Another fine Messi: football must heed the lessons from Barça’s woes

The maths is not adding up for Premier League teams – and the reality of that is pretty frightening

‘The illusion of wealth comes from a cyclopticfocus on just one side of the ledger’

All the action on the pitch during Euro 2021 (sorry, Euro 2020) earlier this summer somewhat eclipsed the drama off it in the weeks leading up to the competition.

But news that a private equity firm is banging hard at the gates to Spain’s La Liga and Barcelona has been forced to sell Lionel Messi because of financial difficulties serves as a reminder that English football still needs to take a long, hard look at itself.

The aftermath of the failed European Super League bid gave added piquance to the Government’s pre-planned “fan-led review” of football chaired by Tracey Crouch. This will, among other things, assess the need for an independent football regulator. Yet even the most ferocious regulator won’t help address the issues with football unless there is an honest assessment of what it’s presiding over.

The review will look at the flow of money through the game and assess the need for “cost controls [and] real time financial monitoring”. It will also consider the possibility of a levy on transfer or agent fees to support the development of the grassroots, amateur and women’s games.

All this is to be welcomed – as far as it goes. But there’s a real possibility it will not address the main financial forces that led to the Super League, the malignant threat of which is not dead, merely sleeping.

There’s a popular myth that football clubs are rich. This is understandable. The owners are gazillionaires, the players drive from their mansions to training in supercars. The fans pay through the nose for season tickets, replica shirts and even to watch their teams play on TV. What’s more, the Premier League has never been more popular. Surely these guys must be coining it?

And the pretence is perpetuated by those who really should know better. In that sense, Barcelona’s recent woes should serve as a salutary lesson to all in the sport.

This is a football club that was crowned the world’s richest in Deloitte’s Football Money League as recently as January this year.

The illusion of wealth comes from a cycloptic-focus on just one side of the ledger. Too few in the world of football, it would seem, are familiar with the principle espoused by the Charles Dickens character Wilkins Micawber: “Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.”

Barcelona may have been the first club in any sport to surpass $1bn (£720m) in annual revenues, but this was slashed by the pandemic.

As Simon Kuper details in his book Barça: The Inside Story of the World’s Greatest Football Club, revenue was easily surpassed by the club’s annual expenditure. “Adding together the salaries and write-offs [on transfer fees], Barça’s total outlay on players was about €700m (£592.8m) a year,” writes Kuper. “Shockingly, that was more than the club’s entire revenue for the 2020-21 season.”

Barcelona, like Mr Micawber, was living beyond its means. Result: misery. Or, more specifically: the tearful departure of perhaps the best player in the history of the sport, debts of €1.2bn, league-imposed spending limits, a desperate hunt for out-ofcontract players so as to avoid transfer fees and evaporating hopes of winning La Liga or the Champions League for the foreseeable future.

Barça’s problems are far from unique – they are just both more extreme and more obvious thanks to rules that govern member-owned clubs in Spain.

The finances of English football clubs are somewhat obscured by their owners’ propensity to keep shelling out evermore cash to prop them up. Normal accounting rules ascribed zero cost to this equity, allowing most clubs to post (fairly meagre) profits.

That money could have been invested in something else. Ascribe the correct opportunity cost to such owner-equity and you can calculate the economic profit (or loss), which gives a much clearer picture.

The reality is pretty frightening. Premier League clubs suffered record economic losses totalling £1.4bn for the 2019-20 season, according to financial and strategy analysts at Vysyble, well over double the £599.5m loss made in the 2018-19 season.

Such ugly numbers are, of course, partly the result of Covid. But they are also the continuation of a long-term trend. Since 2010, Premier League clubs have achieved combined revenues of £34.3bn but suffered collective economic losses of £3.5bn.

The Crouch-chaired review of English football will assess the flow of money through the sport. But the issue is less with flow and more with leakage in the form of player salaries and agents fees.

Barcelona had an annual wage bill of €500m. About a quarter of this went to Messi. El Mundo newspaper calculated that the Argentinian earned a total of €500m between 2017 and 2021. His salary tripled between 2014 and 2020. Messi brought trophies to Barcelona and untold joy to fans. But he also brought ruin to the club’s finances.

It’s not as if Premier League clubs reined in spending to help counter their diminished revenues through the pandemic. Collectively, they spent £874.1m on transfers in 2020-21, the second most profligate year after 2018-19 when they shelled out £918.8m. It is now clear that the era of parabolic TV rights deals, which saved the sport in the past, is over.

Jack Grealish’s recent £100m transfer from Aston Villa to Manchester City does not augur well for more spending restraint in English football. According to Vysyble’s calculations, Man City suffered an economic loss of £189m during the 2019-20 season, the biggest in the Premier League.

Football can’t go on like this and it won’t. “It was clear looking at the underlying economics of the game in England over several years that the owners of Premier League football clubs would not want to continue shouldering large economic losses. That is why we thought something like the European Super League was inevitable,” says John Purcell of Vysyble.

“Yes, it was stopped in its tracks … this time. But the underlying economics remain the same. It is therefore safe to assume that English football will be confronted with something very similar to the Super League before long.”