By Peter Adolfsen Løhmann (@ploehmann)
What exactly is the financial state of play for Wednesday?
And what would it look like if we were to be relegated to League 1?
It is worth stating I’m not a trained accountant or in the possession of ’in the know’ knowledge. The following analysis is based on publicly available data sources and my own estimations and calculations.
With that disclaimer out of the way, let’s look at Wednesday’s wages bill since the 2012-13 season.
It’s clear to see how wages ballooned with the arrival of Dejphon Chansiri in 2015, going from £13m to £19m in the Play-Off final season, then £29m in the season finishing 4th and a staggering £42m in the ill-fated 2017/18 season (though the accounts for that season do span 14 months).
Since then I would project* the wage bill at Hillsborough has gradually reduced to a total of £22m in the current 2020/21 season, close to the £19m in wages paid in the chairman’s first season in charge (2015/16).
The wage bill in 2021/22, supposing that all remaining contracts are not renewed, will fall to just £9m** with only 14 players remaining contracted for the 2021/22 season. This projected wage bill has been constructed using wage estimates from Football Manager 2021, which is obviously imperfect, but is used by industry experts for similar purposes. To add in wages paid to other staff 25% is added to the wages paid to first team players to get the club’s total wage bill.
The players still under contract at Sheffield Wednesday in the 2021/22 season are:
- Bannan
- Dawson
- Dele-Bashiru
- Palmer
- Paterson
- Börner
- Harris
- Iorfa
- Luongo
- Wildsmith
- Dunkley
- Windass
- Adedoyin
- Green
It is worth noting that Adam Reach and Tom Lees are reported to have been offered new contracts. If they accept I’d estimate the club’s yearly wage bill to be £12m rather than £9m, in 2021/22.
Wage costs have plummeted since 2017 and could continue to do so: Sixteen players, including two loanees, are not under contract for the 2021/22 season and they have combined yearly wages of £10m.
That’s a bare minimum squad, with depth largely supplied via youngsters, and you’d expect at least a few to leave and a few to join, so a likely cost would probably end up being at least £10m-£12m.
What would all this mean if we end up relegated?
No more salary caps! The EFL recently abolished its ’Squad Salary Cap’ in League 1 and 2 after an arbitration panel found it unlawful. In the absence of new rules as a reaction to that development the spending regulations in League 1 are now back to the previous regime of ’Salary Cost Management Protocol’ (SCMP).
The SCMP pegs a clubs wages to how much revenue a club has:
However, EFL rules also state that relegated Championship clubs can operate a wage bill of 75% turnover:
What would that restriction mean for us if we were relegated?
First, let’s look at our turnover, the money earned by the club, since 2012:
The effects of the pandemic are clear to see in my projections with just £14m of revenue expected this season. The estimated revenue for 2021/22 assumes fans are allowed back into stadia.
Relegation would mean a drastic reduction in revenue in a situation, where Chansiri is already struggling to make ends meet with the club’s cash flow, even drawing out repayment of an estimated £700,000 worth of season tickets.
In the Championship Wednesday receive around £8m in broadcast income (before the Covid-19 rebate to broadcasters). That falls all the way down to around £2m in League One.
On top of that attendances are also likely to fall, meaning a drop in match day revenue even before accounting for effects of the pandemic currently, in the immediate future and in the longer term. When were last relegated in 2010 average attendances dropped by more than 20%, from 23,000 to 18,000:
When Sunderland went down in 2019 their attendances increased - but they also reduced tickets by around 15% - and their matchday income increased too, in part due to more home matches and two Wembley appearances in their first season in League 1.
Sunderland’s first season down in League 1 is a poor proxy for Wednesday, though: Their attendances are significantly higher than ours and they had the comfort blanket of Parachute Payments to draw on in licking their wounds in that first season in League 1 in 2018/19. Football finance expert @SwissRamble on Twitter estimates revenue of £19m for Sunderland in the current season.
Wednesday’s revenue isn’t likely to be that high in League 1, but instead around £14m***. We’d be allowed to spend around £10m (75% of revenue) of that under the SCMP financial regulations mentioned before. It’s worth noting that the 23-man skeleton squad shown above had wage costs of £12m, so they would be £2m too high.
’Football Fortune Income’ meanwhile is transfer fees received, prize money - and investment from owners by means of shares (equity). The chairman has largely loan-financed the hefty losses of Wednesday during his tenure, and if he is prepared to issue and buy new shares himself we can spend all of that income on players’ wages if we wanted to.
Add that to the fact that the “Salary Control Management Protocol” is a limp construction compared to the abolished “Squad Salary Cap”.
According to football finance expert Kieran Maguire SCMP is full of loopholes, which we, considering we’ve used the P&S loophole of sale and lease back of our stadium, would probably not hesitate to use.
* = The wage expenses of 2018/19 onwards are, as listed, projections. Educated guesswork on my part, but informed by the relation between the total wage expenses listed in accounts and the estimation of individual players’ wages in those years using various sources and some rules of thumbs used in football finance on how the wages of first team players relate to the total wage bill (adding 25% to first team players’ wages to get total wages paid to all staff).
** = For the purposes of this projection, Barry Bannan’s recently extended contract is assumed to be on the same estimated wages as before.
*** = Includes an assumed 25% drop in match day and commercial income and £2m in broadcast income.
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