Economics and Challenges: Financial Sustainability of Lower League Football
BURY, ENGLAND - A general view inside the stadium prior to the Pre-Season Friendly match between Bury FC and Bradford City at Gigg Lane on July 08, 2023 in Bury, England.
Premier League clubs and Championship clubs have always been more secure than the lower league clubs. Premier League clubs have the TV deal in addition to the numerous sponsors and matchday revenue to fill their coffers. Championship clubs are not as rich as the Premier League clubs but the recently relegated clubs get Parachute payments to keep them afloat.
The difference is stark when it comes to financial security between the bottom two leagues and the top two leagues of the Football League. How do the lower league teams survive?
The Financial Divide: Premier League vs Lower Leagues
While the Premier League clubs are minting money left, right, and centre, fewer than 20% of the clubs in the other three leagues describe their finances as “Stable” or “Healthy”.
The instability in the financial department led to the collapse of Bury FC, an unfortunate club that had just won promotion to League One but issues off the field meant that the club was given a winding-up order.
Blackpool, Bolton Wanderers, and Notts County have all flirted with liquidation only to get saved at the last minute. Sometimes these clubs spend beyond their means and then end up in trouble if they do not get the desired end result.
The Premier League revenue currently stands at £5.5bn, Championship revenue is around £700m, and on the other hand League One and Two have a combined revenue of around £300m. The urge to get their hands on the revenue of the leagues above makes some of the lower league clubs spend beyond their means and thus end up in administration or financial trouble.
The Questionable Ownership and Its Repercussions
EFL has apparently given up on doing the fit and proper test for ownership in the recent past. That is why some clubs get owned by people or companies who are not capable enough to run them.
Steve Dale is one such example as he bought Bury for £1 when they were already facing financial difficulties and thought he could turn the fortune around only to realise later that the task is beyond his capability and he bit more than he could chew. Bury became defunct as a result.
Reading Football Club is currently going through a crisis and its owner Dai Yongge is at the centre of it. Football finance expert Kieran Maguire has described the ownership as a “Car crash”.
Dai Yongge failed to pay the wages of staff and players on time which resulted in a 6-point deduction. That deduction meant Reading was relegated to League One last season and that would mean owners will take another hit to the finances of the club considering the revenue will be far less in League One.
The irony of the point deduction is not lost as Reading would have survived the drop had Dai paid the staff and players on time. Without the 6-point deduction, Reading would still be in the Championship. To compound the matter even further, Reading faced another points deduction even before the start of the season because of non-payment of taxes. Talk about dragging the club into the mud.
Proposed Solutions for Financial Sustainability
Premier League clubs have discussed a plan to change the way how cash gets distributed in the lower leagues. The relegated clubs from the Premier League get £44m in parachute payments to keep those clubs in a healthy position when they drop down.
The proposal would see the cash being distributed to the other championship clubs as well. The relegated clubs would get fewer payments in the future. The basic idea of this proposal is to make sure other championship and lower league clubs do not spend beyond their means just to try and get some hands on the lucrative Premier League and Championship revenue.
While the ideas are still in the proposal stages, Premier Clubs have also been threatened to release millions of pounds per year to the lower league or face the prospect of being forced by legislation.
One thing is for sure, without the help of Premier League clubs chances are high that lower league clubs will face administration due to a lack of financial sustainability. Premier League and EFL bodies need to find a resolution to keep the heritage of English Football alive.
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