PKF: Football FDs are battening down the hatches
FDs of clubs are tightening their belts in the face of reduced revenue from merchandising and fewer ticket sales
FOOTBALL CLUB finance directors are making tough choices to rein in their spending, according to a PKF survey.
The tenth annual football club FD survey found nearly 60% of FDs are aiming to implement a more closely aligned “wages to turnover ratio” at their club, compared to just 15% last year.
The report “Open to Attack” surveyed the Premier League, Football League Championship, Football Leagues One and Two, and Scottish Premier League.
Just a fifth of clubs have been late with tax payments, compared with 27% last year.
However, 63% that made late tax payments had not agreed this with HM Revenue & Customs, up from 27% for the previous year.
John Cassidy, tax partner at PKF and a member of the firm’s Football Industry Group, said: “The rise in the number of clubs who have not made a late payment agreement with HMRC is a major cause for concern. I would urge any club, or any business for that matter, to open dialogue with HMRC straight away if it is apparent that there will be difficulty making a tax payment.
“In reality, HMRC will not want to kill off a good source of tax revenue and, in my experience, will be far more sympathetic and helpful if the club is open and approaches HMRC at an early stage to sort out the problem.”
The survey also finds that only 5% of respondents are concerned about HMRC’s project to challenge tax-free payments made to some players for image rights. This is largely because nearly two-thirds of respondents do not have players with image rights’ arrangements. Of the Premier League respondents – which are much more likely to have such deals in place – 44% were unwilling to comment on this issue.
Cassidy adds: “This lack of transparency could indicate that Premier League clubs are concerned about a potential challenge from HMRC and are therefore playing their cards close to their chests at the moment.”
Only a fifth of clubs intend to increase their first team payroll this season, compared with a peak of 59% in 2008. Also half the Championship and Scottish Premier League clubs hope to reduce their first team payroll over the next 12 months.
No respondent said their club is planning to increase the size of the first team squad. Just 24% have an internal audit function to tackle fraud and access risk.
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Next year the Uefa financial play rules come into effect. Uefa is calling on all clubs that play in European cups to get their finances in order by breaking even and balancing their books.
Nearly half of the clubs plan to abide by the Uefa rules, including 67% of the Premier League and 75% of the Scottish Premier League.
Trevor Birch, (pictured) London head of corporate recovery PKF and the former CEO of Chelsea, Everton, and Sheffield United, said the recession was affecting fans and hitting revenue streams such as ticket sales and merchandising.
“The absence of a meaningful economic recovery and looming financial fair play rules are forcing clubs at all levels of the professional game to peg their costs more closely to revenues, which remain under serious pressure.
“As a result, football clubs have realised that they need to make tough choices with wage-related costs to get their finances back on track – albeit several years later than most other British businesses. Looking ahead, we do not expect any of the main revenue streams to show meaningful improvements, so clubs will have to continue to batten down the hatches for the foreseeable future,” he said.