Bristol City – A club in big trouble

A few days ago Bristol City announced their latest financial figures for the 2011/12 season, which showed a record loss of £14.4 million. With a new £92 million 30,000 seat stadium currently in a legal battle, some of this loss can be attributed to the continuing work at Ashton Vale. However, this isn’t really significant and even a cursory glance at the figures makes grim reading for supporters of the club.

Key Data
	2008/9	2009/10	2010/11	2011/12
League Position	10th	10th	15th	20th
Loss	£6.5m	£11.8m	£11.5m	£14.4m
Turnover	£11.7m	£11.1m	£11.9m	£11.8m
Wages	£10.2m	£13.8m	£15.9m	£18.6m
Wages to Turnover	87%	124%	134%	158%

Turnover has stagnated, wages have increased and league performance is deteriorating. When wages are greater than turnover a club should be concerned. With an extra £8.4 million going on wages now than four years ago, and no increase in turnover, it is unsurprising that the club is spending more than one and a half times its turnover on players. They should be even more concerned when this meteoric rise in wages does not lead to an improvement in on the pitch performance. Currently, Bristol City find themselves 22^nd in Championship and in a relegation battle, one that they managed to win last year. So what does the future hold for Bristol City?

If they survive

Remaining in the Championship means complying with break-even regulations: http://www.football-league.co.uk/page/FLExplainedDetail/0,,10794~2748246,00.html 

Championship teams voted 21-3 in favour of break-even constraints, much like the UEFA system, and below is how it will work.

Football League Financial Fair Play Framework – Permitted Losses
	2011/12	2012/13	2013/14	2014/15	2015/16
Acceptable Deviation	£4m	£4m	£3m	£3m	£2m
Shareholder Equity Investment	£8m	£6m	£5m	£3m	£3m
Total Permitted Losses Allowed	£12m	£10m	£8m	£6m	£5m

In the first reporting period 2011/12 (the accounts just published) clubs are allowed to make a total loss of £12 million as long as owners/shareholders fund at least £8 million of that loss. The numbers then reduce over a five-year period until the total permitted loss reaches £5 million, which will remain in place for subsequent seasons. Bristol city have already failed in this respect with their accounts showing a loss of £14.4 million (even when new stadium expenditure and youth development costs are deducted this figure is likely to remain above £12 million). Luckily, the Football League does not intend to sanction clubs until 2014/15 to allow clubs time to adjust to the regulations. However, given that Bristol City find themselves in a relegation battle for the second year running it is obvious that the current playing squad is not good enough to match the ambitions of the club. With future investment constrained by break-even the club is reliant on its new stadium to provide a boast to revenues in order to fund any new player acquisitions, but as of yet construction hasn’t even started due to legal challenges by residents close to the proposed site.

If they are relegated

Relegation means complying with a completely different set of regulations. Salary Cost Management Protocol (SCMP) is the regulation of choice for League’s 1 and 2, meaning clubs are currently restricted to a wage to turnover ratio of 65% in League 1 and 55% in League 2. In League 1 this figure will reduce to 60% from the start of next season. This would present a real problem for Bristol City who currently have a ratio of 158%! It is likely that turnover would decrease should the club be relegated, though it should also be expected, especially since the club was only promoted from League 1 in 2007, that player wages will also be contractually reduced. Even if wages are reduced in this way, the club would still face a monumental task to meet the terms of SCMP.

Other Issues

Relegated or not a lack of income means that Bristol City must reduce costs. Hopes that a new stadium is the answer seem far-fetched given attendances at their current stadium Ashton Gate. With a capacity of 21,497 and proposals to build a 30,000 seater at Ashton Vale to replace it, does the club have the support base to take advantage of this increase? The attendance figures would strongly suggest that they do not.

Bristol City Average Attendance
	2008/9	2009/10	2010/11	2011/12	2012/13
Capacity	21,497	21,497	21,497	21,497	21,497
Average Attendance	16,816	14,600	14,604	13,845	13,204
Usage	78.2%	67.9%	67.9%	64.4%	61.4%

When a 21,000 capacity stadium is on average less than two-thirds full, why build a 30,000 seater stadium to replace it? The money should be invested in developing young players to improve the club’s future on the pitch. Despite City’s lowly position near the foot of the Championship they are actually the highest placed team in the whole of South West England. £92 million would go a long way to building up a formidable academy and scouting network to aid the development of future players.

Bristol City are lucky enough to have an owner willing to invest in the club, however, the way that the club is currently operating is not conducive to its long-term success under FL regulations.