The financial issues City face as experts predict £1bn loss for Premier League clubs
PUBLISHED: 10:19 11 June 2020 | UPDATED: 15:13 11 June 2020
PA Wire/PA Images
Premier League clubs are set for a combined loss of £1billion in revenue in their 2019-20 accounts due to the coronavirus pandemic, financial services firm Deloitte has predicted.
The finance experts predict top-flight sides face a permanent loss of £500million, made up of rebates to broadcasters and the loss of matchday revenue from the suspension of competition for three months, but that a further £500m missing off the 2019-20 balance sheets will be deferred and recouped in 2020-21 if the competition is able to complete this season and next.
When the Premier League was suspended Norwich City’s senior staff revealed they were bracing for a loss of expected income of between £18m and £35m, however this was factoring in the risk of the season not being completed.
It’s understood that City are now expecting their loss to be at the lower end of that scale, with the loss in matchday revenue and commercial funds from playing their six remaining home games behind closed doors having been forecast to amount to around £9m.
The Deloitte report also states that clubs are forecast to earn around half of what they normally would in matchday revenue in the 2020-21 season, with that estimate of £350m set to be lost if supporters cannot return to stadiums at any stage of the campaign.
The grim picture is set against the backdrop of clubs posting record revenues for 2018-19, with the Premier League’s combined revenues topping £5billion for the first time.
For the Canaries however there is added uncertainty in predicting how high the pandemic’s financial impact will run, due to the threat of relegation looming large with Daniel Farke’s team bottom of the table and six points from safety.
Dropping down to the Championship brings a drastic drop in income. For example, City’s turnover for 2015-16 was £97.8m but after relegation from the Premier League this dropped to £75.3m the following year, £61.6m for 2017-18 and then £33.7m once parachute payments had stopped in 2018-19.
Clubs relegated after just one season in the Premier League only receive parachute payments for two years, rather than the full three years.
The Canaries had been expecting to make a profit of around £16m for 2019-20, after opting to spend carefully within a self-sustainable model following promotion, budgeting for relegation to ensure long-term financial stability. That was before the pandemic forced football’s suspension on March 13 though.
Other steps taken by the club’s senior staff following the suspension were to agree a one-year deferral of tax payments worth around £18m, to find savings across the business of around £2.5m and to furlough 200 non-playing staff using the government’s Job Retention Scheme to cover 80 percent of wages.
While players did not take wage cuts or deferrals as at some other clubs, City’s squad and senior staff set up a fund worth over £200,000 for work to be carried out by the Community Sports Foundation during the pandemic, such as supporting food banks and producing personal protective equipment (PPE) for care staff.
Premier League players also formed the Players Together fund which was aiming to raise millions for NHS Charities Together, while Norwich players and staff have also been calling older season ticket holders to help combat isolation during lockdown.
The Canaries issued a rebate scheme for season ticket holders and members as spectators will not be able to watch the remaining games of the resumed 2019-20 season.
While this could be worth close to £4m if all rebates were claimed, supporters have also been offered the option of passing on their refund to the Community Sports Foundation - which is budgeting for a loss of £500,000 in expected income - or for the club to put their money towards its youth academy system. Fans have until June 30 to arrange their rebate.
Dan Jones, the head of Deloitte’s sports business group, anticipates that around two-thirds of the Premier League’s combined £500m loss will be rebates to broadcasters, with the remaining third related to matchday revenue.
He said: “We expect the ongoing COVID-19 pandemic to cause significant revenue reduction and operating losses across European football in the current season’s financial results.
“Clubs are having to weather multiple financial impacts, including rebates or deferrals of commercial and broadcast incomes, as well as the loss of match day income and other event-related revenue.
“Football returning - in a safe and sensible way - is clearly important to limiting the financial impact that the pandemic has had.”
The Premier League is due to resume behind closed doors on June 17, with City playing their first match when they host Southampton on Friday, June 19 (6pm), and it remains unclear when it will be safe for big crowds to attend sporting events again - with the 2020-21 season currently expected to start in mid-September.
Deloitte chief Jones said clubs could expect to receive half - at best - of what they would normally gain from matchday revenue in 2020-21.
“Exactly how that half comes to pass is open to a lot of speculation by a lot of people at the moment but it’s an estimate of where we think we might get to,” he added, speaking to the Press Association news agency.
“That assumes some form of phased opening over time but hopefully by the end of next season being back to having full stadia again.
“For 18-19 for the full year we had £680m of Premier League matchday revenue. For 20-21 we have assumed £350m. So if you allow for a bit of inflation you’d be thinking £700m or thereabouts would have been the right number, so we have gone for £350m as an estimate.”