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Record wage bill, reliance on Premier League TV money and £23m to pay in bonuses: What accounts reveal about Norwich City
Chairman of NCFC Ed Balls, managing director Steve Stone and finance director Ben Dack present the NCFC annual account s briefing. Byline: Sonya Duncan Copyright: Archant 2017 - Credit: Sonya Duncan
Norwich City can expect an “earthquake” in its finances if the club is not able to fight its way back to the Premier League this season.
Football finance expert Kieran Maguire of University of Liverpool. Picture: Kieran Maguire - Credit: Kieran Maguire
The warning comes from a football finance expert after the stark reality of the Canaries’ situation was laid bare in their corporate accounts published on Tuesday.
Sports accounting specialist Kieran Maguire, who teaches on the University of Liverpool’s football MBA course, said failing to reach the summit of English football would see parachute payments stop meaning TV payments would fall from £50.5m in 2016/17 to around £7m in the 2018/19 season.
He said: “Norwich City are coming from a good place financially but the loss of parachute payments will still be an earthquake.
“Around two thirds of their income, about £50m, has come from parachute payments and if they aren’t promoted they will lose that. It will be replaced by Football league TV money but that is about £7m a year.
Former Norwich manager Alex Neil received a "sizeable chunk" of more than £4m paid out in compensation by the club over the 2016/17 financial year. Picture by Paul Chesterton/Focus Images Ltd 18/02/2017 - Credit: Paul Chesterton/Focus Images Ltd
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“The league is without a doubt the most competitive in the world and there is some stiff competition out there with the likes of Wolverhampton Wanderers and Leeds United who have rich owners and teams like Middlesborough who are spending after relegation.”
Fixing the wage bill is key
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Mr Maguire said Norwich’s £55m wage bill for the year to June 30 was the second-highest ever reported in the Championship, with only Queens Park Rangers paying more, during their promotion-winning 2014 campaign.
“Their wage bill last season was probably twice that of the average club in the Championship so to not get into the play-offs is a real blow,” he said. “I would expect that to be beaten by Newcastle United and Aston Villa when they publish their accounts.
“In 2016 Norwich’s average wage in the Premier League was £34,500 per week, last season it was £28,200 – more than twice the average Championship team.”
How do City stack up in the transfer market?
City have received more in transfer fees than they have paid out this year, largely helped by Jacob Murphy’s move to Newcastle for a reported £12m and highly-paid players such as John Ruddy having left the club.
Mr Maguire said a failure to win promotion would significantly restrict the club in the transfer market.
He said: “I think their ability to compete in the transfer market will be seriously restricted unless the owners put money back into the club.
“They are going to have to get the wage bill down, although I would be surprised if it is as high this year.
“They are going to have to cut their cloth accordingly.”
Financial stability
Promotion would come with a cost, however, with up to £23.7m of potential payments to clubs and players highlighted as contingent liabilities in the club’s accounts.
Mr Maguire said for a club of Norwich’s stature these would most likely be based on promotion, although also could be related to appearances and international caps.
Overall Mr Maguire said Norwich had been run well and was one of the better teams financially in the division but would still have to accept the power of its rivals in the transfer market.
He said: “The summer won’t be nice for the directors because they either have to sell off players or have got to underwrite an investment of £20m or £30m to compete.”
However, Mr Maguire pointed to a recent fine handed out to QPR for breaking financial fair play rules, which could reach as high as £58m, which he said may discourage some clubs from overstretching their finances.
Payouts
Norwich City’s accounts highlighted a £712,000 payout to former chief executive Jez Moxey when he left after six months, having already drawn some £417,000 in wages – coming to £6,488 per day.
Total severance payouts hit £4.4m with former manager Alex Neil taking the largest slice. But Mr Maguire said the figure was some way short of the amounts being handed to outgoing managers at other clubs with Roberto Martinez receiving a reported £7m when Everton sacked him in 2016, while Brendan Rodgers and his backroom team received £15m when fired by Liverpool.
Chelsea have spent a reported £70m in 10 years on severance pay.
