For most local clubs, football is a loss-making business for now
Local league football was transformed by Gibraltar’s entry into UEFA in 2013, but a newly-released report shows that several years on, most of the Rock’s top clubs were losing money.
Four clubs reported operating loss margins of over 20% for 2017, despite receiving increased funding from UEFA, according to data in the UEFA Club Licensing Benchmarking Report.
Another reported a 10% loss margin, with only one club acknowledging a profit for that financial year.
Conversely, however, player salaries over the same period increased sharply by 26%, according to the report.
The data illustrates the challenges faced by local clubs which aim to progress into European competitions but are constrained for different reasons as to the revenue they are able to generate at home.
The debt ratios appear significant but fall within the criteria requirements set by UEFA’s Financial Fair Play regulations.
Officials here indicated that there are many parameters which permit clubs to be in debt as they build up their teams.
Not only that, under new UEFA rules, clubs will also have to publish their accounts on their websites or other public platform if they wish to apply for UEFA club licensing, opening the doors to greater financial transparency.
The UEFA report offers insight into how the business side of competitive football in Gibraltar is evolving.
With their sights set on European competitions, clubs continued to increase their wage expenditure during 2017 to attract better players instead of lowering their debt.
According to the report, Gibraltar’s “wage to revenue” ratio stood 116%, the highest among the 20 lowest ranked leagues.
The rise in wages is in line with trends across Europe, but with one key difference.
Unlike clubs in Gibraltar, most other UEFA member associations also sought to follow UEFA’s concept of “spending what you earn”.
A majority of European clubs reported wage-to-revenue ratios of around 80% or lower.
In the middle and lower-ranked leagues, only Gibraltar, Croatia and Serbia reported wage-to-revenue ratios of over 100%. Armenia had the lowest ratio at 29%.
Gibraltar is also one of six associations where UEFA accounts for 50% of total club revenues. This is despite the fact that no clubs from those countries reached the group stage of the Champions League or the Europa League.
Gibraltar is also one of six UEFA countries whose clubs reported losses of up to 30%.
The UEFA report is based on 2017 financial data submitted by six local clubs, four of which reported loss margins of over 20% and one of which reported a loss margin of 10%.
Only one of the local clubs that provided financial data UEFA reported profits, with an operating profit margin of over 20%.
The figures come as no surprise to the football industry, which continues to operate outside normal revenue-making options seen in other leagues.
The data relates to 2017, when the Victoria Stadium was a government-owned facility. That meant clubs were limited in how they could capitalise on revenue-making opportunities from matches.
With no revenue generated from hospitality, gate-receipts or advertising, alongside a continued disagreement over how to implement live streaming services, clubs operated with few avenues from which to generate additional revenues.
That, in turn, increased their dependence on UEFA funding, prize-money and kit sponsorship deals.
Clubs continue working mainly in the free-agent transfer markets and short term player contracts.
While this reduces transfer costs when bringing players in, it has also seen little return when players depart clubs, with little to no remuneration from transfer dealings taking place.
Gibraltar is not the only association where clubs operate at a loss.
According to UEFA, the number of associations reporting net loss margins of more than 20% increased from six in the 2016 financial year to 11 in 2017, with six countries (Croatia, Estonia, Georgia, Gibraltar, Latvia and Ukraine) reporting a loss margin of more than 30% for their clubs.
The UEFA report also noted that Gibraltar clubs spent around £2m in total on player salaries in 2017.
While the overall scenario highlights the continued difficulties faced by clubs, when it comes to average club wages Gibraltar is still ranked higher than countries such as Kosovo, Wales, Armenia, Andorra and San Marino.
UEFA’s contribution to local club revenues is likely to see a further increase in the coming season.
UEFA prize money is set for another large increase in 2018/19 on the back of a new TV rights cycle.
Prize money for participants will rise significantly, as will solidarity payments for clubs taking part in UEFA qualifying rounds. Even clubs that do not enter UEFA competitions will benefit from some funding.