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Clubs tightening financial belts

Scottish football demands better TV deal as squeeze goes on

CelticScotland’s top football clubs have learned the harsh lessons of financial engineering but are seeing their ambitions squeezed by weak sources of income, according to the latest research.

Only one Premiership club is able to make a profit and all struggle to maintain a good flow of revenue. They are frustrated by the poor television deals compared to England and three-quarters have seen corporate entertaining fall in the last year.

The survey reveals that one club is up for sale and that all Premiership clubs have cut their transfer budgets. They have expressed a preference for Summer football as a potential means of increasing income.

The figures are revealed in accountancy firm BDO’s annual survey of football finance directors, entitled Investing for Success: football finances and commercial growth. 

Clubs have rejected living off advances on season ticket sales, media income or money received from player transfer receivables. These actions are broadly in line with clubs across the UK which have learnt the harsh lessons of selling off future income to fund current liabilities.

Yet profitability still seems difficult to attain in Scotland with just one club stating that they would make a profit after player trading and depreciation. Income streams remain subdued with a mixed picture across Scottish Premiership football.

The clubs were fairly evenly divided between those which have experienced reduced takings from match tickets, catering, season tickets and sponsorship and those who stated that all of these income streams have improved over the year. Three quarters of clubs stated that corporate entertaining has gone down over the last year.

One unidentified Scottish Premiership club said its owner is considering selling within the next 12-18 months and has been approached by external investors with a view to taking a stake in the club.

Generally, however, clubs are more optimistic about the forthcoming season with the majority believing that revenue will increase in 2015/16. The biggest concerns for Scottish clubs in the coming season are falling attendances due to the state of the economy and inflexible players’ salaries.

Charles Barnett, professional sports group partner at BDO, said: “It is clear that the financial lessons of the last decade which saw several Scottish football clubs go into administration have been learnt.

“There is a much greater understanding and will to ensure financially security in the years to come. Clubs know they cannot borrow now to fund future success and have responded accordingly. They are also much more aware of the need to develop new sources of income where possible.”

One potential source of new income derives from Scottish club’s desire to play in the summer. The BDO survey found that all of the Scottish clubs who responded said they were in favour of summer football whereas the response in England ranged from 12% in the Championship to 27% in League One. In Scotland there was a feeling that summer football was favoured because of  the more extreme weather conditions as well as producing the potential for some much needed additional funds from TV and gate receipts.

Mr Barnett said: “The appetite for summer football in Scotland is apparent even accepting the relatively small number of Scottish Premiership clubs who responded to the survey.

“Not only might the quality of football improve on better playing conditions but the clubs who generally have to participate in the qualifying rounds for the Europa League and Champions League might also benefit from squads that are better prepared for these earlier rounds. In England, the feeling is clear that there is not sufficient financial incentive to justify disrupting the current football schedule.”

A further sign of financial probity is indicated by the clauses in players’ contracts which stipulate that their wages will be cut if the club is relegated. In Scotland 75% of clubs stated that 20-50% of players will have wage cuts if the club is demoted with the level of these cuts up to 40%.

All Scottish clubs stated that their first team squad will be the same or smaller in size in the coming season but half state that their player payroll with be higher. Three quarters state that they will be decreasing their transfer budget in the coming season.

Mr Barnett added: “We can see that clubs now fully understand the need to be financially responsible and have responded to the current economic climate by spending more prudently and ensuring they are not accumulating large debts off the pitch for the sake of short term success on the pitch.

“Whilst many fans may be annoyed or upset to find clubs limiting their spending on players and reducing their transfer budgets it is a harsh reality that clubs have had to learn the hard way. Cash can’t be spent on Scottish football that Scottish football doesn’t have. There is little point in looking south of the border at the media riches being dispensed.

“However, it is worth revisiting the issue of the disproportionately low fee that Scottish football gets for its TV rights. Simple arithmetic indicates that if Sky and BT are happy to pay £1.712bn a year for English football the comparable figure for Scotland should be £142m (Scotland has 8.3% of the population of the UK). To be getting just over one tenth of that at £15m a year needs to be reviewed.

“Equally the BBC gives just £1m a year to Scotland’s football clubs against £66m for its Match of the Day highlights. These figures are only exacerbating the gap between English and Scottish football and should be examined in more detail by the appropriate authorities.”

He concluded: “However, as long as Scottish football doesn’t have that media funded financial safety net it must be creative in maximising existing income whilst generating new income streams. I think it may be frustrating in the short term for fans but in the long term Scottish football will be creating a viable and vital game which will be sustainable in the long term.”

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