Category: News

Football clubs seek alternative fundraising avenues as COVID strips up to £100m from 2021 match day revenues.

With UK football clubs increasingly seeking alternative fundraising routes, such as bonds to increase their financial clout and make long-term sustained success more achievable, We have announced our launch of a dedicated sports investment fund to sit alongside our existing real estate-focused offering. 

Football is a big business. 

It is the world’s most popular pastime and generates unimaginable amounts of money. In 2021 alone, the average Premier League team generated £246m in revenue, with Manchester City leading the way with a total of £571m.

With so much money to be made, it’s perhaps surprising that some clubs are turning to alternative investment channels in order to raise money.

Bonds in football

Issuing bonds is a relatively new concept for the world of professional football, but it’s already gaining ground fast in overseas leagues with the likes of Barcelona, Inter Milan, and Porto each recently issuing bonds worth up to hundreds of millions of Euros.

In doing so, they allow fans and investors to loan money to clubs in order to enable everything from improving training facilities and upgrading pitches, to ensuring youth academies are of a good enough standard to nurture the very best emerging talent.

Inspired by this, UK clubs have also started to experiment with bonds.

The question is, why are clubs choosing to do this? 

One reason is the uneven levels of club wealth within the English football pyramid. While the average Premier League club generated revenue of £246m in 2021, the average for Championship clubs was £26.5m, and just £5.4m for those in League One.

For these lower league clubs, therefore, money is much harder to come by. This makes it difficult for clubs to invest in their future, attract top players, push for promotion and, once that’s achieved, remain competitive against far wealthier opposition.

Then, of course, there’s the financial impact of COVID-19.

The impact of the pandemic on profits

In 2021, matchday revenues fell to just 1% of total club revenue, a dip to the tune of -15.5% due to the pandemic’s impact on matchday earning potential. Income that clubs, especially those in lower leagues, rely heavily upon.

As a result, Alliance Fund estimates that in 2021, the average lost revenue per club due to Covid was an estimated £45.1m for Premier League clubs; £5m for Championship clubs; and just under £1m in League One.

CEO of Alliance Fund, Iain Crawford, commented:

“The never ending quest for investment to aid financial health and club development is a vital one and while many top flight clubs benefit from their substantial accumulated wealth, it’s a far tougher task for those in the lower leagues.

Building the momentum required to compete and challenge for promotion is a herculean task in itself. However, this has been made all the harder by the devastating impact of the pandemic, with many clubs still struggling to overcome the financial pothole it has placed them in.

Having personally made multiple investments into football clubs from League One and upwards, I’ve seen first hand how the ability to secure investment via alternative paths can hand a vital lifeline to lower league clubs

While the practice remains in its relative infancy within the UK, it’s an up and coming sector and one that provides huge room for growth long after the impact of the pandemic has been overcome – not to mention exceptional yields for those investing.

With this in mind we felt it prudent to launch a dedicated sports fund in order to provide a tailored platform for those wishing to invest within football, utilising both my own personal experience, contacts and existing Alliance Fund resources.”

“With this in mind we felt it prudent to launch a dedicated sports fund in order to provide a tailored platform for those wishing to invest within football, utilising both my own personal experience, contacts and existing Alliance Fund resources.”

The latest research by Alliance Fund, the end to end real estate fund, has revealed that Chelsea splashed enough cash during January’s transfer window to purchase 395 homes in their home borough of Hammersmith and Fulham. 

Alliance Fund analysed the spend of each Premier League team during January’s transfer window and found that the overall £736.9m spent is enough to purchase 2,378 homes at the current average house price of £309,902 across England and Wales.

Chelsea not only tops the table with a serious spend of £291.2m, but the money spent by the club this January is enough to purchase 395 homes in Hammersmith and Fulham, by far the most in the league and despite the Blues having the highest average house price at £737,402.

The £291.2m spent by Chelsea also equates to 2.4% of the annual GDP of Hammersmith and Fulham. 

Newcastle’s spend of £43.6m is enough to purchase 226 homes within Newcastle upon Tyne where the average house price is currently £192,611. 

With respective January transfer spends of £55.9m and £37.1m, both Southampton (222) and Liverpool (201) could purchase over 200 homes within their local areas with the cash splashed on players this transfer window. 

Bournemouth (138), Leicester City (116) and Aston Villa (112) could purchase over 100 homes in their local areas based on their January transfer spend. 

Arsenal completes the top 10 having spent the third highest sum at £53.3m. However, with the average home costing £713,205 in Islington, it’s enough to pick up just 75 properties in today’s market. 

CEO of Alliance Fund, Iain Crawford, commented:

“Every year we see the sums spent on securing the best talent in the football world climb to dizzying new heights and while the January window is generally more muted in terms of activity, that doesn’t mean the spend made by Premier League clubs isn’t still substantial.

It’s probably fair to say we’ve become a little bit desensitised to it in recent years but what better context to highlight the enormity of the money spent than comparing it to the cost of homeownership in one of the most sought after property markets in the world. 

To think that you could buy almost 400 homes in the prime London borough of Hammersmith and Fulham for the money spent by Chelsea this January alone is quite staggering, especially when homeowners across the land are saving every penny they can spare just to afford a home of their own.”

Research by Alliance Fund has revealed that European football is by far the most lucrative where total revenue is concerned and while the UK sits top of the league in terms of the sum of this total revenue, it’s Spain where football is arguably the most influential from a business point of view. 

Alliance Fund analysed the total revenues made from association football across the globe before looking at what this total revenue equates to when compared to the GDP of each nation. 

The research shows that Europe is the dominant force within football with regard to total revenue, generating over £19.6bn per year. 

The fast emerging North American market sits second where total revenue generated from football sits at £1.76bn, albeit 91% below the total revenue generated across Europe. 

Total revenue generated from football across Asia comes in at £1.29bn, while at the other end of the table, it sits at a comparatively low £47.5m across Africa.

With the Premier League widely accepted as the best in the world, it’s no surprise that it’s the UK driving this far superior European performance. Total revenue generated across the EPL, Championship, League 1 and 2 and the Scottish Premiership is currently £6.28bn per year. 

Only Germany (£3.37bn) and Spain (£3.18bn) come close to the level of total revenue generated across the UK game, although they remain substantially off the pace set by the UK. 

The research by Alliance Fund shows that the £6.28bn generated via UK football leagues is equivalent to 0.28% of the nation’s GDP. While this may not sound significant, the value added by the UK’s entire agricultural sector equates to 0.7% of GDP, providing some context as to just how big a business football has become in the UK.

In fact, when analysing total football revenues as an equivalent percentage of GDP across Europe just one nation sits above the UK. The £3.18bn generated via football leagues across Spain is equivalent to 0.31% of the country’s annual GDP.

Alliance Fund soon to launch the Sport Investment Fund

Alliance Fund is launching a dedicated sports investment fund to sit alongside their existing real estate focused offering to support this emerging funding process and to help UK football clubs with short-mid-term cash flow requirements, 

The fund is due to launch in March 2023 and will focus on clubs in EFL League One and above

CEO of Alliance Fund, Iain Crawford, commented:

“European football as a business is by far the most lucrative on a global scale and nowhere more so than the UK, where the total revenue generated eclipses even Spain and Germany.

We’re lucky enough to have what is arguably the best league in the world and this not only attracts the best players, but also the big money, whether it be via sponsorship, broadcasting rights and more. 

However, it’s fair to say that these revenue opportunities aren’t evenly distributed between the top flight and lower leagues and we’re now seeing teams turn to alternative investment paths, such as issuing bonds, to help level the financial playing field. 

So despite the UK already leading the world in terms of the revenues gained through football, there remains a wealth of opportunities with regard to investing into the beautiful game for those at all financial levels.

Despite the UK already leading the world in terms of the revenues gained through football, there remains a wealth of opportunities with regard to investing into the beautiful game for those at all financial levels.”

Market analysis by Alliance Fund, the end to end real estate fund, has found that total construction output has almost returned to pre-pandemic levels, but the recovery of the sector is being slowed by the delivery of public new housing, with the level of private new housing construction already bouncing back to exceed the pre-pandemic peak. 

Alliance Fund analysed the latest data from the Office for National Statistics on construction output across Great Britain to estimate just where the sector will stand come the end of the year and how it has performed over the last year and since the start of the pandemic.

Based on the latest data, Alliance Fund estimates that come the end of the year, the total volume of construction output across Britain will hit almost £46.2bn. 

This would mean an improvement of 8.9% on 2021, and an almost full return to the pre-pandemic peak of £46.3bn seen in 2019 (-0.2%). 

However, the story of Britain’s construction output differs drastically when splitting sector performance between that of private and public enterprise.

Alliance Fund estimates that the volume of private new homes is set to climb by 3.9% in 2022, hitting a total value of £40.8m. This would also see the private sector surpass the pre-pandemic total of £39.25bn seen in 2019 by 3.9%.

In contrast, while the level of public new housing is forecast to increase by 6.2% on an annual basis, the sector is still some way away from recovering from the pandemic, with output sitting -23.6% below the level seen in 2019.

“While the residential property market has been booming pretty much since the start of the pandemic, it has proved a far more problematic period for the construction sector and we’re only now seeing total output return to pre-pandemic levels. 

This recovery has been very much driven by private enterprise and this is to be expected as the private sector is responsible for the vast majority of new homes delivered on an annual basis. 

Of course, the delivery of public housing is still a vital cog in the machine but public housing construction output continues to sit well below pre-pandemic levels. 

This is largely due to financial constraints, but it’s also fair to say that the rigid framework of the public sector has also prevented it from pivoting to the same extent as the private sector with respect to overcoming the problems posed by the pandemic and the solutions needed.”

 

Iain Crawford, CEO Alliance Fund

A lot has been said about the future of property values, following years of COVID-fuelled price booms, the economic uncertainty that much of the world now faces has led many commentators to suggest that property no longer provides the stable investment that it has for so long.

However, in a world of economic uncertainty, real estate continues to be one of the most reliable investment assets money can buy, according to new market analysis by Alliance Fund and maintains its position as a valuable and reliable money maker.

For current and new investors, one thing is for sure. 

Property continues to be widely regarded as one of the safest and dependable avenues of investment and as we approach 2023, many investors will be looking for opportunities in the new year. 

New research from Alliance Fund indicates that even after adjusting for inflation, the average new-build property has increased by 22.1% in the last year, up 62.4% in the last decade, suggesting the market continues to be strong.

Those looking at the buy-to-let market specifically, will see that the rental market has experienced a particular boom in the last few months, with rental properties within major hubs being particularly competitive. 

Rising demand for homes, combined with falling supply, has pushed prices higher than before the pandemic. So, although house prices have spiked, investors can still create an amazing return on their buy-to-let properties. 

Earlier this month, Rightmove reported that the average monthly rent for a property outside London is £1,162, up by 3% in the past three months, while in London it is £2,343 per month, a rise of 16.1%.

According to the Chief Executive of Alliance Fund, Iain Crawford:

“The property market ebbs and flows and is well known to be cyclical”. 

“Yes, we’ve seen turmoil in the interest rate markets since the flawed Kwasi Kwarteng Budget but property owners have enjoyed a rather sweet time of late, even if there is an adjustment of 5% to 10% in prices, those owners are still well ahead of the game on accrued value”. 

“Property is far more reliable over the medium to long-term than the temporary hikes of energy and crops”.

“Indeed, property has historically been one of the safer and more consistent investment options. It is relatively accessible due to a range of buying options, while segments like residential purchases, funds, buy-to-let, and even commercial spaces offer something for everyone.”

“2023 will be a leaner property market, that is undisputed. But talk of price crashes and meltdowns are wide of the mark given that medium term mortgage rates are already dropping significantly”.