It is no secret that the biggest football clubs around the world earn and spend huge amounts of money. This January has already seen Chelsea Football Club spend above £100million on transfers and loans into the club. While Premier League clubs continue spending hundreds of millions every year, how can the UK’s smaller clubs competing financially?
End-to-end real estate fund Alliance Fund is launching a dedicated sports investment fund for clubs in League One and above. The fund aims to support UK football clubs with short to mid-term cash flow requirements. Alliance’s football fund is set to launch in February 2023 to tackle a disparity in football funding.
In 2021, the average Premier League football club generated £246million in revenue. Some clubs far surpassed even this value, with the likes of Manchester City reporting earnings of £571million. Despite the masses of money both earned and spent by these clubs, it is a well-known fact that many smaller clubs lower down in the league pyramid have struggled in recent history.
While in 2021 Premier League clubs earnt an average of £246million, Championship clubs generated an average of £26.5million in revenue. Meanwhile, EFL League One generated just £5.4million in the same period.
Fighting the funding gap
A number of UK clubs have already investigated the concept of issuing bonds to raise money. Most famously, Barcelona, Inter Milan and Porto have all issued bonds collectively worth hundreds of millions of Euros.
The method enables fans and investors to loan money to the club. Queens Park Rangers reached its maximum allocation limit of £6.8million just 10 days after investment opened. The money was raised by 1,500 fans and investors to help fund a new training ground at Heston.
May 2022 also saw Peterborough United raise over £1.5million issuing bonds to enable the club to improve stadium facilities. Peterborough’s bond paid nine per cent interest annually. Investors are also paid a bonus 15 per cent should the club be promoted during the five-year bond.
Disparity in football
Recent history has been especially hard on football clubs. COVID-19 saw a lot of football played behind closed doors for 18 months. This period placed significant strain on smaller clubs in particular, which rely on revenue from ticket sales, food and drinks sales and more.
Alliance Fund analysed club revenue data, finding that between 2016 and 2020, match days accounted for an average of 16.5 per cent of total club revenues. In 2021, matchday revenues fell to only one per cent of total club revenue. The figure shows that, on average, 94 per cent of all matchday revenue was completely lost for clubs.
Alliance Fund estimates that in 2021, the average amount of revenue lost due to the pandemic was £45.2million for Premier League clubs, £5million for Championship clubs and just below £1million for League One clubs.
Alliance sports investment fund
Iain Crawford, CEO of Alliance Fund, discussed the launch. Crawford explained: “The never-ending quest for investment to aid financial health and club development is a vital one and while many top-flight clubs benefit from their substantial accumulated wealth, it’s a far tougher task for those in the lower leagues.
“Building the momentum required to compete and challenge for promotion is a herculean task in itself. However, this has been made all the harder by the devastating impact of the pandemic, with many clubs still struggling to overcome the financial pothole it has placed them in.
“Having personally made multiple investments into football clubs from League One and upwards, I’ve seen first-hand how the ability to secure investment via alternative paths can hand a vital lifeline to lower league clubs.
“While the practice remains in its relative infancy within the UK, it’s an up-and-coming sector and one that provides huge room for growth long after the impact of the pandemic has been overcome – not to mention exceptional yields for those investing.
“With this in mind, we felt it prudent to launch a dedicated sports fund in order to provide a tailored platform for those wishing to invest in football. It will utilise both my own personal experience and contacts and existing Alliance Fund resources.”