The English Premier League and the City of London (1980–2010): a tale of two ‘revolutions’

ABSTRACT

This work analyzes the English football ‘revolution’ of the 1980s–90s, epitomized by the launch of the English Premier League, through the lens of the financial ‘revolution’, which transformed Britain from the late 1970s. It identifies analogies between the two industries’ transformation and the attempts to regulate them, as well as differences, related in particular to the nature and implications of the respective crises. While research has concentrated on Americanization and globalization of English football, this article focuses on its (supposed) financialization. It looks at attempts to apply the shareholder value principle to English football and to generate profits for football clubs through financial, rather than traditional, channels. This article identifies instances of financialization in football. It argues, however, that unlike the financial sector, the fundamental causes of the crisis in English football were not rooted in its financialization, but in traditional factors, such as excessive wage costs.

Acknowledgments

The author would like to thank Celia Kent and two anonymous reviewers for their comments on an earlier draft of this paper.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. What I will refer to as ‘football’ throughout the paper, is known as ‘soccer’ in many parts of the world.

2. Hay, ‘Chronicles of a death foretold’. See also Saunders ‘Crisis? What crisis?’.

3. The downsizing of the state was symbolized by the privatization of former state-owned enterprises, particularly significant around the mid-1980s, and the dismissal of industrial policy (Woodward, The Management of the British Economy, pp. 157–94). More details on the growing role of the financial sector in the British economy will be provided in the next section.

4. George, ‘Before the Millennium’.

5. Gieve, ‘London, Money and the UK Economy’.

6. Gamble, ‘The United Kingdom: the triumph of fiscal realism’.

7. A Guardian/ICM poll found that 93 per cent of those interviewed considered banks and bankers responsible for the crisis, with 73 per cent of them convinced that they were the major culprits for it (Glover, ‘Voters blame bankers’).

8. These were the words of the economist Egon Frank interviewed by Kuper, ‘Football abandons the fantasy that it is a business’.

9. Hamil and Walters, ‘Financial performance in English professional football’.

10. House of Commons, Culture, Media and Sport Committee, Football Governance, 28.

11. Deloitte, Annual Revenue of Football Finance.

12. Duke ‘Local tradition versus globalisation’. See also the literature mentioned in note 39.

13. Millward, The Global Football League; Giulianotti and Robertson, Globalization and Football; and Giulianotti, ‘The globalization of football’.

14. Cassis, Capitals of Capital, 244–8.

15. Carruthers, City of Capital.

16. During the 1970s–80s the loss of jobs in the most developed economies – particularly in the manufacturing sector – was accompanied by a decreasing degree of unionization among blue-collar workers (Lazonick and O’Sullivan, ‘Maximizing shareholder value’, 19).

17. Kitson and Michie, ‘The de-industrial revolution: the rise and fall of UK manufacturing’.

18. Keegan, Mrs Thatcher’s Economic Experiment.

19. Kitson and Michie, ‘Britain’s industrial performance since 1960’.

20. Crafts, Britain’s Relative Economic Performance.

21. Jennett and Sloane, ‘Football in decline’.

22. Michie, The London Stock Exchange.

23. Lawson, ‘Forward’, i–v.

24. Augar, The Death of Gentlemanly Capitalism.

25. Augar, Chasing Alpha, 15.

26. At the same time, the BoE gained formal independence from the Treasury over the control of short–term interest rates.

27. Sukhdev, Moran, and Williams, ‘Post-Crisis Financial Regulation in Britain’.

28. Bell and Hindmoor, Masters of the Universe, 289–331.

29. Walters and Hamil. ‘The contests for power and influence’.

30. Pieper, ‘Financial fair play in European football’.

31. Dobson and Goddard, The Economics of Football; Kesenne, ‘Revenue sharing and competitive balance’; Kesenne, ‘League management in professional team sports’; and Sloane, ‘The economics of professional football’.

32. Conn, The Beautiful Game?, 34–6.

33. Szymanski, ‘Insolvency in English football’.

34. Platts and Smith, ‘“Money, money, money?”’

35. Dabscheck, ‘The Globe at their Feet’.

36. Taylor, The Association Game, 338–42; and Conn, The beautiful game?, 38–42.

37. Gibson, ‘Out of the ashes of Hillsborough’.

38. Taylor, The Association Game, 342–5; and Conn, The Beautiful Game?, 47–57.

39. Andreff and Staudohar, ‘The evolving European model of professional sports finance’; and Hoehn and Szymanski, ‘The Americanization of European football’.

40. The FA retained only the prescription that forbade owners from winding up clubs and keeping the proceeds (King, The End of the Terraces, 128–31).

41. Deloitte and Touche, Annual Review of Football Finance, 47.

42. Hamil and Chadwick, Managing Football.

43. Leach and Szymanski, ‘Making money out of football’.

44. Wilson, Plumley and Ramchandani, ‘The relation between ownership structure and club performance’.

45. Roman Abramovich, who took over Chelsea in 2003. The Chelsea purchase was a way for the Russian oligarch to secure part of the fortune he had earned, during the 1990s, by virtue of his proximity to President Vladimir Putin (Conn, ‘Chelsea are back in fashion’).

46. Malcom Glazer, who took over Manchester United in 2005; George Gillet Jr and Tom Hicks, who took control of Liverpool in 2007; John Henry, who took over a Liverpool in financial disarray three years later.

47. Alisher Usmanov, who acquired a minority stake in Arsenal in 2007; Farhad Moshiri, Usmanov’s partner, who took control of Everton in 2016.

48. Thaksin Shinawatra, former controversial Thai Prime Minister, forced into exile in London, who took control of Manchester City in 2007.

49. Stan Kroenk, who acquired the majority stake in Arsenal in 2008.

50. Vichai Srivaddhanaprabha, who took over Leicester in 2010 (all information for this and the previous four notes is in Nauright and Ramfjord, ‘Who owns England’s game?’).

51. Brett, ‘The limits to financialization’.

52. Davis and Kim, ‘Financialization of the economy’.

53. Davis, Managed by the Markets.

54. Lazonick and O’ Sullivan, ‘Maximising shareholder value’.

55. Arrighi, The Long Twentieth Century.

56. Karnak, ‘Accumulation by dispossession’.

57. Dixon, Garnham and Jackson, ‘Shareholders and shareholding’; and Tischler, Footballers and Businessmen.

58. Friedman, ‘The social responsibility of business’.

59. Fama and Jensen, ‘Separation of ownership and control’; and Jensen and Meckling, ‘Theory of the firm’.

60. Kay, ‘ The concept of the corporation’.

61. King, ‘New directors, customers and fans’.

62. Manchester’s Martin Edwards and Arsenal’s David Dein, for instance, realized huge capital gains floating part of their shares on the market (Edwards) or selling them privately to other businessmen (Dein) (Conn, The Beautiful Game? 54–7).

63. Morrow, The people’s game?, 85.

64. Szymanski, ‘Insolvency in English professional football’, p. 20; and Deloitte, Annual Review of Football Finance, 16.

65. Millward, ‘New football directors in the twenty–first century’.

66. Krippner, ‘The financialization of the American Economy’.

67. A new holding company headquartered in the Cayman Islands raised further governance issues with regard to the lack of transparency of the Manchester United Ltd operation (Morrow, ‘Football, economics and finance’).

68. Williams and Hopkins, ‘“Americanization”’. Also episodes of securitization, with lending provided by investors against anticipated cash flows such as season ticket sales or total gate receipts income, ended badly, as was the case for Leeds and Newcastle at the beginning of the 2000s (Morrow, The people’s game?, 159).

69. Thani and Heenan, ‘The ball may be round but football is becoming increasingly Arabic’.

70. A glance at the UEFA investigation over the scale of Manchester City’s Financial Fair Play’s breaches before 2014 revealed that the losses over the period 2012–13 were four times above the limit allowed by the FFP regulation. The deals with sponsors to balance the books were not commercially credible because these firms, namely Etihad, were directly linked to Sheikh Mansour (Conn, ‘Revealed: scale of Man City’s FFP breaches’).

71. Augar, The Bank that Lived a Little, 228–38.

72. Armitstead, ‘Barclays saviour Sheikh Mansour makes £2.25 billion’.

73. An inventory of the main concerns and policy suggestions to improve the situation can be found in the 2006 special issue of the Journal of Sports Economics (see, in particular, Lago, Simmons and Szymanski, ‘The financial crisis in European Football’; and Babatunde, Simmons and Szymanski, ‘English football’).

74. A few weeks after the September 2008 collapse of Lehman Brothers, which revealed the gravity of the financial crisis, Queen Elizabeth II inaugurated a new building at the London School of Economics and asked the economists convened there why nobody had seen the crisis coming.

75. Szymanski, ‘The financial crisis and English football’.

76. When, at the end of 2019, the US private equity firm Silver Lake acquired a 10 per cent stake in City Football Group, which controls Manchester City and other football teams, the overall valuation of the company stood at $4.8 billion (Ahmed, ‘Man City $ 500 million stake sale’). As impressive as it could seem, this represents but a fraction of HSBC’s capitalization. HSBS, the largest British multinational bank, realized in 2019 revenues of $56.1 billion, a figure that makes the €711.5 million revenues realized in 2018–19 by Manchester United – the wealthiest football club of the EPL – pale in comparison (Deloitte, Football Money League).

77. When in 2009 the Irish government decided to provide a blanket guarantee to its overleveraged banks and their bondholders, the result was a shocking 30 per cent deficit increase (Eichengreen, Hall of Mirrors, 354–8).

78. Hungarian economist Kornai’s ‘soft budget constraints theory’ – originally applied to explain the inefficiency of enterprises in socialist economies – has been used to compare football clubs to banks and make sense of the paradoxical coexistence, within the English football, of persistent losses combined with extreme stability (Storm and Nielsen, ‘Soft budget constraints’).

79. Babatunde, Simmons and Szymanski, ‘English Football’.

80. In the decades prior to the 2007–8 crisis, salaried bankers were able to enjoy remunerations that had previously been the preserve of owner–managers. This meant that bankers risking other people’s money benefited from the same privileges that in the past were reserved to those risking their own capital (Cassis and Telesca, ‘Financial crises and the public discourse on financial élites’).