Often Partisan

Summer Sale or Winter of Pain

The excellent finances in football blog Swiss Ramble tweeted some graphs yesterday about finances in the Championship which help to lay bare what Birmingham City’s problems are.

I’m not in the same league when it comes to finances as Swiss Ramble; I understand he works in accountancy and therefore his grasp of the situation is superior to mine. I think it’s worth highlighting some of his work to show the answers to the perennial question – “Where’s the money gone?” Please note that these graphs are from accounts for the 2012/13 season.

Championship Revenue excluding Parachute Payments (courtesy @swissramble)

The first graph shows how much revenue Championship clubs take in without parachute payments. Blues lie sixteenth in that table – which to me belies the belief held by some that Blues are a big club. It’s also easy to see from that table that matchday income is by no means Blues’ biggest income stream – the sad fact is what keeps Blues going is the parachute payments and commercial revenue. Of course, this graph represents last season’s accounts; this year matchday income will have dropped further and as such Blues would be even further down the list.

Championship Wage Bills, courtesy @swissramble

The second graph shows how last year’s wage bills compared in the Championship – and as you can see, Blues had the seventh highest wage bill last year. By comparing the two graphs it’s possible to see that Blues’ income excluding that from parachute payments was around half of what the wagebill was – which should amplify just how much Blues relied on those parachute payments to keep what players they had. Again – this is from last season. With a self-imposed wage cap this season that meant new players couldn’t be given more than £5k a week that figure will have significantly dropped further – is it any wonder Blues are struggling to compete?

Championship Wage to Turnover ratio, courtesy @swissramble

The third graph shows the wage to turnover ratio from last season. Last season, for every £1 Blues took in they paid out 95p in wages; a ratio which is absolutely unsustainable without significant investment each year – which Blues have not been getting. What is alarming from a business point of view is that Blues are 15th in that table; thirteen clubs above them are paying out more in wages than they are turning over  and three are paying out more than 150% of turnover in wages. Is it any wonder that a third of Championship owners are looking to sell their clubs, according to a study undertaken by BDO?

The bottom line is this: without significant investment Blues are in trouble. The club doesn’t bring in enough money to compete in the division on its own and with declining gate revenues that is only going to get worse. Blues are utterly reliant on parachute payment money – there were rumours from sources such as Tom Ross that this year’s parachute payment was “sold” to a finance company so that the club could receive cash up front last season and one has to wonder if next year’s money has been factored in a similar fashion. If that is the case then BIH have to sell the club this summer because if they don’t, it’s going to be a long hard winter for us all.

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