The Economics of Football: Why Europe is Falling Behind Britain

By Robert Dye

When thinking of football’s economic powerhouses, one’s mind strays to the super clubs of Europe, the Real Madrid’s and Manchester United’s of the game. These ‘super clubs’ form an exclusive group at the pinnacle of the game, made up of the select teams who regularly challenge for club football’s biggest honors. However, whilst the financial importance of these clubs to their specific nations should not be undervalued, the real indication of a European nation’s (footballing) economic strength is not directly dependent on the size of these powerful clubs. In fact, the size of the gap between those super clubs and the rest of the clubs that make up the top division in each specific nation is often a far better indicator. By analyzing the overall economic strength of each European top division and focusing on all the constituent teams, we can construct a more realistic model of each nation’s footballing economic strength.

In the English first division, the Premier League, the gap between the top clubs (the well-known big six) and those below them is the smallest. British clubs make up ten of the top 32 economically strongest European football clubs, compared to just six each from Italy and Spain. In addition to this, total revenue figures for Premier League clubs outstripped all other European leagues, £2 billion ahead of nearest rivals, the German Bundesliga. These statistics do not prove that the Premier League is a competition in which teams are close in terms of economic strength as there is still a vast gulf between the best and the rest. However, the distribution of economic strength present throughout the Premier League is clearly more even than in most European leagues. KPMG’s estimation that clubs from Britain’s most lucrative league make up four fifths of the economic value present in the 32 clubs in Europe is testament to this. The Premier League’s ‘Big Six’ alone are not solely responsible for this dominance, with West Ham, Everton and Leicester City also in the European top 32.

Matchday revenue defines the economic strength of a football club to a large extent. The ability of a team to raise significant funds allows a football club to purchase better players and retain them through paying higher wages. Additionally, revenue can be invested in improved facilities, more experienced coaching staff, and efforts to grow the brand domestically and internationally. The importance of revenue therefore is reflected in a club’s access to high quality of players, coaches and facilities as well as its ability to market memorabilia to a large audience. Can it be true that British clubs on the whole simply make more money on matchdays than those across the channel? There are two main aspects to this; namely the number of supporters attending matches and the prices these fans pay to attend. Whilst the Premier League average attendance is the second highest in Europe at 36,600 on average, the German Bundesliga actually outdoes Britain on this account, with averages for 2013 – 18 period recorded at 43,300. Where Britain really pulls away from Europe is in the second aspect of matchday revenue, ticket prices. The average price paid for a Premier League ticket is £32, with 6% of fans paying over £60, a stark contrast to La Liga at £10.90 and the Bundesliga with £9.91 respectively.

Similarly to matchday revenue, there are elements of football club ownership in Britain that hand its clubs a financial advantage over continental rivals. Over the last decade, patterns have shown that owners of British football clubs are far more willing to take financial risks and run higher levels of debt than those in Europe. The 2017/18 season was a landmark year for owners of British club with Manchester City breaking the all-time record for transfer spending at £255 million and rivals Manchester United breaking the all-time record for annual spending with £202 million. Of course, these trends can be viewed as reflective of the pattern of global increases in transfer spending, but the fact British clubs are leading this shift shouldn’t be overlooked. In terms of debt, Manchester United and Tottenham Hotspur have two of the largest net debts in the world. The cash injections via the Glazer family since 2005 have left the former owing £513 million, closely followed by the latter, who’s ambitious construction of a new £900 million stadium has left a debt of £437 million. Whether a coincidence, or part of a larger pattern, the apparent lack of risk adversity in Premier League ownership has allowed clubs to invest huge sums of money in players, facilities and coaching, creating spending trends that European football has not kept pace with.

High levels of broadcasting revenue can be seen as the culmination of other components of British football’s economic supremacy. However, on top of clubs being paid more by broadcasters in Britain compared to Europe, there is also a larger element of equality between clubs. This is key, because Europe’s top clubs all earn between £200 and £300 million per annum from broadcast deals, a level of consistency not present among the teams lower down in respective leagues. Looking at the difference in revenue between the top club in each league and the bottom, the scale of the Premier League’s ‘equality in distribution’ becomes clear. In the 2017/18 season Italian Serie A, Juventus’ £181 million/year eclipsed Crotone’s £20 million. Additionally, the same season in Spain saw Real Madrid’s £219 million in broadcast revenue take a similar lead over the lowest club, Leganes at £40 million. These huge differentiations between Europe’s elites and those striving to reach that status stifle the growth of those clubs trying to push into the European top 32. In the Premier League, total broadcasting inequality seems to have been averted with Liverpool, the recipient of the largest broadcasting fees in 2017 at £224 million, being far closer to bottom of the pile Stoke City with £103 million. With greater revenues across the board, the Premier League allows a large range of clubs to invest in players, coaches and facilities. As a result, British clubs have been uniquely placed to grow their brands off the pitch, alongside their desire for success on it.

Matchday revenue, ambitious investment and lucrative broadcasting deals have opened up a clear gap between the Premier League and its rivals in Italy, France, Germany and Spain. Economic dominance over Europe has allowed British football fans to watch entertaining sport, played by high quality players, themselves managed by world class coaching staff. However, the route to economic dominance has been less rosy for British football fans than the results of such dominance. Supporting a Premier League club has become more expensive than supporting a European equivalent. Season tickets and television subscriptions are notably more costly in the British game, in order to fund huge revenues for Premier League teams. The economic dominance of British football comes at a clear price, but one which many supporters agree to pay, simply in exchange for the wonderfully scintillating football it offers us.

The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.

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