Manchester United are no longer the most valuable club in Britain

3 May 2019

Bernardo Silva
Photo: On the pitch Manchester City have prooved to be a better team than neighbours United and off the pitch they're also a more valuable club.

Gulf of £1 billion or more separates each ‘Big Six’ club from rest in University of Liverpool study.

A smaller team that fought to avoid relegation most of the season is a surprising number seven on the list of the most valuable English clubs.

Amongst the ‘Big Six’ one club is failing to keep pace with the rest.

See the full list of Premier League club valuation at the bottom of the article.

There is now a £1 billion gap between each of the ‘Big Six’ clubs in the Premier League and the rest.

This was one of the key findings of the University of Liverpool’s Premier League Club Valuations report for 2019, which shows that Arsenal, the lowest-ranked of the so-called ‘Big Six’ at £1.368 billion, have a value nearly £1 billion greater than the seventh-ranked club, Burnley (£398 million).

The study by the University of Liverpool’s Centre for Sport Business also showed that Manchester City have overtaken their neighbours, Manchester United, as the highest-valued club in English football.

City’s 2018 Premier League triumph was mirrored by their continued growth off the field, which has led to a rise in value of £385 million from £1.979 billion to £2.364 billion - enough to dislodge United from the top. 

In terms of Manchester City being at the top, we all know from Der Spiegel that some of their financial activities are unusual and that has helped them, but their finances are improving year to year and that will have contributed as well

Overall, the value of Premier League clubs decreased by 1.6 per cent to £14.7 billion in 2017/18, yet the ‘Big Six’ now make up 74 per cent of this total (£10.9 billion) compared with 67 per cent (£9.9 billion) last year.

According to football finance expert and author of the report, Kieran Maguire, this gap is likely to continue to grow.

“The separation between the ‘Big Six’ and the remainder of the Premier League is accelerating and it’s going to continue to accelerate because the clubs are going to have a bigger share of the new TV deals,” said Maguire, who is an offthepitch.com columnist.

“It’s quite clear in terms of kit deals and shirt sponsorship and things of that nature, sponsors only want to be associated with those clubs who are attached to big brands.”

Manchester rivals trading places

When City posted their 2017/18 annual report last year, the headline figure was that the club had recorded a turnover of £500.5 million, while posting a profit for the fourth successive season. 

Assessing the reasons, the University of Liverpool report cites “a combination of higher revenue and lower wages” and suggests that the latter - if “perhaps surprising” given the need to pay out bonuses to Pep Guardiola’s title-winners - could be attributed to player sales at the start of 2017/18.

City’s multi-club ownership model has raised questions from critics and Maguire adds:

“In terms of Manchester City being at the top, we all know from Der Spiegel that some of their financial activities are unusual and that has helped them, but their finances are improving year to year and that will have contributed as well.”

Neighbours United’s value, by contrast, dropped during the past year - from £2.463 billion to £2.087 billion, a decrease of over £350 million, which the report puts down to “revenue increasing by only 1 per cent but wages increasing by 13 per cent.”

It adds that United “also had to deal with finance costs of £18 million and dividends paid to shareholders of £22 million which reduced net assets.”

So far, United have yet to see value for a huge outlay on wages and their poor player recruitment is likely to have a further negative impact looking ahead to next year’s report, particularly if the club fail to qualify for the 2019/2020 Champions League.

Maguire adds: “Until they start to find the right players, they are not really going to be able to exploit the reputation and the amazing commercial department they have. Manchester United’s costs have gone up significantly without the rewards you’d expect on the back of that - recruiting [José] Mourinho and [Paul] Pogba, [Romelu] Lukaku, [Alexis] Sánchez. All of these are big names with big pay packets, but they’ve not delivered in terms of trophies, either domestically or in Europe.”

Impact of Europe

The Liverpool University valuation model is based on a combination of revenue, profits, non-recurring costs, average profits on player sales over a three-year period, net assets, wage control and proportion of seats sold.

Valuation methodology

The valuation method is broadly based on the Markham Multivariate Model created by Dr Tom Markham, who presently is a senior executive for Sports Interactive, creators of Football Manager. 

 

The formula used is: 

 

((R+A) x ((R+P-NR+D)/R) x C)/W  where
R = Revenue
A = Net Assets
P = Profit
NR = Non-recurring items
D = Average player profit over last three years
C = Average attendance/ Stadium Capacity
W = Wages/Revenue

The figures are derived from the financial statements sent to Companies House. 

Looking at the other leading Premier League clubs, Tottenham Hotspur, Liverpool and Chelsea all showed growth according to the report, while the absence of Arsenal and Leicester City from the Champions League resulted in a considerable drop in their respective values.

Tottenham are ranked third with a value of £1.837 billion, having had, the report notes, the boost of “higher revenues as a result of playing at Wembley with higher attendances and hospitality packages, Champions League participation and new commercial deals.”

The analysis estimates that the Spurs’ new stadium could raise annual matchday revenues above the £100 million mark. The north London club also benefit from having the division’s best wage control, with an overall outlay of £148 million on salaries that equates to spending just £39 on wages for every £100 of income.

Liverpool’s success in reaching the 2018 Champions League final and the expansion of Anfield, and subsequent increased matchday income, contributed to their soaring value from £1.130 billion to £1.595 billion - a total that places them joint-fourth with Chelsea. 

The report notes that while the Reds’ wages have virtually doubled in the five years from 2013 - from £132 million to £263 million - revenue has soared from £206 million to £455 million and should continue rising in 2018/19 after another successful campaign on the field.

Chelsea’s value rose too - up to £1.615 billion from £1.093 billion - with the help of a new kit deal with Nike and £113 million raised in player sales. Yet the absence of Champions League football in 2018/19 is likely to have a negative impact and the stalled redevelopment of Stamford Bridge as Roman Abramovich looks to sell the club means their stadium capacity remains considerably lower than the rest of the ‘Big Six’ (at 41,631).

According to media reports, Abramovich wants at least £2.5 billion if he is to sell the club. But yesterday The Daily Mail wrote that Roman Abramovich's valuation for the club should be in the region of no less than £4 billion.

Chelsea need only look to north London for an illustration of the impact of missing out on Champions League football. Arsenal’s absence from the elite European club competition meant their value fell by almost a quarter, dropping from £1.822 billion to £1.368 billion in the study. With wages rising by £40 million as revenue fell by £20 million, the club’s wage/revenue ratio increased from 47 per cent to 60 per cent. 

Ashley's reluctance to invest in players to grow the club has probably cost him £1 billion

Ninth-placed Leicester City’s valuation, meanwhile, dropped from £955 million in 2017 - the year they reached the Champions League quarter-finals - to £378 million.

Best of the rest?

The label of ‘best of the rest’ belongs to Burnley, whose seventh-place finish in the 2017/18 Premier League was mirrored by their position in the Liverpool University study - with a valuation of £398 million. A sensibly run club, Burnley have the third-lowest outlay on wages in the division at £82 million. 

Of the other mid-ranked clubs, Newcastle United sit eighth with a valuation of £383 million. The Tyneside club’s revenue of £179 million in 2017/18 was more than twice the sum achieved in the previous season spent in the Championship. 

Newcastle also benefit from the fact that their owner, Mike Ashley, has not charged any interest on the £144 million he has loaned to the club, yet speaking to offthepitch.com, Maguire observed that Ashley’s modest transfer spending had stymied the club’s growth during the period of his ownership. 

“His reluctance to invest in players to grow the club has probably cost him £1 billion, at least in terms of the value, because Newcastle could be in the top six if they had invested greater funds in players at an earlier stage,” Maguire said.

Newcastle are not the only club who see the slipstream of the ‘Big Six’ high above their heads. Everton’s major shareholder, Farhad Moshiri, had big ambitions for the club when he took over in 2016 but has yet to see a significant on-field return after making his squad the seventh best rewarded in the English game (£148 million) and the club fell in value from £425 million to £363 million (11th). Indeed, only Crystal Palace in 2017/18 had a higher wage/revenue ratio than the Merseysiders’ 77 per cent. 

If Everton are hoping a new stadium can improve their fortunes, West Ham United’s stadium move has not yet provided a launchpad to bigger and better things, partly due to a policy of cheaper season tickets than elsewhere in the capital - West Ham’s £431 average annual income per fan is the lowest of all London’s top-flight clubs.

With wages rising and revenue falling due to a lower league finish, the club’s value in 2018 fell from £368 million to £291 million.