3 August 2010

European football’s biggest leagues would be bankrupt within two years if they were “normal” companies, a new report has claimed.

 An A.T. Kearney study that looked at teams in England, Spain, Germany, France and Italy predicted that leading clubs could go out of business unless stricter financial controls are put in place. “Running as normal companies, the leagues in Spain, England, and Italy would be bankrupt within two years,” Kearney’s Munich-based vice-president Juergen Rothenbuecher wrote in a report called FootballSustainability Study.

 Financial statistics in some leagues are “shocking” because of players’ “enormous

salaries” – the key reason for the situation, the management consultant company said. The clubs in the five leagues also spend more on players than they take in from selling others. The current economic system “encourages over-investment and extreme risk-taking” in order to win games, “far beyond economic sense”, the report added. Comparing the return on assets with the ratio of equity to assets, the consultants demonstrate that in normal conditions the English Premier League and the Spanish Primera Division’s clubs should be bankrupt in a year while these ratios were such that Serie A should be bankrupt within two years.

Only France’s Ligue 1 and the German Bundesliga generated positive, although low, aggregate return on assets and equity to asset ratios in excess of 25%. The report makes a comparison between the financial crisis that has hit Greece and what could easily happen in European football, but as in the world of banking and government fiscal profligacy, the country least likely to face a crisis in Europe was Germany. Last year the consulting firm identified the Bundesliga’s business model as more sustainable in the medium term than that of the Premier League and that the former would eventually overtake the latter.

In order to take the idea of sustainability further the report a alysed the top five European professional football leagues in terms of their sporting, economic, social and environmental performance using a number of variables to establish a category ranking. Whereas as already discussed Germany ranked 1st and France 2nd in terms of economic performance, the English Premier League came 1st in sporting performance and in its social diversity. The Bundesliga ranked first in economic and in environmental performance and a second position in social performance gave Germany the top overall ranking. (See Table). The worst overall performing top professional league was Italy’s Serie A. Surprisingly the study found that there was no correlation between economic and sporting performance.

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