UEFA have revealed a staggering level of debt amongst it’s member clubs ahead of the introduction of Financial Fair Play.
The survey across 650 clubs in 53 member nations shows that football clubs had a combined audited debt of €1,641,000,000 at the end of 2010!
That figure represents a 36% rise over 12 months with 29% of the clubs spending €12 for every €10 brought in working on a catch-line from a former SPL chairman.
The full UEFA report runs to 124 pages and will be published next month but in a summary on their own website a stark warning is given that the risk of ‘insolvency and bankruptcy is much higher than in the top divisions.’
Despite income continuing to grow the UEFA report states that: “various signs of financial distress are also identified, with the increase in revenues accompanied by record aggregate net losses of €1,641,000,000 – i.e. an increase of 36% on the previous financial year ending 2009.
“As so often is the case, the devil is in the detail, and deep analysis of the parts of financial statements to which people rarely venture concludes that the rise in losses was almost exclusively due to reduced transfer profits arising from a slowdown in transfer activity in 2010, as opposed to an increase in underlying operating losses.
“For the first time in a number of years, the ratio of employee costs to revenues (a commonly used football club key performance indicator) stabilised at 64%.
“While the underlying result was therefore similar to 2009 and many clubs reported good financial results, the fact remains that half of the top European clubs reported losses, and, of more concern, 29% of clubs reported significant losses equivalent to spending €12 for every €10 in income.
“Indeed, the proportion of clubs reporting losses climbs to 75% when only the largest clubs (those with annual revenue of more than €50m) are taken into account.
“To counter-balance some of the bad news with better news, the report also finds that clubs have survived the combined €4bn losses in the last five years due to owner and benefactor capital injections totalling €3.4bn.
“While the tough economic climate is clearly providing challenges for clubs across Europe, only two of the largest 20 top divisions broke even.
“The situation is even worse down the football pyramid, where the risk of insolvency and bankruptcy is much higher than in the top divisions. In this context, the report reflects, the phased implementation of the new UEFA Club Licensing and Financial Fair Play Regulations is aimed at encouraging clubs to better manage their finances and cash flows, and achieve a sustainable balance between income, spending and investment.
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