been preceded by asset price over-inflation over varying periods of time. The only thing that remains unclear is when exactly the football bubble is likely to burst.
Ashis Banerjee (watches football from a sofa)