SCOTTISH football has come to terms with living within its means but major challenges remain in delivering sustainability and profitability for the majority of senior clubs.
Those are the conclusions of the latest annual survey of football finance directors by accountants and business advisers BDO LLP.
It is a harsh reality that clubs have had to learn the hard wayCharles Barnett, BDO
The fiscal landscape of Scottish football has been scarred by a series of crises and insolvency events in recent years.
The BDO survey reveals that 100 per cent of Scottish Premiership clubs who responded are not raising funds by selling off future earnings such as advances on season ticket sales, media income or transfer income.
“It is clear that the financial lessons of the last decade which saw several Scottish football clubs go into administration have been learned,” said Charles Barnett, professional sports group partner at BDO.
“There is a much greater understanding and will to ensure financial security in the years to come. Clubs know they cannot borrow now to fund future success and have responded accordingly. They are also much more aware of the need to develop new sources of income where possible.”
It is clear, however, that significant challenges remain. Just one club stated they would make a profit after player trading and depreciation.
Clubs were split between those who have experienced reduced takings from match tickets, catering, season tickets and sponsorship and those who stated that all of these income streams have improved over the year. Three-quarters of clubs stated that corporate entertaining has gone down over the last year.
One Scottish Premiership club in the survey has stated that their current owners are considering an exit within the next 12-18 months and that they have been approached by external investors with a view to taking a stake in their club.
Generally, however, clubs are more optimistic about the forthcoming season with the majority believing that revenue will increase this season.
The biggest concerns for Scottish clubs in the coming season are falling attendances due to the state of the economy and inflexible players’ salaries. A further sign of financial probity is indicated by the clauses in players’ contracts which stipulate that their wages will be cut if the club is relegated.
In Scotland 75 per cent of clubs stated that up to 50 per cent of their players will have wage cuts if the club is relegated with the level of these cuts up to 40 per cent.
All Scottish clubs stated that their first-team squad will be the same or smaller in size in the coming season but half of them state that their player payroll with be higher. Three-quarters state that they will be decreasing their transfer budget in the coming season.
“We can see that clubs now fully understand the need to be financially responsible and have responded to the current economic climate by spending more prudently and ensuring they are not accumulating large debts off the pitch for the sake of short-term success on the pitch,” added Barnett. “Whilst many fans may be annoyed or upset to find clubs limiting their spending on players and reducing their transfer budgets it is a harsh reality that clubs have had to learn the hard way. Cash can’t be spent on Scottish football that Scottish football doesn’t have. There is little point in looking south of the border at the media riches being dispensed.”
That said, Barnett claims that Scottish football is being badly undersold when it comes to the broadcasting deals currently in place. “It is worth revisiting the issue of the disproportionately low fee that Scottish football gets for its TV rights,” he said.
“Simple arithmetic indicates that if Sky and BT are happy to pay £1.712 billion a year for English football, the comparable figure for Scotland should be £142 million (Scotland has 8.3 per cent of the UK population).
“To be getting just over one tenth of that at £15m a year needs to be reviewed. Equally, the BBC gives just £1m a year to Scotland’s football clubs against £66m for its Match of the Day highlights. These figures are only exacerbating the gap between English and Scottish football and should be examined in more detail by the appropriate authorities.
“However, as long as Scottish football doesn’t have that media-funded financial safety net it must be creative in maximising existing income whilst generating new income streams. I think it may be frustrating in the short term for fans but in the long term Scottish football will be creating a viable and vital game which will be sustainable in the long term.”