Edinburgh Impact

Beyond football’s elite, survival can seem like success

As Europe’s top clubs take time out for the World Cup, most of Scotland’s professional teams – financially, on a different planet – will keep playing regardless.

 Home supporters celebrating Michael McKenna's equaliser as Arbroath play Queen of the South
Home supporters celebrating as Arbroath play Queen of the South at Gayfield Park in November 2021. Both teams will continue playing while the 2022 World Cup is happening.

By Martin Gannon, Lecturer in Entrepreneurship at the University of Edinburgh Business School
&
Finlay Maclean & Renzo Cordina, Senior Lecturers in Accounting & Finance, at the University of Dundee

Football has grown into a global multi-billion dollar business – and nowhere more so than in Europe, where leading clubs can boast turnovers in excess of £500million.

This economic expansion has not been universally welcomed, however, with some critics contending that this perceived over-commercialisation is at odds with the game’s sporting roots. Yet, despite claims of the prioritisation of commercial gain, most European football clubs continue to pursue sporting success, incurring significant debt in the process.

To counteract this, and with one eye on promoting financial sustainability, the governing body of football in Europe (UEFA) introduced Financial Fair Play (FFP) regulations in 2010, limiting permissible losses for football clubs.

Specifically, FFP stipulates that clubs can spend a maximum of €5m more than they earn over a three-year period, but this can increase to €30m if there are injections from club owners or related parties. While all member association members are required to submit financial statements to UEFA, such restrictions apply only to those whose costs exceeded income by more than €5m in the two years prior to participation in a European competition, such as the UEFA Champion’s League.

Grassroots view

There has, however, been debate since their inception about whether catch-all FFP regulations are appropriate for smaller league contexts.

Recognising this, we sought the views of the directors of Scottish clubs on their experiences of FFP. Many acknowledged the limitations of UEFA regulations for Scottish football more broadly, with top-down regulations perceived as ignoring the interests of smaller clubs with, at times, costly outcomes. One study participant, for instance, recalled the case of Brechin City – a club with only the remotest chance of ever playing in Europe– being told by UEFA that their pitch was not wide enough and should be modified at great expense.

Our findings highlight the complexity of top-down, catch-all regulations within football – with some club directors contending that FFP imposed the financial ‘discipline’ needed to ensure Scottish football’s sustainability. Others, however, were more sceptical about the ability of FFP to curb excessive spending and borrowing, arguing that larger clubs have ways of bypassing restrictions – such as striking inflated sponsorship deals that involve companies linked to club owners.

Falling foul of FFP

For some Scottish football club directors, there remains fear that FFP can stimulate a ‘poverty-trap’. Restrictions on losses and limits on benefactor funding for those incapable of earning substantial football-related revenues may consolidate the position of larger clubs, they say. The directors argue that this favours the status quo and could prevent smaller clubs from investing in success and securing entry into European competitions out of fear of falling foul of FFP.

One counterargument to this is that some small clubs still manage to achieve success in spite of the regulations in place. Only last month, for example, BK Häcken – Gothenburg’s second biggest club, with a modest 6,500-capacity stadium – defied the odds by winning the Swedish league.

BK Hacken's Ibrahim Sadiq dribbles ball during game against AIK on October 19, 2022 in Solna, Sweden
BK Hacken's Ibrahim Sadiq (in white) takes on AIK players in October 2022 in Solna, Sweden

The relevance of benefactor funding restrictions within the Scottish football context is, however, of limited importance, especially in the lower leagues where investment tends to be scarce.

As one participating director highlighted, this level of football is a far cry from Europe’s premier competitions, and is instead closely bound to the local community where “these people are doing it for the love of the club”. Indeed, directors here often tend to be supporters, with limited investment ability compared with larger, foreign-backed clubs competing for European honours.

Yet, the current financial situation of most Scottish football clubs is far from secure; strengthening the case for financial discipline. Broadcasting revenues are dwarfed by those of larger European leagues – just £38 million in Scotland compared with £3.1 billion in England last season – though additional support from UEFA may redress this imbalance.

To that end, UEFA introduced the Conference League last term to provide teams that do not regularly qualify for European competition increased opportunity to do so. Dundee United were the beneficiaries of this in 2022, but the new competition has reduced the number of teams allowed to take part in the more lucrative Europa League. That could have a potential impact on revenues for Scottish clubs if the country’s coefficient – which determines how many clubs qualify – diminishes.

Power of community spirit

There are also huge disparities between the revenues and salary commitments of Scotland’s two largest clubs, Celtic and Rangers, and the chasing pack.  Recent news articles have highlighted the Scottish Professional Football League’s (SPFL) record £39.5m turnover for 2021-22. At the same time, the direct impact of the cost of living crisis on clubs, and the considerable impact of inflation on the spending power of Scottish football fans, will likely exacerbate long-standing disparities. 

Clubs are experiencing a decline in the number of fans attending away matches; a demand for higher wages by players; and increased energy costs – with each likely to worsen their financial positions. To counteract this, the Scottish FA and SPFL have been considering the introduction of earlier kick-off times to reduce the need for floodlights in stadiums. 

Queen of the South fans with banner saying Not For Glory But For Passion
Queen of the South fans in the shed at Palmerston Park, Dumfries

Thus, while FFP regulations may act as a monitoring mechanism for investment-swamped larger football clubs, their role within Scotland appears limited. Here, the industry is more reliant on fan support and community spirit than in larger football leagues, with a one-size-fits-all approach to regulations potentially detrimental to smaller clubs. Such regulations are especially acute given the current financial challenges smaller clubs face.

Scottish football has, however, been historically resilient to financial difficulties, with only two out of the ten Scottish clubs which have gone into administration since 2000, no longer registered with the SPFL. Perhaps, given the community spirit associated with football in Scotland, the future is less bleak than many would imagine.

Picture credits: Gayfield - Colin McPherson/Getty; BK Hacken - Michael Campanella/Getty; Palmerston Park - Colin McPherson/Corbis via Getty