The Importance of the Premier League to the UK Economy
With the controversy of Saudi Arabian Public Investment Fund becoming the majority owner of Newcastle football club last season, it begged the question of whether football and its economics uphold any standards or morals when it comes to its participants.
The latest sport news broke the story of the Saudi PIF around the time of the Russian invasion into Ukraine, which resulted in Abramovic shutting up shop at Chelsea due to the subsequent Russian sanctions – something that many argue English football should never have let a Russian oligarch have such an influence in.
Regardless of the ethical concerns, it’s clear that Abramovic marked the start of a new era in the Premier League. An era that not only attracted foreign investment, but welcomed it, but of a certain wealth too. Before 2003, which was when Abramovic took over, there were only a small handful of transfers over £40m, which were mostly abroad. But since then, Abramovic has spent over £2 billion at Chelsea. In his first season alone, he spent £121.3 million on the likes of Makelele, Crespo, Veron, and Damien Duff.
In his second season, Chelsea spent £92.2 million on the likes of Cech, Robben, and Carvalho. This set the stage for spending at a loss, and it set a trend that to this day, the UK economy can be thankful for.
Premier League’s contribution to the UK economy
In the 2019/20 season, it was estimated that Premier League football contributed £7.6 billion to the UK economy – in a season where it was suspended for 3 months due to COVID-19. It is estimated that clubs’ economic activity has risen by 840% since 1998/99 – certainly well above national inflation, meaning that the industry was booming.
There are around 94,000 jobs supported in the UK thanks to the Premier League, which is almost 9 times more than the 11,000 in 1998/99. Beyond just the numbers though, it’s worth noting that these jobs and economic activity is spread fairly evenly around the UK, as opposed to being London-centric. All nine major regions in England had at least one club representing them during this survey of the 2019/20 season, and around 72% of the Premier League’s economic activity is outside of London.
When it comes to tax, the Premier League is a big contributor, too – seemingly more than many billion-dollar companies operating within the UK. It is estimated that Premier League clubs generated a tax contribution of £3.6 billion in total in 2019/20, of which £1.4 billion of that was contributed to by the players. This £3.6 billion tax contribution is £3.1 billion higher than it was in 1998/99.
Ironic, then, that so many billionaires are leaving tax havens to operate in a UK industry that pays tax. If anything, it is common for clubs to inflate their revenue figures, as opposed to inflating their costs as most tax-minimising entities would do. This is because of the Financial Fair Play rules, which were a set of UEFA rules introduced in 2010 that would seek to prevent excessive spending by wealthy owners. Essentially, spending way more than you earn, as this is inherently uncompetitive in a rational market.
The biggest reason behind the attraction of the Premier League is that it is the most-watched league in the world, with an estimated 3.2 billion viewers worldwide. Not only does this far outperform the other leagues, which is perhaps why we are seeing many of the best players and managers in the world come to England, but it’s brought in an estimated 500,000 tourists in 2019/20.
This is another contributing factor to the UK economy that mustn’t go overlooked, though it’s arguably a bad thing for local fans who struggle to get a ticket. And, this highlights an issue with all of the money and attention the Premier League is harbouring – it’s not necessarily to the benefit of local fans.
Whilst their local teams are better resourced to compete in European competitions, there is arguably a loss of atmosphere, a disconnect with the billionaire owners, and a feeling that football is heading towards TV entertainment. After all, a resounding majority of all Premier League viewers is outside of the UK, meaning the communities that the clubs represent are relatively insignificant economically.
It is estimated that TV money makes up around 60% of a club’s revenue, while commercial revenues make up 27% on average. This leaves very little importance for matchday income (around 13% of total income) – meaning local communities are at risk of losing the attention of their club’s owners to Asian and American markets.
Whilst it is yet to be seen how the FA and other governing bodies deal with the ethics of where the money is coming from, we can be sure that the industry will continue to grow. It is also difficult to argue that the league is in a speculative bubble, because both matchday tickets and home viewership are relatively demand-inelastic – meaning they will be purchased through a thick and thin, recession or not.