UEFA's fourth club licensing benchmarking report on European club football comes at a key time as the first elements of the financial fair play rules to ensure stability come into force.
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UEFA has issued its fourth club licensing benchmarking report on European club football – covering financial results from more than 650 top-division clubs from UEFA's 53 member national associations.
The European Club Footballing Landscape is a document of 124 pages, and is published in four languages – English, French, German and Russian. The report comes at a key time for European club football in the wake of financial fair play measures introduced by UEFA, aimed at limiting the financial problems which have affected the European club game.
The UEFA Club Licensing Benchmarking Report Financial Year 2010, the broadest of its kind, covers the financial figures of 665 clubs – 90% of all top-division clubs. The bulk of the financial information is sourced directly from audited financial statements that clubs submit as part of the club licensing requirements.
While there is an understandable focus on financial matters, the report also deals with other non-financial issues relevant to European football, with analysis spanning the period up to the end of the 2010/11 domestic season – the report includes a section on youth and locally trained players, and presents analysis on club head coach profiles covering a sample of 535 top-flight head coaches.
Elsewhere, spectator attendance levels and trends, the levels of stadium utilisation, club and country coefficient trends, the structuring of domestic championships and European club licensing results are some of the many aspects featured in the report.
The style of the report is visual, with many charts and a basic question-and-answer format; for example, one question asks what is the typical job length for a top-tier manager. Analysis from a sample of 500-plus clubs concludes that over half of top-division managers have been in place less than 12 months and enjoy an average "survival" period of just 17 months. Another question asks what impact UEFA's locally trained players rules have had, and analysis shows an increase in club-trained and Under-21 players appearing in UEFA Champions League matches.
The second half of the report studies club finances in detail, at Europe-wide, national and individual club levels, as well as examining key figures for clubs taking part in UEFA competitions. It opens with a positive message that despite a period of economic downturn, football revenues continued to rise – in 2010, total revenues for top-flight clubs increased a further 6.6% to reach a record €12.8bn.
Indeed this positive note extends beyond the major European leagues, with football club incomes outpacing the national gross domestic product (GDP)/economy growth rate over the last five years in 49 of the 53 UEFA member associations. Despite this upbeat news, 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. To put this into proper context, this deterioration of net equity of €600m-plus has taken place during a period of significant income growth.
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.
The report states that if the new break-even regulations were applied today, several clubs would fail to comply with the new rules, and clubs from 22 countries would have to recapitalise their balance sheets to cover "mid-size" losses (losses within the "acceptable deviation" in financial fair play speak). While the financial simulation featured in the report covers a period before the new break-even provisions, there is no doubt that many clubs need to adapt now, to prepare for tomorrow.
The implementation of the new rules, the report concludes, will challenge a number of clubs to put their finances in order. European football's governing body, however, believes that systematic handling of current problems is the only way to guarantee fair competitions, as well as financial discipline and stability in the long term.