Just how screwed are Leicester City if we get relegated? A blagger’s financial guide
Disclaimer: I’m no financial expert, but thankfully we know others who are. This feature is mostly designed to collate knowledge of what we actually know right now, using insights from the brilliant Kieran Maguire (whose Twitter insights and The Price Of Football podcast are both consistently superb), and The Swiss Ramble’s invaluable analysis of our 2021-22 accounts.
Relegation from the Premier League with an eye-watering wage bill, you say? The mind wanders to just one thing: expensive goldfish.
Peter Ridsdale oversaw Leeds United’s reckless spiral into fiscal doom two decades ago, but the club’s collapse back then – still the quintessential case of financial mismanagement in Premier League history – might always be epitomised by a £20-a-month payment for upkeep to the former chairman’s aquatic office pets.
As far as we’re aware, Susan Whelan doesn’t enjoy such company on club expenses from the confines of her King Power domain – but Leicester’s chief executive could be overseeing a similarly catastrophic demise to the balance sheet this summer, as we prepare for the very real possibility of an unexpected drop back into the Championship.
The question, though, is just how worried we should be as fans this summer. There’s plenty of scaremongering on social and beyond – about debt to Australian banks, relegation wage clauses and more – but how much of it is actually justified? Here, we’ll attempt to break it all down.
Off the bat, it’s important to stress that there’s a lot we don’t know ahead of this most uncertain of summers. Mainly, how difficult it will be to shift a huge swathe of this feckless rabble, some of whom will doubtlessly limp off on loan to Turkey while we foot a bill for half their wages. Their exits might not be quick, and they might not happen at all – the possibility of one or two hanging around like determined cockroaches after a nuclear holocaust is very real.
But first, your headlines
Nobody needs reminding that we’re getting relegated with the most expensive squad ever assembled, both in terms of transfer fees and wages. The latter bill has tripled since 2014-15, our first year back in the top flight.
But a quick note on that, first of all. Admittedly, the bare figures don’t look good for the club, but it’s easy to snipe at them with hindsight. The salary skyrocket has ultimately been linked to success – generally speaking, Leicester were very good at tying down their top performers, which for a while was done well and meant we got juicy transfer fees at optimal times. That inevitably meant generous remuneration as a result: you can’t have it all ways. Poor recruitment and mystifying form since then has demolished that legacy, but it was nice while it lasted.
On the whole, though, this club has paid dearly for trying to keep the pace with English football’s increasing financial superpowers: wages-to-turnover stood at 85% for the 2021-22 season, but that’s only really been noticed amid our current woes – it’s not dropped below 75% since 2017. In hindsight, those two botched attempts to finish fourth have cost us big; we made £70m from the Champions League alone in 2016-17, a figure that dropped as we slipped through Europe’s secondary competitions and finally became nil for this season.
So let’s start with the good news here: according to John Percy, the players do have relegation clauses in their deals, between 35 and 50 per cent. Standard practice at clubs admittedly, but you can’t blame us all for wondering amid the current mess. Chuck in the fact that nine players are absolutely certain to leave this summer – seven out of contract, Tete’s loan over and James Maddison desperately sexting Eddie Howe – and that’s a healthy chunk taken care of.
But that’s just the start of what needs to happen now. Debt has grown year on year – Top, presumably about to spend his summer staring blankly into the abyss, might end up personally footing a very expensive journey to Rotherham (he wrote off £194m of loans in December), while our debt to the aforementioned MacQuarie bank has increased. The club renewed that agreement in January, secured on money – in our case, potential parachute payments – through to 2025/26. (Nothing to worry about too deeply, in short, despite that income effectively being hit before it even reaches us. We’re not about to burn into a ball and start a phoenix club in the ninth tier.)
The bottom line was a £92m black hole in the latest financial accounts, which made it four years of losses in a row. That’s largely because we didn’t sell anyone big like previous years, a strategy that changed with the sale of Wesley Fofana last summer and would continue, reassured chief executive Susan Whelan. “As we look to continue to compete with more established opponents, profits from player trading and continued successful recruitment will continue to feature prominently in our strategy,” she said. Stifle your laughter while we prepare for the yard sale.
At the end of 2022, we were placed on UEFA’s watchlist for FFP compliance, escaping any fine due to “exceptional COVID deductions and consideration of historical financial results”. They’re irrelevant now, and those rules are less forgiving than the Premier League ones (if only on the paper they’re not worthy of being written on), but even the latter only allow for £105m losses over a three-year period. Ours stand at £192m, though in reality are much less from an FFP perspective once certain allowances get knocked off the bill: COVID, a category one academy, the women’s team, community projects and infrastructure costs (like the small matter of a £100m training facility, for example).
But mega losses they still are, and clearly this pattern wasn’t sustainable after our failure to qualify for Europe this time out. Player wages are often criminally overlooked in fan discourse around club finances, as Twitter shitposters parp on about transfer fees and net spend, but they’re generally the most influential factor in the grand scheme of things. Last summer’s harsh emergency stop – fatal, as it might well prove to be – was presumably a direct result of that salary skyrocket, with no other remedy for how to rectify it. Stay up, consolidate, go again. We’ll be absolutely fine!
Everything must go
The Championship is a hard fall. On his recent Radio Leicester appearance, Maguire said that the club’s revenue is likely to drop by around two-thirds – £70-80m, as opposed to £214m. The TV money alone will likely plummet by around £100m per year.
But there’s more great news coming up – barely any of those we can’t wait to see the back of will actually be playing in a Leicester City shirt next season! Hooray for them.
So let’s run through things quickly and separate this lot into four clear categories:
BYE: Youri Tielemans, Ayoze Perez, Jonny Evans, Daniel Amartey, Ryan Bertrand (lol), Caglar Soyuncu, Papy Mendy, Tete (loan).
ON THE MARKET: James Maddison, Timothy Castagne, James Justin, Harvey Barnes, Wilfred Ndidi, Patson Daka, Kelechi Iheanacho.
THE ‘LOAN, PROBABLY STILL PAYING HALF YOUR WAGES AT ANTALYASPOR’ BRIGADE: Boubakary Soumaré, Dennis Praet, Jannik Vestergaard.
PROBABLY STAYING: Daniel Iversen, Danny Ward, Alex Smithies (fear not!), Luke Thomas, Harry Souttar, Wout Faes, Kiernan Dewsbury-Hall, Jamie Vardy. Then possibly, Ricardo Pereira (long deal), Victor Kristiansen (tricky one; recently signed, but could be loaned out to Europe?), Hamza Choudhury (returning).
In my eyes, that’s not a terrible situation to be in for a relegated club, from a purely financial point of view at least – a couple of big ticket sales, plus enough others who should tempt suitors. You’re always going to be left with a few giant turds (about 6ft 7in high) to deal with at the end.
Doubtlessly, it won’t all be so easy in reality – there’s a likely scenario where we can’t rebuild until players go, and the ones we’re keenest to get rid of might well be left until last as other clubs try to sweep up late deals in the window. But at this point, who really knows.
The hope is that this article is entirely moot in a few days’ time, but one thing is certain either way: whether we stay up or hurtle to the ground in a gory blaze on Sunday, major change is afoot this summer. This appalling season has shaken the club to its core – and maybe, just maybe, some lessons will be learned as a result.
So who’s looking forward to the two-year Evans contract extension?
