Financial challenges aplenty

Thursday, 6 August 2020, 8:55
5 mins read

The life of a Swansea City fan is never easy.   For all of us we have had to see many ups and downs in our time supporting the club and for many of us in a very short space of time we have seen matches to stay in the football league right through to winning trophies and competing in Europe.  But it’s a different battle now and one that will be interesting to see how we come through.

The job of balancing the books at any football club cannot be an easy one.  The higher up the ladder you go (in terms of league positions) the more 000s you see on your balance sheet and – for a very large majority of clubs – it is almost certain that on a cashflow basis the amount of money exiting the bank account exceeds the amount of money coming in.

The biggest part of your income arrives in a couple of instalments and there is often a line of people queuing at your door with new contracts or requests to move on and, unless you have reached the very top division, you find that sponsors become more local than global and budgets accordingly become much lower.

And in the main, players and agents control the finances of a football club rather than the other way around.  Throw in the biggest global pandemic that any of us have experienced and you have the challenges that face Trevor Birch and his team right at this moment in time.

All week on Planet Swans we have been looking at the impact of Covid-19 on football through transfers, Leagues One and Two and then the Championship but it is now time to cast our eyes on Swansea City – our club.  How will we come out of the pandemic given the pressures that already existed financially at the club?

It is fair to say that if nobody appreciated the financial implications of relegation from the Premier League then we certainly do now.  In the two years since we fell back into the Championship then we have had to see some high profile departures from the Premier League squad and the likes of Dan James and Ollie McBurnie last summer.  This time around it was almost certain to be Joe Rodon, Mike van der Hoorn and possibly Andre Ayew to follow you can see without any inside information just what a financial challenge we were facing.

Fast forward to the spring of 2020 and a global pandemic and you find your income streams severely hampered by the postponement of games, the return of football behind closed doors, season ticket income effectively stopped and your retail outlets remaining closed.  Crisis may be a strong word to describe it as but it has certainly got far more serious than any of us could have predicted in January.

I am firmly of the belief that Joe Rodon was going to have to have been sold this summer even before the pandemic took hold.  I am no accounting expert but with our income hugely reduced, parachute payments reducing season by season and the wage bill still holding some Premier League wages creating a sustainable football club was top of the agenda, maintaining it was the second item.

The sale of Rodon would probably have come close to balancing the books when you factored in the cuts that the club were making elsewhere.  The academy status of the club would have been a tricky one.   Without the players coming through the academy the last two years would have been far trickier but could we afford to maintain the status had to be balanced against could we afford not to?  You start to see why the work feels an impossible task.

The question now is how do you estimate the financial impact of Covid-19 on the club.  We played four games behind closed doors at the end of last season and I would best guess now that we won’t open the doors to the Liberty until January (even on a capacity reduced basis)   If we use last season’s fixtures as a gauge that was 13 games before January, maybe a couple less this time around due to the later start of the season.  So maybe 15 games in total where the gate revenue is nil.  Add to that no refreshments, club shop sales on the day, hospitality income and the like the number starts to add up.  Season tickets 20/21 are a challenge – many people were happy to leave the £80 for last season in the pot, not sure the same level of people will leave half a season’s money there?

Back in February after the release of the 2019 accounts the words of the Chairman were “To put our revenue decline in context, for the year ending July 31, 2018, we had a total turnover of £126.8m. Next season (2020-21) that will drop to just shy of £30m, and when the parachute payments cease for season 2021-22 then turnover drops to approximately £17m if we are not promoted. That’s a drop of nearly £110m.

“So, it is not surprising that many clubs struggle following relegation from the Premier League and that many slide straight through the Championship and into League One.”

The club was – at that point – predicting less than a £30m income – how much that prediction has been revised since the lockdown and loss of revenue remains to be seen but what we do know is that the expenditure – or at least the largest part of it – has not been reduced by the same amount in comparison.

Since those accounts were released then McBurnie has been sold to Sheffield United and some add-ons from previous sales (Fabianski, James, McBurnie and Jack Cork for example) have come in which will help but it is still a financial problem that the club is facing into and one that will be causing headaches around the corridors of the Liberty Stadium.

As fans, none of us should underestimate those challenges.  What will happen to Landore and Fairwood?  Do we need them both?  What will happen to the academy?  Has category one disappeared?  Category Two?  Category Three?    Will we manage to move the final top earners off the payroll and what of our transfer policy?   For me the latter will be answered with a blend of youth, small parts of experience and hopeful use of the management team contracts to bring in players maybe on loan as we did last time around.  I’m struggling to see how we can have any further policy.

Financially it does feel all doom and gloom at times but football is no more immune to this than any other business.  So many people have lost their livelihoods in the past few months and businesses – strong brand name businesses – have ceased to exist or are certainly hugely downscaled from what they were.   Some clubs will see this happen to them and we all know that a downscale is better than the other option.  And that is why the job of someone balancing the books is not to be underestimated.

With the world in the middle of a global pandemic and predictions of spikes, second waves aplenty and local lockdowns in place, we are looking at some of the potential impacts on football going forward.  Tomorrow we will close our series by continuing our look at Swansea City but this time with an eye on potential investment into the club.

You can read our thoughts on the transfer market here and share the views with other fans on our forum here

You can read our thoughts on football in Leagues One and Two here and share the views with other fans on the forum discussion here

You can read our thoughts on the impact in the Championship here and share the views with other fans on the forum discussion here

Images courtesy of Getty Images, Athena Picture Agency and Swansea City Football Club.

Phil Sumbler

Been watching the Swans since the very late 1970s and running the Planet Swans website (in all its current and previous guises since the summer of 2001 As it stood was right at the forefront of some of the activity against Tony Petty back in 2001, breaking many of the stories of the day as fans stood against the actions where the local media failed. Was involved with the Swans Supporters Trust from 2005, for the large part as Chairman before standing down in the summer of 2020.

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