Financial impact of Covid-19 on Premier League clubs: Total revenue dropped to £4.5 billion

The ongoing Covid-19 pandemic has had a terrible effect on everybody around the world. The football fraternity is no exception. All the big leagues and clubs suffered huge losses due to the pandemic.

Deloitte has released a report on the 'Annual Review of Football Finance' for 2021. It's one of the year's most awaited studies in the football world. It talks about the industry's finances and how national competitions fare. 

Due to Covid-19, total revenue of Premier League clubs dropped by well over half a billion pounds in the 2019-20 season (-13%) to £4.5 billion as the average revenue per Premier League club reduced by £33 million to £225 million. This was the first drop in total revenue in Premier League history. And that's not all, this was the lowest total revenue level since 2015-16.

Matchday revenue decreased by £84 million (12%) to £599 million. It was expected because no fans were allowed to go to the stadium due to the Covid situation. The stadiums were closed from game week 30 in March 2020. The stadiums remained closed once matches resumed concluding the season. But the scenario is different this season.

This Deloitte's report only represents the financial impact of the first three to four months of Covid-19 with clubs generating matchday revenue for the majority of the season. The full impact of Covid-19 on financials will be revealed in the next edition. The next edition will be launched months before the 2022 FIFA World Cup in Qatar.

Covid-19 impacted the broadcast revenue in the 2019/20 season. As a result, the revenue fell down by 23% to £2.3 billion, accounting for 52% of total revenue (compared to 59% in the prior year).

Commercial revenue is the third major component of revenues. The good news is, it was increased by £145 million (10%) overall, with 13 clubs reporting an increase. The fastest commercial revenue growth among the consistent Premier League clubs was at Everton (104%), driven by a significant stadium naming rights agreement. But on the other hand, Leicester City (21%) and Wolverhampton Wanderers (15%) suffered the heaviest declines. 

Wage costs

Though it was a huge drop in income, unfortunately, Premier League clubs' wage costs actually increased by 4% to £3.3 billion. This the smallest rate of increase since 2004/05. Only six clubs (AFC Bournemouth, Arsenal, Chelsea, Manchester United, Southampton and West Ham United) managed to realize a reduction in wages.

Overall, the wages to revenue ratio worsened to its highest level in Premier League history (73%). 

Profits slashed

The financial impact of Covid-19 is in profitability, almost wiping out the collective operating profit of £837 million recorded by Premier League clubs in 2018/19. A reduction of £782 million saw combined operating profits of £55 million reported for 2019/20. 11 Premier League's clubs reported an operating loss, up from four in 2018/19. 

Everton were on the top. They (£140 million) reported the largest pre-tax loss among 2019/20 Premier League clubs, with pre-tax losses of over £100 million for the second successive season. Manchester City (£125 million) were the only other club to report pre-tax losses of over £100 million. The other 12 teams reported pre-tax losses of more than £50 million compared to only two in 2018/19.

Only four clubs (Burnley, Chelsea, Norwich City and Sheffield United) reported pre-tax profits compared to 11 in 2018/19. Chelsea recorded the highest pre-tax profit of £43 million. Selling Eden Hazard to Real Madrid contributed significantly to the club's profit.

European competitions

Deloitte's research also shows that the Premier League's performance was top-notch. Across Europe's professional top-flight football landscape, aggregate revenue contracted by 13% in the Covid-19-hit 2019/20 season, as overall revenues fell by €3.7 billion to €25.2 billion. 

Germany's Bundesliga revenues declined by 'only' 4% to €3.2 billion (the Bundesliga was the first major European sports league to resume matches due to Covid-19). In Spain, the aggregate revenues of the twenty La Liga clubs fell 8% to €3.1 billion, while the Serie A clubs saw their combined revenues fall 18% to €2.1 billion.