Almost a year ago, as we sat at the bottom of the Premier League pile looking nervously over the precipice, I wrote an an article about how life in the Championship would be a struggle because of the league’s general inability to produce profit. That lack of profitability coupled with our own monetary woes looked like a recipe for disaster. Ultimately, irony is a cruel form of humour.
Now, with the club’s full accounts for the 2016-2017 season to be released in the coming weeks, it’s perhaps worth inspecting the fiscal aspect of League One - a league we look increasingly likely to find ourselves in come that start of next season.
That’s not a sign of surrender, by the way, I understand there is still a chance that we can escape the grim clutches of a successive relegation; however, the league position and our season’s results speak for themselves - we look increasingly likely to suffer another demotion.
Championship - Relative form— soccerstats.com (@soccerstatscom) March 15, 2018
The Relative Form table shows how each team's PPG (Points Per Game) in their last 8 league matches compares with their overall PPG so far this season in the league. #EFL #Championshiphttps://t.co/BuVCxGRpku
Relative Form = PPG last 8 - PPG total pic.twitter.com/1r3xT65iHe
One major thing to note regarding League One is the fact that, much like the Championship, not many teams make a profit.
In fact, only four sides found themselves in the black after the last set of full accounts were made available (2015/16), and even those numbers weren’t exactly groundbreaking.
One thing that is incredibly worrying, however, is the fact that according to our own latest set of financial records (also 2015/16), Sunderland AFC was losing somewhere close to the tune of around £3 million per month. That’s more than most League One sides were losing in an entire year.
Of course, you would imagine the club have spent some serious time and effort in attempting to reduce the incredible sums of money being lost from the coffers, and the annual losses shown in the 2016/17 accounts will show just how deep Martin Bain cut in order to try and restore some form of fiscal parity.
Despite the incoming parachute payments, and income generated from player sales, the cost of running this club will still be very high in comparison to other League One clubs’ standards, so expect further cuts to staff and the wage bill this summer should we suffer the agony of another drop down the league pyramid.
Almost all clubs in League One lose money with only five reporting profits in 2015/16. The largest of those was Fleetwood Town £4.5m, boosted by the £6.7m write-off of an inter-company loan. That said, #Millwall had the second highest loss (£7.1m) in the division that season. pic.twitter.com/LgNCg5AoKw— Swiss Ramble (@SwissRamble) February 6, 2018
On the subject of wages, League One is a pretty tight league when it comes to wage budgets, thanks largely to Salary Cost Management Protocol - which dictates how much football league clubs can spend on wages as a percentage of their turnover (according to the EFL):
Clubs that played in the Championship last season will be required to submit their FFP returns for 2014/15 to The Football League by December 1. They will be permitted to record a maximum loss of £6m subject to the deduction of certain costs including any expenditure on infrastructure, promotion bonuses, youth development and any exceptional items (as agreed by the Fair Play panel).
Clubs relegated from the Premier League do not face any sanctions in their first season back in The Football League relating to the previous season as long as they have complied with the Premier League’s financial reporting requirements during that campaign - irrespective of any outstanding matters relating to FFP returns from previous seasons in The Football League. The three relevant clubs – Burnley, Hull City and Queens Park Rangers – all complied with the Premier League’s requirements during 2014/15.
Any club that has been relegated to League 1 having exceeded the £6m limit will not be subject to a transfer embargo but will be required to comply with the Salary Cost Management Protocol (SCMP) regulations in place in that division. These rules require League 1 clubs to limit their spending on players’ wages to 60% of turnover plus 100% of Football Fortune income (e.g. financial donations, transfer income, revenue from cup matches), with a club relegated from the Championship being able to operate at 75% of turnover for a transitional period of one season.
Sunderland will likely have a season’s leeway due to being likely relegated, but even then the club will be frantically looking to offload high earners because, as stated by Louise Taylor in the Guardian, the club still spends around £35 million on players wages despite a large drop in wages due to relegation clauses in the majority of players’ contract.
To put that into perspective, the highest wage bill in League One back in 2015/16 was a fraction under £12 million per season, and things won’t have changed too much since then. That being said, outspoken Peterborough owner, Darragh MacAnthony, was quick to highlight that players are expecting increased wages now due to the Premier League’s inflated sense of value.
Ultimately, Sunderland will likely have to turn over a massive number of players this summer if we are to quickly and effectively restructure the club’s worrying wage situation in order to avoid any potential FFP sanctions.
In an attempt at explaining just how bad Sunderland’s wage issues are, note that Jack Rodwell’s yearly salary is more than several League One sides’ total annual wage bill (70,000*52=3,640,000). Beyond infuriating, and incredibly harrowing reading, I’m sure you’ll agree.
#Millwall £9.4m wage bill is likely to have been one of highest in League One in 16/17, though still below Sheffield United’s £10.0m. Their 15/16 figure of £8.0m was only beaten by Wigan Athletic £11.9m, who were boosted by parachute payments, and #SUFC £11.3m. pic.twitter.com/Gux50NZ42b— Swiss Ramble (@SwissRamble) February 6, 2018
Ultimately, relegation to League One for Sunderland will be an absolutely enormous issue. With eye-watering debts of over £100 million as per the 2015/16 accounts, and losses of over £32 million per year, the club will undoubtedly have to continue to slash costs at a phenomenal rate despite already undertaking an austerity driven approach to life in the Championship.
The next set of accounts won’t give us the most up to date view of Sunderland’s current situation, but rather the financial actions of our final season in the Premier League. It will show us how much the club’s debts and running costs altered for better or for worse, and just how bad the situation was heading into this current campaign of misery.
Ultimately, we are fortunate in the sense that we have a big chunk of cash to come into the club for the next two seasons - thanks to Premier League parachute payments. However, a swift analysis of League One sides’ financial situations shows just how grave our current position is, and just how much the club has to adapt in order to find a level playing field. The next set of accounts will be intriguing to say the least.