English football and finance. Living on the edge? ft. Christina Philippou

Every football fan's worst nightmare is seeing their team going bust. But how likely is that to happen? While the English game has been able to attract significant capitals,  cases of teams falling into financial hardship are frequent.  In this episode co-hosts Guy and Francesco ask Portsmouth University's Christina Philippou  what is the state of English football clubs' financial health. Christina teaches accounting and finance and is an expert on the financial sustainability of football, having co-authored two reports on the subject for the British government. Christina explains what might the planned new regulator look like and cover and how does women's football in England compare to men's football. 

Transcript

English football and finance. Living on the edge? ft. Christina Philippou

Guy Burton 00:14
Hello and welcome to another episode of the FootPol Podcast where football meets politics. And I'm one of your co -hosts Guy Burton and my other co -host Francesco Belcastro. How are you doing?
 
 

Francesco Belcastro 00:24
  I'm fine, Guy. How are you?
 
 

Guy Burton 00:26
I'm doing great. And today we're going to be talking about a range of topics and issues relating to the financing of football in England today, as well as more broadly, issues relating to governance and corruption in the football industry.
Guy Burton 00:46
And we may well get round to talking a little bit about the financing and politics of the women's game as well. To cover those things, we have a fantastic guest with us today, Christina Philippou, who is a principal lecturer in accounting, economics and finance at Portsmouth University.
Guy Burton 01:03
Before she joined the university in 2015, she was a forensic accountant for a Big Four firm. And since becoming an academic, she has written and led and delivered a course on football finance for the Premier League's Elite Academy Managers Programme and has also co -authored at least two reports on football finance sustainability for the UK government's Department for Culture, Media and Sport.
Guy Burton 01:26
So we will get to some of those topics. More generally, her research interests cover corruption in sport, football finance, the financial education of athletes and corporate and sports governance. So we're going to talk about a range of these issues and it is fantastic to have you here with us today, Christina.
Guy Burton 01:42
Hello.
 
 

Christina Philippou 01:42
Thanks for having me. 
 
 

Guy Burton 01:43
So can we just dive straight into it a little bit and talk about the issues relating to money in football in the UK over the last few years? There's been a lot of foreign investments, a lot of club expenditure. 

Guy Burton 01:54
I wonder if you can talk a little bit about why this is happening and if this has contributed in any way to football's popularity or it's more of a reflection. Why and how does this matter? 
 
 

Christina Philippou 02:06
Yeah, there's a lot of questions right there. So there's two parts to it, right? One is on the kind of revenue side and part of why football has become so big is because of its popularity, which means that there's lots of broadcasting deals and therefore lots of money coming in from there, lots of sponsorship deals because loads of companies wanna get involved.
Christina Philippou 02:26
So lots of money coming in there and obviously kind of the fan experience, so lots of money, which I'm sure loads of us here. Otherwise we wouldn't be talking about football if we weren't interested.
Christina Philippou 02:37
Also spend lots of our money giving it to clubs. So there's that kind of revenue side and the more as interest grows, obviously that has increased. So the business side on that one. And then you have the sort of flip side, which is lots of money coming in.
Christina Philippou 02:56
So that's really good and that's why we've seen lots of interest and that kind of then goes onto the sort of how much money is being spent. How much money is being spent on athletes and training and all that kind of stuff.
Christina Philippou 03:09
So that makes the product better. I'm sorry for using the word product, but from a business perspective, that's what they look at, right? So that's why money coming in is a good thing for the sport and then that makes it more interesting and then more people watch and then it kind of grows.
Christina Philippou 03:26
The issue we have is that there's a lot of spending. So on the flip side, what we're seeing is lots of money coming in, but even more money going out and that's not sustainable. There's lots of issues in football where the majority, particularly in England, but it's not just an English problem.
Christina Philippou 03:42
It is a generally worldwide problem. Lots of money coming in, lots of money going out and the issue is, you know, clubs are making losses and ultimately what we then see is clubs go into administration or go bust and then that has impact on not just the fans, but also the local communities and it's a wider problem than just people who are interested in football.
Christina Philippou 04:08
So that is a whistle -stop summary on the financial side of football. 
 
 

Guy Burton 04:15
But I think a lot of those are issues relating to further down the football pyramid, right? I mean, if we look at the English Premier League, I mean, this is an exception, isn't it? I mean, there aren't that many clubs that are going to the wall there, right? 
 
 

Christina Philippou 04:30
So technically there's only ever been one Premier League club that has gone into administration while in the Premier League and that is Portsmouth Football Club. So you know in that sense it looks good but in reality what happens is the problems are still there while they're in the Premier League and then they get relegated and then they go into administration or get relegated again and then go into administration.
Christina Philippou 04:56
So out of the original members of the Premier League when it was set up in 1992-93, eight of them have gone into administration and when we did this research a couple years ago 40% of all clubs in the top four leagues had gone into administration at some point during the course of the Premier League so those 30-some years, whatever it is now.
 Christina Philippou 05:23
So that's not just a guess. It's not. The Premier League is seen as the promised land and that's why we see a lot of problems particularly in the Championship because a lot of clubs overspend to try and get into what they consider the promised land because there's a lot more revenue coming in. But in reality and you know you talked about the reports that we did looking at financial sustainability in football and out of all the clubs there was only one that didn't tick at least one red flag in this in the Premier League in terms of financial sustainability problems.
 Christina Philippou 06:01
It's not--the promised land is not as brilliant as everybody says in terms of revenue and money coming in yes, great, but in terms of how it looks from a profit point of view and how it looks to people on the ground it's not as brilliant as everybody seems to think it is. 
 
 

Francesco Belcastro 06:20
It's absolutely scary numbers, aren't they? 
 
 

Guy Burton 06:21
So there's a couple of things that I'd like to unpack about this. So one is this issue of, you know, in many ways the English Premier League at least entered into this financial lucrative angle fairly early on.
 Guy Burton 06:36
To what extent does it actually represent a model for, you know, other leagues? Are we seeing the similar sort of patterns happening elsewhere? And the second thing I wanted to also raise, at least very early on in the English Premier League, I think when it was first started, you know, you had sort of big local businessmen were able to buy up a club and then they sort of provided a largesse.
Guy Burton 06:58
Then of course we had, you know, sort of equity firms. But now we have states and I think Manchester City since 2008 being sort of somewhat connected to the Emirati state, whether this signifies another shift in the way that, you know, football is being financed. 
 
 

Christina Philippou 07:17
Yeah, I mean deep pockets obviously helps the situation. The issues are very complex because they have what are commonly known as financial fair play regulations. They used to be called financial fair play regulations.
Christina Philippou 07:31
They are now called all manner of different things and not just from UEFA, but all the different leagues also have their own financial sustainability rules. So part of that is you can only spend as much as you put in.
Christina Philippou 07:45
So there are restrictions that have come in since Man City got bought up by a state. But having said that, we are seeing quite a lot of private equity still coming in. We are seeing a lot less of the single high net worth individuals or single high net worth families buying into clubs.
Christina Philippou 08:09
Part of that is the numbers involved. There's been massive increase in terms of how much football clubs are worth. And yes, that has started, you can look at the Premier League and go, yeah, it starts there and then it filters down the leagues.
Christina Philippou 08:27
But in reality, if you are in the football structure, you have a chance of making it to the Premier League. One of the ideas behind buying into Wrexham was in X number of years, we hope to be in the Premier League.
 Christina Philippou 08:44
That's the draw of it. And yes, the further down the pyramid you go, the cheaper it is. But that's the kind of gold standard there. In terms of kind of states buying in, there is a whole host of reasons around that.
Christina Philippou 09:03
As we've talked about, football is not a particularly profitable industry. Lots of losses going in there. But there is, in economics terms, it's a luxury good. There aren't that many big clubs or global clubs in the world.
Christina Philippou 09:19
People want to buy into that. So there's something to come of that. There's also employment. It is a big industry. Yes, we've talked about the costs, but the cost comes because they pay loads of different people to do loads of different jobs.
 Christina Philippou 09:39
And that's not just the players. That's communications, that's ticketing, that's on the ground, off the ground globally, shops in other countries. And there's a lot of offshoots of football. And that is good if you are looking to kind of grow your economy as well.
Christina Philippou 10:04
So there is kind of links to the political side of things as well. And obviously then the PR side. It's people know who these clubs are, and therefore they know who's owning these clubs or are interested to know.
 Christina Philippou 10:20
And it kind of comes with a profile which has its good and bad effects, obviously. 
 
 

Francesco Belcastro 10:25
Yeah, could I ask you one thing on the aspect of government? So there seems to be quite a lot of pressure from the public opinion towards European governments, towards doing something. And the British government has responded to that with the announcement of a new football regulator.
 Francesco Belcastro 10:40
Now, I understand we don't know much about it, but it's going to be, it's going to have a bit more powers and it's going to look at more areas. You think that's going to make a difference? Is that going to be a game changer or do we know enough to answer that question?
 Francesco Belcastro 10:53
Or what's your view on that? 
 
 

Christina Philippou 10:55
So I have been involved in some ways with the discussions on an advisory capacity, so I need to be careful what I say, but at the moment it looks like that is going ahead. The idea is that the bill, which is the first bit before it becomes a law, will be introduced at some point.
Christina Philippou 11:20
And the idea about it is mainly financial sustainability. So the whole idea of this fan -led review, which then led to the suggestion of an independent regulator, which then led to, yes, this is something we are going to follow through on from the government perspective, was to stop administrations effectively, and to stop things like Bury Football Club.
 Christina Philippou 11:44
But also we've seen Derby County since then. There's been a lot of issues in relation to administrations in football, and therefore it's quite a hot topic, and it's political as well, because you have to look at where the interest is in the country, and football is pervasive everywhere.
Christina Philippou 12:05
So the introduction of a football regulator, particularly looking around financial sustainability of clubs, what they hope to do is stop that happening again to the extent that they can. And how that would make a difference is, well, if you've got somebody monitoring the finance services, if you've got somebody saying, well, actually, you can't spend over 200% of your revenue, which we have seen repeatedly in the Championship, over 200% of your revenue just on player wages, that's not a sustainable thing.
Christina Philippou 12:43
And when you don't have any regulation, or the regulation that has been in place hasn't been working, then the idea is to have some form of monitoring function, and that would obviously have a positive effect in that, well, if you've got somebody monitoring and it's linked to the licensing system, so you won't get your license if you don't do what you're supposed to do, then that should at least alleviate some of those pressures for the local community, for the fans.
Christina Philippou 13:14
Now, on the flip side of that, obviously, if you have a financial regulator, will there be this obsessive spending 200%, over 200% of your revenue on wages? No. So what would then, how that would impact what happens on the pitch will be interesting to see because there will be some some effects in terms of competitive balance and things like that.
Christina Philippou 13:41
So there's a lot of potential change. It depends on what the regulator looks like and how the ultimate end system is is going to work. 
 
 

Guy Burton 13:53
Linked to that: I mean, I noticed that, for example, the Premier League started talking about dispensing more and more of its revenues to the Championship and further down the pyramid, partly as a response to this proposed football regulator, partly because they don't want it.
Guy Burton 14:09
From what you're telling me, it sounds like the regulator is going to be more concerned with the smaller clubs, the ones who are more likely to go to the wall than the Premier League. Is that right? Or do you think it's going to have an impact on the Premier League in a significant, meaningful way? 
 
 

Christina Philippou 14:27
I think it will have an effect on the Premier League as well, because like I said, a lot of the Premier League also makes losses, where the Premier League is slightly better is because a number of them play in UEFA competitions and therefore the regulations are more strongly monitored, but also there's more money coming in.
 Christina Philippou 14:46
So if you play particularly Champions League, there's a big jump in terms of the revenue coming in. So yes, potentially impacted less. But there is still an issue in the Premier League. Like I said, there was only one club that didn't raise a single red flag in the research that we did.
Christina Philippou 15:07
So it will affect the Premier League as well. I mean, it's not surprising that the Premier League aren't particularly keen on having a regulator, because let's be honest, who would, right? Who wants to have somebody come in and monitor you?
 Christina Philippou 15:21
The surprising one was the EFL, which looks after Championship, League 1 and League 2. So the tiers two, three and four of English football came out and went, yes, we would like a regulator, please. Now, that was surprising, because like I said, you know, who wants to be monitored?
 Christina Philippou 15:38
But I think that's an indication of how bad the situation is that they themselves have come across and gone, yes, we would like, we would like somebody to monitor us and kind of help us get back on an even keel. 
 
 

Francesco Belcastro 15:53
If you talk to people involved with clubs down the pyramid, part of it seems to have to do with fairness in a sense. They perceive it as in there are rules for the big clubs and then there are different rules for them.
 Francesco Belcastro 16:07
Do you think it's also a matter of fairness behind this kind of drive, particularly from public opinion point of view? Do they have a point? 
 
 

Christina Philippou 16:14
It's a really difficult one because the evidence is that competitive balance is getting worse, right? We are seeing more yo-yo clubs as well, so clubs that kind of get relegated but then they get promoted again.
Christina Philippou 16:30
I think this last season was actually an outlier in that sense. So that is kind of problematic. The regulator has tried to kind of distance itself from the financial distribution and redistribution for, again, obvious reasons because it's such a complicated thing.
 Christina Philippou 16:52
The issues that you see at the kind of further down the pyramid that you go, I think a lot of it is around lack of proper governance. And a lack of proper monitoring of their own finances. So something like a regulator would be helpful in that sense and I think that's why the EFL was so kind of keen on the idea.
 Christina Philippou 17:22
But yeah, distribution is an issue. We are seeing kind of pockets even within the Premier League. The Premier League is not the Premier League. You've got the Big Six now with Newcastle, possibly Big Seven, right?
 Christina Philippou 17:34
And then you've got the middle of the pack and then you've got the yo-yo clubs that kind of come up for a couple of seasons, go back down. So even they're not one kind of solid entity, right? There's packs within that.
 Christina Philippou 17:50
And yeah, the further down the league you go, the more difficult it becomes to then sort of move back up again. And we are seeing a lack of, it used to be a lot more sort of evenly distributed, you know, FA Cups:
 Christina Philippou 18:07
We used to see a lot more sort of, now it's such a big thing when one of the smaller clubs beats one of the bigger clubs. There used to be a lot more common. And a lot of that is due to money. It's the amount of money, the difference in money and what that makes. 
 
 

Francesco Belcastro 18:25
Okay, I know you've also worked on governance and on FIFA related issues. I was wondering if I could ask you something there. So about a year ago, and the build up to the World Cup, there was so much talking about corruption, but within FIFA and within regional confederations and national federations.
 Francesco Belcastro 18:43
That seems to have slightly gone away, and I think it's part of it is because of the sort of how the media work. Has there been anything happening in that sense? Are we looking at an improved system? So there are less scandals coming from there because things are working better?
Francesco Belcastro 18:58
Is it just something has been less in the news for other reasons? 
 
 

Christina Philippou 19:03
I think it's a combination of things. You're right, it's a media cycle. I'm sure we'll hear more about the issues again in a couple of years time, because that's how it works. But there have been improvements, obviously since the big scandal that hit in 2015.
 Christina Philippou 19:22
And then it's sort of kind of been dragging out because court cases take a long time to come through. And some of that is still coming out in the wash. It hasn't filtered through the system completely yet.
 Christina Philippou 19:35
So there is a lot of issues kind of still happening. But again, there have been some positive changes. FIFA didn't used to publish their accounts, they do now. They have, they published their legal documents as well.
Christina Philippou 19:51
They have a lot more reports. It's a lot more open than it was. There's still a lot of issues. I'm not saying it's perfect. But there has been a clear improvement in sort of working in the right direction.
 Christina Philippou 20:07
And I think a lot of that has come from pressure from the public, particularly in terms and the media, of course, kind of helping kind of fuel that accountability almost of why is this happening? Why is this happening like this?
 Christina Philippou 20:25
And, but you know, it's not all smooth. There have been issues that have been raised, some kind of less high profile things. But FIFA is not just about the World Cup, well, not just about the men's World Cup, right?
 Christina Philippou 20:39
They have other events. They have been concerns around those. And so, yeah, there's still issues, particularly, I mean, given how bad the situation was, but there's clearly been a step improvement. And that does seem to be the way that FIFA are at least heading to in terms of accountability and having some stronger controls in place than they did once. 
 
 

Francesco Belcastro 21:03
Thank you. We've had a great episode on the women's game a few weeks ago with Carrie Dunn, so I think Guy wants to ask something on that topic, don't you, Guy? 
 
 

Guy Burton 21:12
Yeah, because I noticed looking through your previous work as well, you've done some work that looks at the financial and economic side of the women's game. And to us, we're quite new to this field.
 Guy Burton 21:28
But our impression should be that as you get more interest in the sport, that should generate more money. But actually, the work that you've produced suggests that it's a far more complicated picture than that.
 Guy Burton 21:38
So I wondered if you could explain a little bit about why that is. And what steps the women's - or at least the authorities, the clubs and other actors - in the women's game can take? 
 
 

Christina Philippou 21:50
Yeah, it's a very complicated picture. You're right, with more interest, with more visibility, the Euros, the World Cup, there's been a lot more kind of interest in the women's game and that has come with more sponsors, better broadcast deals, and therefore kind of more money coming to the women's game.
Christina Philippou 22:09
So, so far, so good. The issues then come in terms of, you know, at club level. So, how do we get these people who are interested in the sort of big events, who, you know, we saw how packed Euros stadiums were.
 Christina Philippou 22:27
But then if you look at the WSL, yes, there's been a huge increase in terms of matchday attendance, but it's still not particularly big, right? So, it's how do you kind of work that? I think there's also some issues involved in terms of the links with the men's game.
 Christina Philippou 22:49
So, a lot of the top women's clubs are now, you know, affiliated with mainly, so the WSL is mainly made up of teams that are affiliated to Premier League clubs. And so, what then happens is you have to think around the kind of decision making, and that sort of brings us back to the governance and political side of things, because who are on the boards of these women's clubs?
 Christina Philippou 23:12
Okay, yeah, there might be some sort of mix. Then you look at, but the women's clubs are only, you know, lower down the pyramid in terms of the hierarchy. Who are making the decisions at the top of the club?
Christina Philippou 23:24
Well, not many that are involved in the women's side, or the women's club, are actually making the decisions at club level. And then of course that affects how much money is spent, how the resources are allocated, and whether the product - here we go back to calling football a product - is actually, you know, made and used and properly resourced to make sure that the momentum keeps going. 
 
 

Guy Burton 23:55
Quick question then. I mean, we've talked a little bit about the regulator, but this is not going to affect the women's game at all, or will it have a remit for the women's game as well? 
 
 

Christina Philippou 24:05
This is the interesting bit. So the women's game does not fall under the remit of the regulators. So the regulators only looking at the top five professional men's leagues. So Premier League, Championship, League One, League Two and National League.
 Christina Philippou 24:18
But then that brings in some of the issues of well, how is money allocated? All right. If we're talking about things like financial regulation, well, how do we make sure that, you know, things aren't internally allocated in ways that kind of benefit clubs that have a women's team compared to clubs that don't have a women's team.
 Christina Philippou 24:42
So there's a lot of issues around there. There was a report that kind of got released on the future of women's football, looking at some of these issues and kind of a call to arms of, you know, more investment needs to come in.
 Christina Philippou 24:55
We need to look at this, you know, these are the issues. And if we want to grow the women's game, this is what we need to do. But that's not, that doesn't come under the remit of the regulator. There's no sort of, yes, we must do something.
 Christina Philippou 25:08
This is a suggestion. And we know how well suggestions are taken because, you know, the regulator is potentially coming in now. But, you know, 30 years ago, they had another report that reviewed the governance of the game and suggested that something like a regulator happens.
 Christina Philippou 25:26
And, you know, it's taken over 30 years to get to that point. So, you know, your guess is as good as mine because whether there will be positive changes coming out as a result of that. 
 
 

Guy Burton 25:37
I mean, just since you flagged it up, talking about 30 years ago, you remind me that, you know, I'm an Aldershot fan. Of course, we were one of the last ones to go into administration before sort of the new world order, as it were, came into being with the Premier League.
 Guy Burton 25:50
So I was just thinking, you were talking about sort of the nature of ownership and investment. Say, for example, and you also alluded to Wrexham, but say, for example, Francesco and I wanted to, you know, buy and own a club.
Guy Burton 26:04
You know, what would we do? We go about it. Well, should where should we be looking? 
 
 

Christina Philippou 26:09
Don't do it. And that's my answer. Do it, but yeah, the draw is there. And traditionally that's what we've seen, you know, people who are interested in buying a club or started buying a club. What we are seeing more of is people buying clubs for business reasons rather than for joy of the game.
 Christina Philippou 26:33
And that will kind of change the face of football because if you're buying a club for business reasons, you want to make money and most clubs don't make money. So the first thing you need to do is make millions if you are going to - I don't know how deep your pockets are guys - but you need a lot of money to buy even the very bottom of English football. 
 
 

Guy Burton 26:55
Well, if we can finance it through this podcast, it'd be fantastic. 
 
 

Francesco Belcastro 26:59
If any listener wants to get in touch, drop Guy an email. Christina, what are you working on at the moment? Any area of interest that our listeners should keep an eye on in the next couple of months? 
 
 

Christina Philippou 27:12
Yeah, so I'm looking at the moment, I'm very much looking at the sort of the two sides of the coin. So I'm looking at the effects of administrations. So I'm doing some research on how administrations affect clubs and local communities.
 Christina Philippou 27:27
And then so it's not all depressing, I'm looking at the flip side and sort of the community value. So economic and community value of football clubs and what they bring to the community. So kind of a more positive spin on the same topic but from slightly different ways.
Christina Philippou 27:44
So that's the majority of my stuff. I'm also doing a few bits and pieces on women's football and financial sustainability. But yeah, many looking at the value of clubs in local communities, both good and bad. 
 
 

Guy Burton 27:59
Well, thank you very much. 
 
 

Francesco Belcastro 28:03
Thank you so much, Christina. I think we've got a few final reminders. One is to like and review our podcast on the platform where you're listening to it. If we get 1000 reviews by the next episode, Guy is gonna buy Aldershot Town and bring Champions League football within five years.
 Francesco Belcastro 28:22
So please do. 
 
 

Guy Burton 28:23
And we'll also keep - just as the Wrexham owners have their own documentary - we can't promise that, but at least we'll keep you informed through this episode - through the podcast. 
 
 

Francesco Belcastro 28:33
All that's left to say is thank you so much, Christina, for a fascinating episode. We've learned so much from it. And maybe we can ask you to come back. 
 
 

Christina Philippou 28:41
There's plenty to do and plenty to hear about. Thank you so much for having me. 
 
 

Guy Burton 28:45
Yeah, well, thank you. 
 
 

Francesco Belcastro 28:45
Well, thank you very much. 
 
 

Guy Burton 28:47
And we'll speak to you next week.