It is not just any old debt as it is debt in US Dollars and that has serious implications with the GBP weakening.
Last week I did a post regarding Real Madrid and how they have turned a profit whilst also reducing their overall debt last year. The football reality is very few clubs actually turn a profit and this will become a major concern when the newly adjusted fair play rules come into play.
The new rulings are that you can use up to 30% of the clubs revenue to spend on players and no more. Increasing your debt in order to purchase players is not going to be a loophole clubs can dance through.
Owners of the clubs are required to cover the shortfalls if the club requires topping up. If we look at Manchester United there are a number of financial practices that will have to change.
For the year ending June 2022 United reported a loss of £115.5 million increasing their debt by another £95 million. This is with the revenue having increased by over 18%. The clubs debt now sits at £515 million which has a cost. Here is the bit that makes no sense as the owners (Glaziers) took home £33 million over the year. According to the new rules they need to be emptying their pockets and not filling them. The debt is going to play a role going forward as it has to be paid back unless the owners never intend to and will sell the club for a huge including the debt.
The biggest problem United have right now is that debt is increasing due to the borrowing having been done in US Dollars.
The weakening of the Pound will only raise the debt the club owes as the debt is in Dollars. Any further erosions of the Pound will make no difference how successful the club is as they will sill owe more than before.
The problem is the club has the biggest wage bill in the Premiership having added another £61m this year currently sitting at £384m per season. The problem is if the performances don't improve on the pitch resulting in points then the club will be in bigger trouble next season.
The club will not be able to keep on spending freely like they have and qualifying for the Champions League next season is no longer a want as it is now a must.
Broadcasting rights last season dropped by £7.5 million due to playing less games than the season before. Being knocked out of competitions or not qualifying for the extras is hurting the bottom line. With the player wage bill now the highest in the Premiership have they the ability to claim a top 4 spot?
The average salary paid to a United player is double that of either Arsenal and Tottenham. We know having the highest wages does not necessarily mean you have the best squad as look at United's results over the last 10 years compared to what they have outlaid.
The crunch with the new regulations regarding player purchases will not have an impact this season, but only next season. Clubs will have to run more as a business and the loop holes they have been using are slowly disappearing. The clubs with the big money backing them seem to be the ones who will actually benefit as owners can fund the shortfalls. The likes of Manchester City and Newcastle are now sitting pretty.
