Sunday, October 13, 2024

English football starting to resemble a European super league

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Almost two years ago, a dozen elite football clubs proposed a breakaway European Super League. The objective was to establish one single league competition that would boast a large number of the world’s very best players — and could grab a significant part of the sport’s multibillion-dollar revenues.

The plan failed — victim of a furious revolt by fans and by many of the clubs left outside.

Over the past two weeks, the same goal has been on its way to being accomplished — albeit in a very different form. After an onslaught of spending on new players by its leading clubs, many in the game are now wondering if the English Premier League has become a de facto super league, where superior financial muscle is leaving the rest of European football behind.

During a frantic January transfer window in Europe, English clubs spent €830mn, almost double the previous record. Chelsea alone spent more than all the top-tier clubs in Italy, Spain, Germany and France combined, a sign of the Premier League’s increasing financial dominance over the world’s most popular sport. Of the top 10 biggest spenders in Europe this season, all but one play in England.

The perception in some European leagues that the top English clubs have enjoyed an unfair advantage thanks to years of light-touch regulation was bolstered when the Premier League quietly posted a notice on its website last Monday, accusing Manchester City, the current champions, of more than 100 breaches of the league’s financial rules.

The accusations — the result of a four-year investigation — cover a period of more than a decade, starting soon after the club was bought by a member of the Abu Dhabi royal family in 2008. City, now the wealthiest club in the world, denies any wrongdoing.

For the league, the charges against City illustrate how seriously it takes the idea that clubs should not be allowed to just buy success. But for those who see English football as a haven from financial regulations, the belated action against City together with the lavish January transfer spending appeared to confirm their suspicions.

Javier Tebas, chief of Spain’s La Liga, accused the Premier League of allowing its wealthy club owners — from Middle Eastern petrostates to US private equity billionaires — to weather “barbaric” losses, which put the health of the broader game at risk by driving up costs for everyone else.

“It is quite dangerous that the [transfer] markets are doped, inflated, as has been happening in recent years,” he said. “That can jeopardise the sustainability of European football.” 

Ironically, one of the complaints about the financial strength of the Premier League has come from the architects of the European Super League, who are pointing to the widening gap between English football and everyone else in order to rally support for their revamped plans.

A presentation put to clubs last week by A22 — a sports marketing company that continues to lobby for a breakaway competition — included a slide titled: Premier League has become the Super League.  

Manchester City’s owner Sheikh Mansour bin Zayed Al Nahyan waves to the crowd
Manchester City’s owner Sheikh Mansour bin Zayed Al Nahyan. The club, now the wealthiest in the world, was bought by the Abu Dhabi royal in 2008 © Andrew Yates/AFP

Others outside Europe’s top five leagues see the Premier League as simply the most extreme example of far broader inequalities in football where the biggest clubs get bigger and the rest get smaller.

“The system in European football is broken. It may not be broken in England for the time being, but even there it will lead to something which is unsustainable,” says Dariusz Mioduski, president of Polish team Legia Warsaw. “England is just at the top of the pyramid, and its making the problem most visible, but it’s the same situation in Italy, Spain, France and Germany.”

A thirty-year makeover

English football wasn’t always the glitzy global entertainment spectacle it is today. The 1980s were blighted by fatal events such as the Hillsborough stadium disaster. The response was a major overhaul of infrastructure, bringing in all-seater stadiums just as pay TV was gaining traction.

In 1992, the top clubs then decided to break away from the existing system by forming the Premier League, aided by cash from BSkyB, then Rupert Murdoch’s UK satellite television venture.

Barney Francis, executive vice-president at sports and media company IMG and former managing director of Sky Sports, says rising broadcast revenues stemmed from building better stadiums, recruiting the best managers and players, and creating a “much more exportable product”.

“If you’re a broadcaster in the Far East or Latin America, the Premier League became head and shoulders above everybody else,” he says. “It’s where the big managers are, the best players, it’s where the football is super competitive.”

England’s top division has enjoyed rapid growth outside its home market, with international rights now accounting for more than half its income. Its total income this season is expected to top £6bn for the first time, according to Deloitte, thanks in part to a new multibillion-dollar US TV deal.

Fans are pulled to safety on to the upper tier amid the overcrowding disaster at Hillsborough stadium in 1989
The 1989 disaster at Hillsborough stadium in Sheffield, during which almost 100 people died, prompted a major overhaul of live football infrastructure, bringing in all-seater stadiums © Bob Thomas Sports Photography via Getty Images

That strong financial performance has made Premier League clubs rich. Deloitte’s league table of the 20 wealthiest teams in Europe now includes 11 English clubs, up from seven a decade ago. That in turn has enabled big spending.

Club owners include a Serbian-born media tycoon, a Greek shipping magnate, the Saudi sovereign wealth fund, and several American billionaires, making ownership something of a status symbol for the mega-rich. “Owning shares in IT companies and property in Manhattan is not as sexy as owning a Premier League club,” says Francis.

Without billionaire benefactors, other leagues in Europe have chosen to implement stricter financial standards. The idea is to stop teams living beyond their means in pursuit of glory. In Spain, La Liga’s economic controls require clubs to submit regular updates on their revenue, which the league then uses to calculate pre-determined spending limits.

Last summer, those rules briefly barred FC Barcelona from registering new signings, before the Catalan club used asset sales to boost its balance sheet. The league has since tweaked its controls to make that harder to do.

In Germany, ownership of clubs is guarded by the so-called 50+1 rule, which prevents outside investors from acquiring controlling stakes in most teams, leaving clubs to rely on their own income to fund themselves. The Bundesliga says these rules help protect German football from “reckless owners”.

Italy and France do not have such tight rules on ownership, and have attracted investment from US billionaires, sovereign wealth funds and Chinese conglomerates. But those two leagues also have the lowest broadcast revenues of Europe’s top five leagues, leaving most teams in both countries a long way behind English clubs. Only one French team and three Italian clubs make it into the top 30 clubs by revenue, according to Deloitte.  

As a result, many of the game’s superstars gravitate towards English clubs. “It’s the same as any industry — the way you attract talent is by offering generous compensation. The Premier League just happens to have the most money,” says Jake Cohen, sports lawyer at Mackrell Solicitors. “I don’t see that changing.”

A Covid revenue shock

While the financial disparity between the Premier League and the rest of football has been growing for years, Covid-19 added rocket fuel. The onset of the pandemic put a sudden stop to football across Europe, and left many clubs exposed to a dangerous revenue shock. With stadiums closed and some broadcast deals in limbo, many clubs scrambled for cash to keep the lights on.

The Spanish and French leagues turned to private equity, with both taking a cash infusion in separate deals with CVC Partners in return for a future share of broadcast rights. Italy and Germany both explored doing the same, but ultimately opted against. Uefa estimates Covid resulted in losses of €7bn across European football.

Thanks to its far larger broadcast deals and wealthy team owners, the Premier League was better placed to ride the Covid wave, with clubs in the division making an average profit of €25mn in 2021, according to Uefa, while most teams in Europe reported losses.

But for those further down England’s football pyramid, Covid proved a far more serious blow. The race to get into the Premier League is so competitive that the finances of many clubs just one division below have become increasingly perilous.

The average wage to revenue ratio of teams in the second tier reached 125 per cent in the 2020-21 season, according to Deloitte. While Covid exacerbated the problem, teams in the league had spent more on wages than they generated in income for the previous three seasons.

Rick Parry was the first chief executive of the Premier League after helping to orchestrate its formation in 1992. But now, as chair of the English Football League — the body representing the country’s lower leagues — he warns that the gulf between the Premier League and the rest of football is widening.

“Now is the time for a reset and a proper rethink,” he said. “There’s huge amounts of money flowing in at the top, it’s not flowing downwards.”

The EFL argues that the “root cause” of “boom and bust” in football is the “enormous wealth inequality” between its clubs and the Premier League. The price of standing still — never mind reaching the top flight — is that owners cover the losses that arise from wages exceeding revenues. When the money dries up, clubs are at risk of collapse.

Accounts for the Premier League show that revenue was £45.7mn in fiscal 1993, versus £34mn for the EFL. The Premier League’s accounts for the year ended July 2021 showed revenues of nearly £3.2bn. The EFL? £189mn.

The EFL says the solution is for the two leagues to “pool” their TV rights to sell them together and agree on a 75:25 split and recalibrate prize money based on league position to narrow the gap between the top of the Championship and the bottom of the top flight.

The Premier League says it is on course to contribute £1.6bn to the rest of English football across the three seasons to 2024-25.

Despite pressure to find a solution from the UK government, which is set to establish an independent regulator for the game, the EFL says talks with the Premier League are at an early stage.

“There is clearly an issue there around redistribution where the game is struggling to get to a point where it’s agreed a solution among itself,” says sports consultant Dan Jones. “If the game really can’t sort itself out then the regulator will dictate to them.”

Success breeds success

When faced with accusations of fostering unfairness elsewhere in football, the Premier League can point to its huge commercial success — which it says has been built on years of investment in stadium infrastructure, a savvy approach to media rights and a commitment to keeping the league exciting.

In the past 10 years, five different teams have won the English titles: in Germany, by contrast, Bayern Munich is gunning for its 11th championship in a row. Broadcast revenues are more evenly split among teams in the Premier League than any other division in Europe.

English clubs also argue that the claims about their growing dominance are not borne out by the results in pan-continental competitions.

In the past decade, Premier League teams have won the Champions League twice — the same number of European titles as Bayern Munich. Meanwhile Real Madrid have won it five times. Over the same period, English sides have won the Europa League three times, one fewer than Spain’s Sevilla.

A list of the biggest transfers in football history also highlights the enduring might of some of Europe’s biggest teams. The most expensive player in history, Brazilian forward Neymar, joined Qatari-owned Paris Saint-Germain for €222mn back in the summer of 2017. Chelsea’s £107mn move for Enzo Fernández last month, a record in England, only just makes the top five.

PSG also has the highest wage bill in football, spending €729mn last season on star players such as Lionel Messi, according to Football Benchmark, while Real Madrid sits second with €519mn.  Late last year, Uefa reached settlements with eight clubs for failing to meet certain financial requirements — none of them was from the Premier League.

January’s enormous transfer spending was buoyed by Chelsea’s desire to rapidly revamp its playing squad, and is not likely to be matched in future windows.

This summer, the flow of money in the transfer market is likely to depend on potential moves for a handful of top stars, including Kylian Mbappé and Jude Bellingham — neither of whom currently play in England. Should one or both of them move to Spain, the pendulum of spending between leagues could swing back to Europe quickly.

Chelsea’s Enzo Fernández kicking the ball
Chelsea’s Enzo Fernández during the team’s recent clash with Fulham. Fernández’s £107mn move to Chelsea was a record in England, but only just makes the top five for Europe © Kirsty Wigglesworth/AP

The biggest potential threat to the financial firepower of English clubs could come from regulation at home. The Premier League’s move against Manchester City last week served as a sharp reminder that leagues and governing bodies have the power to step in where they see foul play.

City has been referred to an independent commission, which will have the power to deduct points, impose fines or expel it from the league if it is found guilty.

However, the Premier League’s decision came after a four-year probe, and many expect the expensive legal battle between football’s richest league and its wealthiest club to drag on, perhaps for years.

The club has fought some of these allegations before against Uefa, which banned City from competing in the Champions League for two years — a decision that was overturned months later by the Court of Arbitration for Sport.

English football is awaiting the establishment of its own independent regulator, with the UK government due to publish a white paper outlining its scope this month. The move is a direct response to the European Super League but also a recognition that the status quo has left parts of the game at risk.

Other leagues are also taking action. Last month the Italian football federation docked Juventus 15 points after accusing the 36-time champions of false accounting practices.

And on the horizon is a tightening of spending rules for clubs competing in pan-European competitions. Uefa’s so-called financial sustainability regulations will cap spending on the playing squad at 90 per cent of club income from next season, but that number is due to drop to 70 per cent over the next two years.

Some legal experts believe that ultimately it will fall on governing bodies to try to level the playing field.

“Uefa has the means there to try to create a more stable environment in football,” said Carlos Hurtado, sports lawyer at Baker McKenzie. “If you have strong governance and financial controls, you’re creating the perfect environment for the sport to develop, investors to come in and create more value for the business. When you do that you’re going to have more competitive football.”

Data visualisation by Dan Clark

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