Football’s Debt Crisis is Creeping Upwards
The interaction between revenue and wage bills is a frequent source of interest for football analysts. However, the idea that a club can afford to pay their players in huge amounts as long as they produce enough of a return in merchandising is a bit of a flawed one. Even clubs with seemingly endless reserves of cash, like Manchester City and PSG, have fallen foul of Financial Fair Play (FFP) rules due to massive losses.
FFP is, admittedly, unfit for purpose in 2021 but its goal to prevent football spiraling into an eternity of debt and unpaid wage bills is an important and necessary one. After PSG signed Lionel Messi, the I suggested that anybody who believed that the French side could make six world-class signings, including Italy’s Euro 2020 hero Gianluigi Donnarumma, and still have a semblance of control over their finances, was deluded.
Modern football – and sport, in general – has a reckless relationship with debt. Clubs backed by the super-rich, a group that increasingly includes American celebrities as well as world businesspeople, can quite happily write off an entire season’s losses to transfer fees and the construction of new facilities. However, this is precisely how Man City and PSG upset the FFP enforcers. The numbers just didn’t add up.
There’s a correlation between larger clubs spending money and smaller ones falling into debt, simply because the onus is then on the latter to somehow keep up with their richer, more successful peers. Around half of the UK’s EFL teams are now in a perilous financial situation, with Bury and Macclesfield’s recent fight to simply exist serving as a prominent reminder of this burden.
The scourge of financial mismanagement has a knack for creeping upwards. In Europe, Real Madrid, Juventus, Lille, Inter Milan, and even mighty Barça have almost ripped themselves apart trying to maintain or reproduce previous successes. The Catalan giants are more than a billion Euros in the red. Messi couldn’t have remained at the club even if he’d paid his own £1.13m/week wages.
<iframe src=https://www.facebook.com/plugins/post.php?href=https://www.facebook.com/photo.php?fbid=398030648355198&set=a.289417819216482&type=3&show_text=true&width=500 width=500 height=333 style=border:none;overflow:hidden scrolling=no frameborder=0 allowTransparency= allow=autoplay; clipboard-write; encrypted-media; picture-in-picture; web-share allowFullScreen=true></iframe>
Similarly, Lille won Ligue 1 last season but Les Dogues are now up to their floppy ears in debt. Various reports claim figures of up to €200m. Placing a bet on football at Space Casino reveals that the team’s odds for a repeat of their famous win are +2000 – good news for anybody who expects Lille to defend their crown but nevertheless indicative of their rapidly fading fortunes.
Football seems to be facing a crisis. Success and large foreign investments have created a landscape in which clubs can operate ignorant of debt and outside of restrictions placed by FFP regulations. While the FFP rulebook is going to be torn up and rewritten for the super-rich era, it remains to be seen if any of the above clubs’ fortunes can be reversed.
There are some obvious extenuating circumstances at the beginning of the new decade but Barça’s slide began in 2018 after it posted a record-breaking revenue figure now equal to its current debt.