What's the true cost of Premier League relegation?

0:02This is a Global Player original podcast. Relegation and just how much that costs a Premier League club. I reckon it's going to be somewhere in the region of£250 to£275 million. I think you only have to look at the outpouring of grief when obviously Hans left Tottenham and it's not normal to see that many players coming out. Do I feel that Hans could have built something at Tottenham this season? 100 % I do, yeah. Owners treating the football club as a trophy asset in exactly the same way that they might do for a fleet of racehorses or a couple of yachts or similar. I was aware last month only that one club was in six hours of not paying the wage bill.

0:42What was the feel like around Forrest? Obviously, it was very clear that he was the boss. He was the owner, made the decisions and yeah. Hi, everyone. It is just me today. And with Premier League football returning this weekend, we are going to focus on the relegation battle, in particular, the finances. Just how much does a club lose when it leaves the richest league in the world? And we're going to do that with football finance expert Kieran Maguire, who is going to go right into the nuts and bolts of contracts, players' contracts, sponsorships, gate receipts, TV money and so many more other factors that affect clubs and their finances.

1:18Big clubs have gone down before, of course, and come back. Leeds United, Leicester haven't come back yet, Newcastle United and Aston Villa. So how did it affect those clubs? How long does it take to recover? And what is it like working in the dressing rooms in two of the clubs who are in this relegation battle in particular? Nick Montgomery has a unique insight because he worked with Ange Postacoglu both at Spurs and at Nottingham Forest. So he's going to provide hopefully some insight for us as to maybe which of those two clubs is best equipped to survive in terms of the playing personnel they have at the moment.

1:50And what was the feel in those dressing rooms when things got a little bit panicky? Welcome to the Sports Agents.

2:04The Sports Agents with Gabby Logan and Mark Chapman. Kieran Maguire, welcome to The Sports Agents. Just before we started recording, you laughed and said, I said, how are you? You said busy because football clubs continue to not be able to run themselves as businesses. this is you know this is true but we're going to get into the specific machinations of relegation and and just how much that costs a Premier League club leaving the division and maybe whether or not it's one that has had a rich history in the Premier League or one that is used to bouncing up and down whether or not that also affects the finances because they may be more prepared I don't know can we talk about contracts first of all is it that every single player contract would have written into it your salary gets slashed if you get relegated i think for the vast majority of clubs who have just been promoted that is certainly the case because they know that there's at least a 50 50 chance of relegation so therefore when they're trying to recruit players for that first season in the premier league that will be part of the negotiation for the clubs that are established it becomes a little bit more hit and miss if you want to attract a player to come to your club and there are other suitors then how do you make yourself stand out well from the player's point of view they want to de-risk their position we traditionally see relegation clauses of up to 25 to 30 so it is still a significant salary that they'd be earning back in the championship now Now, when it comes to the elite clubs, I think until Spurs have really thrown a spanner in the works this particular season, there was a somewhat sniffy view that there was a zero chance of relegation.

3:58So the likes of Erling Haaland and Mo Salah having relegation clauses embedded into their contracts, I think is highly unlikely. But also the chances of those players being willing to go to Hull on a Tuesday night for a championship game is equally remote because one would anticipate the players leaving as soon as the club was relegated. So it's highly unlikely that many Spurs players will have anything written into their contracts, for example. Well, there's been a really good article from David Ornstein, who is very well connected. And he seems to think that Daniel Levy, who always drove a hard bargain at all levels, has embedded relegation clauses because he was very risk averse.

4:43But if that is the case, I mean, Spurs have already got a very high wage bill by the standards, even of the Premier League. It's well over£200 million. And if that was reduced by a third, it would still be by far the record wage bill for the championship. So we'll have to wait and see. And what about the contracts for sponsors? So whether it's kit or I mean, there are so many different brand and sponsorship deals on there. Clubs have got their own official coffee sponsor and their own official tyre sponsors. Do those contracts have similar caveats? Almost certainly. For the major sponsors, which is going to be the likes of Nike for the front of shirt deal, for the likes of Nike, the kit manufacturer, for the front of shirt sponsor as well, there are going to be significant step downs.

5:36And the reason for that is that the Premier League is broadcast to over 190 countries around the world. And that's getting the brand into lots of sets of eyeballs for people with disposable income. It's not the case in the championship. Whilst the EFL championship itself is a fantastic product, it's not a universal one. And therefore, that's reflected in what clubs can negotiate. and in terms of their operating costs they and and also their um employees the number of employees they have spurs are right up there aren't they in in europe in terms of the amount of people they employ and how much it costs to run the club that there are certain things you can't i mean you can obviously sack people but you can't kind of certain things you can't stop paying for can you when you're operating a big club like that yes you've still got your what you might call your fixed employment costs you you need you need people there on on match days um assuming that spurs will still generate significant crowds and i think that that would be likely because if we're honest we'd expect spurs to be at the very top of the championship and people come to watch a successful side regardless of the division in which they're playing um there there won't be the same demand in some areas for marketing for media contacts and so on so those are the areas which would look most vulnerable and then it comes down to the owners because if you want to keep good people then you're willing to keep them going for that additional year i was going to say that because the plan is to come straight back up right so you want you don't want to lose those good people in the market they'll go somewhere else they'll be snapped up by another club presumably if they really rate their comms team or if they really rate their head of marketing, for example.

7:25Yes, you're absolutely right, Gabby. And football is a very small industry. People think it's far bigger than it is. But if you actually take a look at the number of employees at individual clubs, we are talking about hundreds rather than thousands or tens of thousands. And you are as good as bad or as bad as your most recent deal or your most recent pronouncement. and everybody talks and everybody gossips and everybody knows who are the members of staff who have the talent so you know my observation would be that Spurs would be very reluctant to let good people go just because the club's been relegated because they see themselves as not just being a Premier League club but an elite Premier League club with all of the benefits and in two years time we could be having a discussion about another Spurs attempt at the Champions League and that's when you need comms and that's when you need marketing and that's when you need people who are experienced at sort of the the dull things you know how do you get how do you charter a flight that at a week's notice because you've just got a result which is going to take you to the next round of a global cup competition is it possible have you done any kind of maths worked out just how much it will cost them.

8:40I reckon it's going to be somewhere in the region of£250 to£275 million compared to the current season. That's taking into consideration the fact that Spurs have the second highest yield in terms of how much they extract per fan per match. It's a very sophisticated operation they have. It's sort of the Disneyfication of attending a football match um then of course there won't be the participation in in europe next season that is a given and you put those two faxes together so it could be a step down in excess of a quarter of a billion pounds as far as revenue is concerned how can they match that in terms of cost they that won't be feasible but they will have to make some form of cost savings or they're going to have to sell an awful lot of players to bridge that gap.

9:34And furthermore, they'll have to rely on owner or third party lending to provide sufficient cash to pay the bills on a weekly and monthly basis. Other big clubs have been down before and come back. Some are waiting for that kind of rise again and are being propped up by wealthy owners. So let's have a little look at kind of who's handled it well and and who's kind of recouped the losses then who's who's the kind of the one that you put up on a pedestal financially and say they handled it very well i think west brom were quite good when they went down i think norwich historically have also been very good and norwich at the start of each season they actually prepare two budgets one based on survival in the premier league and and the other let let's work on the basis of assuming we are going to get relegated if you take a look at Luton they they made one of the biggest profits in the history of the Premier League in the one season they were there and then they made a significant profit in in the championship the following season but the downside of that again it's this this paradox is this contrast and conflict between the business side of things and the football side of things Luton are now in League One in receipt of parachute payments.

10:52Most clubs are working on the basis of using the parachute payments as a trampoline rather than a parachute and to allow them to bounce back. That's not been the case at Leicester. Leicester have really messed things up as far as this season is concerned. They've had the additional issues of a point seduction and a potential relegation there as well. So those are the types of things which do cause cause for concern. And Leicester, certainly, if you take a look at the last time they were promoted, that was on the back of a wage bill in excess of£100 million, which is not sustainable. But it worked.

11:34It's clearly not going to work this season. No, Leicester, currently 22nd in the Championship. We docked six points for a breaking PSR. and 71.1 million pound pre-tax loss for the 24-25 Premier League season their third 70 million pound loss in four years cumulative losses topping 180 million and the Srivathana Prabha family are doing that with Leicester aren't they they are really filling those financial holes what we now have is a football environment in which owner subsidies or owners treating the football club as a trophy asset in exactly the same way that they might do for a fleet of racehorses or a couple of yachts or similar um it is is very very high risk what happens if if the owner's circumstances change and when we saw that with chelsea and roman abramovic we saw that at lower levels with with the likes of berry and macclesfield town where where those clubs were effectively lost although the fans came around to rescue them um or what happens if the owner simply wakes up one morning and says this is costing me four or five hundred thousand pounds a week I've got people shouting naughty words at me both in the stands or on social media and I've got my kids whatsapping me saying dad what's happening to our inheritance and you go well actually this this is this is crazy and that's what we saw at Derby County Mel Morris put in probably around 200 million pounds over a period of about you know six or seven years and then decided he'd had enough we've we've seen the the problems with sheffield wednesday where the the owner's personal circumstances appeared to deteriorate and therefore they weren't able to pay the bills and i'm fully aware of clubs where the chief executive or the finance director is phoning the owner three or four days before payroll and say we need eight hundred thousand pounds by friday or it's 1.2 million and if the owner picks up the phone and is in a good mood then you've got then you've not got a problem but it's such a high risk and and i was i was aware last month only that that one club was in six hours of not paying the wage bill do you see the lewis family at spurs stepping in and filling the gaps well uh it has to be said that joe lewis has no connection to spurs according to Spurs.

14:01So therefore, it is now Enoch as an investment vehicle. If I was Enoch, I would be looking to sell. But I think the owners have to accept that Enoch itself has been a very successful business and it does have resources. Now, whether those resources are cash resources, I don't know. But something has to plug the gap. I mean, the good thing about Spurs is that the loans, which are very sizable we are we are running well in excess of half a million pounds more towards three quarters of a million three quarters of a billion um is is sizable but not due for repayment until 2037 and 2039 what we don't know we were talking about players having clauses in their contracts a wee bit earlier is is there a clause in the lending contracts or the loans from very significant banks which say, if Spurs are relegated, we reserve the right to either put up interest rates or to claim back the loan.

15:07That would be clearly a cause for concern and would have everybody scrabbling around. Although Spurs are a very professional outfit, I'm sure they've covered all eventualities or are in negotiations to deal with that if it is a problem. And the championship itself is a tough place financially to be anyway, isn't it? For so many clubs who run losses, it's not somewhere that the finances are any better. They're just a bit smaller, those losses. what what can be done to help the championship clubs avoid financial collapse because i know owners of clubs in league one who seriously kind of have to question whether they even want to go into the championship because that step up is so huge isn't it yes well funnily enough i was uh i was having a whatsapp conversation with liam scully last night who's the the ceo at lincoln city um and i i often send him spreadsheets uh because he's uh he's a bit of a nerd like me in terms of uh i've got figures for every club in english and scottish football um and i said do you want the championship figures and he says can you leave it till tomorrow i'm still celebrating and you'll just make me depressed uh because you know lincoln have been magnificent in getting promoted on a very very modest budget but how do we change the culture of football because if you are promoted to the premier league you're then existing with rocket boosters within that particular competition and at the start of the season you've got a three in 24 a one in eight chance of winning that lottery ticket of going from a tv deal which gives you 12 million pounds to one which will give you 112 million pounds and therefore we see owners willing to gamble and that's what we have we've got clubs who are regularly gambling and losing 15 to 20 million pounds a year if you take the likes of Bristol City you've got the Hemmings family at Preston who've been putting in a million pounds a month practically every month from what I can recall and so on and they are prepared to do it but it only takes a change of circumstance So how do you change that culture?

17:20Because if you turn around to the fans and say, we're going to run this football club sustainably, the fans will accuse you of lack of ambition. And also, what's the point of just losing£100 ,000 a week, £5 million a year, with the reasonable confidence that you'll finish somewhere between 14th and 16th in the championship? Where's the glory? Where's the excitement? Where's the adrenaline in that? We know certain clubs are doing it better than others. And in the Premier League, obviously, Brentford is a club that is pointed to in terms of having a very clear sales policy and players move on when they've accrued a value that the club...

18:06I'm sure there are some that we don't hear about that don't go as well, you know, and there's deals that pass them by. And they're having success on the pitch as well, relative success for them on the pitch um so it can be done it can be done and and there is a sweet spot but the the chances are that you you can't keep panning for gold and finding nuggets and and eventually you'll go through a period and and the problem and the challenge for a club such as Brentford and we saw Brighton was successful a couple of seasons ago but they've sort of fallen back to where you might consider their normal level to be we saw Southampton what you know 10 or 12 years ago with with gareth bale and adam lallana and and and many other players people saying well you know they've got this perfect model then then of course back in the championship i think fighting gravity uh you have to be super smart and there's no doubt that matthew benham at at brentford and tony bloom at brighton are super smart and you've got to give credit to bournemouth as well they've adopted a very similar approach uh can that continue you forever more we'll have to wait and see uh i think they have certainly defied the odds those particular clubs to date and have created a new algorithmic model which is the envy of others but it's uh i was talking to a sports lawyer and he says you know my mum's italian and i think she's got the best tomato sauce but every italian thinks that their mum's got mum's got the best tomato sauce and every club thinks that they've got a magic algorithm which will allow them to spot players who they can buy for£2 million and sell 18 months later for£60.

19:50But that can't be the case by definition. You can't keep on finding these players because the bigger clubs with the bigger budgets will follow those models and snap them up for£5 million instead. The overarching theme of this podcast, as well as talking about the finance, is also which teams down there are best equipped. And we're focusing particularly in terms of the spirit of the dressing room on Spurs and Forrest, because we're going to talk to Nick Montgomery, who worked under Ange Postacoglu at both. In terms of the finances, you've told us what Spurs stand to lose. Because Forrest have had a championship football more recently in their history and have come up and made a real go of the Premier League, does that mean that they're more likely to have a plan in place for relegation, do you think?

20:41And would the financial impact be as great on them well for forest themselves lost over 70 million pounds last season you know they they have been reliant upon a player trading model to to dig them out of a hole um that they've done fantastically well to to qualify for europe and of course we they could be in the amazing paradox next season of being in the champions league should they win the europa league and being in the championship how they're going to find the right number of tuesdays and Wednesdays with a 46 season in the championship I think it's uh it's gonna be a Rubik's Cube forecasting uh policy that's needed they've got one or two players who will leave Elliot Anderson won't stay Morgan Gibbs White won't stay and they've got one or two others who who they will be able to utilize to to absorb the the financial fall of relegation they're in a in a decent place do you think to come back up in terms of their finances as well yes yeah and also you know mr maranakis has been a very generous benefactor of the club he he clearly is willing to to underwrite the losses and and that's what you require because the number of clubs in the in the championship who have got accumulated losses of in excess of 100 million pounds is is is a rather scary number out of the 24th.

22:05Kieran I could carry on talking to you for hours but I'm sure that you've probably got somebody else wanting to get into the nuts and bolts of a spreadsheet somewhere. Take care thanks for your time. Thank you. Well that's the finances of relegation discussed with Kieran Maguire. Next up we're going to talk about what it's like inside two of the clubs who are battling against relegation. Nick Montgomery has a unique insight to Spurs and Nottingham Forest because he was a coach under Ange Postacoglo. So who are the characters who can pull these clubs out of the mess they're in? Which of the clubs is best placed to win this battle against relegation?

22:42We'll speak to Nick next. The Sports Agents. The Sports Agents. With Gabby Logan and Mark Chapman. Nick Montgomery, thank you so much for joining us on The Sports Agents. I love these Champions League Day recordings. I'm in Lisbon, but you've topped anybody that we've spoken to on a Tuesday when we're all around the world because you're in Beijing. Your new job after leaving Ange Postacoglu's set up was to take over at Beijing Guang? Yeah, that's correct, Gabby. I'm in beautiful Beijing. It's obviously a huge city in the capital of China. I often look out the window and think, how did a boy from Leeds end up managing the biggest club in China?

23:25Before we get on to your experiences of both Forest and Spurs, is it going well there? Yeah, so we've only just started the season. We've had one home game last week, which was 65 ,000 fans. It's an amazing atmosphere. The first game we won was the Chinese Super Cup, which was the first time in 33 years the club has won that. So we're only four games into the season. We've got five fractures at the minute in five weeks, which is unbelievable, but long season ahead. Well, I'm glad things are going well because it must have been quite challenging working under Ange Postacoglu in both of those setups.

24:04And this podcast is kind of looking at maybe which of those teams actually is better set up to handle relegation and maybe bounce back and how it's going to affect them financially. But we wanted to talk to you really about working under Ange, particularly at Spurs, where things started so well for him. Tell us about your relationship with him. Obviously, being on my background, I managed in Australia. Won the league with the youngest team, lowest budget in the early competition. Went to Hibernian for a rebuild and back into Europe. Ultimately, I wasn't given the opportunity to do that. That's when I spoke to Ange, who I'd come across in Australia when I was playing there after leaving Sheffield United after many years.

24:46Great experience playing in Australia. and yeah his Brisbane team and his Melbourne Victory team I played against them didn't really know Ange but obviously when he left I think he followed what I'd done in management in Australia with a lot of the young Australian players and when I left there we sort of got in touch and started following my journey I was always following his journey and I was just about to accept another job and invited me to come and assist him at Tottenham when Chris moved to Birmingham City. So yeah, as always, it's always about timing and it was really good for me to go back, assist a manager that I'd won in many countries and dreamt one day of coaching in the Premier League.

25:34So when that opportunity came and to work with Hans, yeah, I accepted it straight away. He'd had such a great start. One of the best ever, the best ever as a Spurs manager and won three consecutive manager of the month awards and then as you say was in the Europa League in that second season but it finished the worst possible way I suppose would be finishing 18th but they finished 17th in the Premier League and their worst ever Premier League finish at that point or you're heading into that kind of finish of a season what what's going on behind the scenes in terms of the chatter about if this club you know goes down is the you know is the unthinkable even possible that was never even discussed I think if anyone cast their mind back to last season it was quite obvious we had an unbelievable amount of injuries no Vicario fractured his ankle at Man City after we beat them 4-0 at the Etihad no Romero no Van Der Veen no Madison obviously Kulitesky I mean the amount of injuries we had I think we had 15 injuries at one point but there was never any talk about any fear about the team being relocated and I think if you look at last season there was one focus from Ange and his leadership from within was okay we're not going to finish in the top six but what we all believed in and it was a great group of players who had a lot of belief internally is that we could go on and win the Europa League so I think when Ange came out and said he always wins in his second season people will see that as a meme but from internally that was something that we all believed in and I think you could see the team selections and as players got back fit again there was never in doubt the club would get relegated and we had enough points and in the end, yeah, it wasn't about Premier League.

27:16It was about trying to break a trophy drought that had gone on at Tottenham for many, many years. So to do that, it was really special. It was special. I guess it did mask for the club that disappointment of finishing solo down on the lowest points tally that Spurs had had and they decided they wanted to make a change. Ange gets the opportunity at Forest and you were part of that as well. Now, that obviously is a very different club in the way it's run and its expectations. What did you find when you arrived at Forest? The euphoria of what we did at Tottenham, of winning a European Cup and seeing 250 ,000 fans around the stadium.

27:58For it to end the way it did and the timing that it did, which was late on after the season had finished, there was opportunities that he had that the other coaching staff had. But at the time, that sort of came quite quickly. and again it's another Premier League team it was in the Europa League very different club than Tottenham so again I think Ange knew the challenge and we discussed that as staff going in that look it's a big challenge it's a club that changes, manages quite often and right now they're in a precarious situation but Ange believed that he could go in there and get the team playing the way he wanted and I think that did happen in terms of some of the performances but the results Do you think, on that, do you think, Nick, with hindsight, going in and changing the way that they played straight away might have been perhaps a mistake?

28:49OK, everybody's going to have their own opinions. I think if anyone, you know, watched them games and actually remember the Chelsea game, the last game before we left and Ange left. I think we could have been three and a half at halftime for whatever reason. Yeah, the results, I definitely didn't think matched the performances. You know, it was still early in the season. There was a Europa League campaign. There was a lot of young players that had been brought in a window that needed to adapt to a different style of football. And ultimately, yeah, you know, needed a little bit of luck. Some of the results were definitely not fair results.

29:22In hindsight, it's a wonderful thing. You had a longer time at Spurs. Did you and Ange make connections with those players, do you think, that perhaps the board was naive to ignore in getting rid of him, that could have strengthened and things could have got better the following season? I have no doubt. I think you only have to look at the outpouring of grief from social media when obviously Hans left Tottenham. It's not normal to see that many players coming out saying really nice things about the manager and post that. But I think when you win a European Cup, under the circumstances we did, you're always going to have that special connection.

30:02So, yeah, no doubt do I feel that Hans could have built something at Tottenham this season. A hundred percent, I do, yeah. They've had more injury woes this season as well. I know that one of the big challenges Ange had was how do you replace Harry Kane? But also, as you've alluded to at Spurs, injuries have continued to be an issue. At the time, Ange's style of football, the intensity with which he set his teams up was sometimes blamed for that, wasn't it? And the training, there was whispers that, you know, the training was just too intense. as those injuries have continued under other managers.

30:37Do you think that's kind of exonerated? And was that a fair accusation at the time? Definitely wasn't fair. Sometimes, yeah, it's unlucky. You know, you have players that have bad injuries, ACL injuries, that result in nothing that you can control. So, yeah, I think in the end, people will always try to, you know, find a way of saying this is the reason why the players, you know, got injured. But I think you can see this season as well to see players injured again. I think in any sport, it doesn't matter what sport you play, you need your best players fit and available. The best ability is availability.

31:10Big players are at the club because they can handle that pressure. Yes, it's an opportunity for young players like Archie Gray, Lucas Berg, who are fantastic young players who I loved working with. I still speak to them. For them, it was a great opportunity for them to get some real good experience, which I think you can see has really helped them this season. I know Lucas has been injured, but Archie Gray's performances as well. You can comment though on the feel of a club under two very different kind of owners and much is made of Maranakis' kind of style and emotional style of leadership, the way he's got rid of managers.

31:46What was the feel like around Forrest in comparison to say the leadership at the top at Spurs? I think it's very clear. I don't think there was a big input when Daniel was at Tottenham. I think, you know, obviously the managers get on with stuff, but obviously at Forest, it's well known. I didn't have much to deal with him other than see him now and then, but obviously it was very clear that he was the boss, he was the owner, made the decisions and results were always going to dictate and different owners demand results, different owners demand, you know, giving people time to build something.

32:22Managers don't have time, do they though? Managers don't get time No, that's not what you told at the start, but yeah, very true Nick, you're in quite a unique position having had relationships with players at both clubs They're both in this mess right now, which one are you putting your house on? I want them both to survive, you create relationships with both sets of players When you're there, it doesn't matter how long you're there for They don't make the decisions, whether managers or coaches stay or go So, yeah, I'm going to say I want them both to survive because I think with seven games to go, a lot can change.

32:58Thanks so much to our guests today, Kieran Maguire and Nick Montgomery. If you've enjoyed today's show, get in touch via email at thesportsagentsatglobal.com. You can message us on social media at The Sports Agents and make sure you subscribe, follow and leave a review. We'll be back on Thursday. The Sports Agents with Gabby Logan and Mark Chapman.

33:21This has been a Global Player original production.