Sir Jim Ratcliffe knows how to turn around a struggling industrials business. The British billionaire, now in charge of sporting operations at footballing giant Manchester United, made his name and fortune buying and rejuvenating underperforming chemicals businesses over more than two decades. But does he know how to turn around a struggling football club? The evidence increasingly suggests not.
In the three years to 2024, United made losses totalling more than £300mn, making them the second most lossmaking club in the English Premier League after Chelsea — a remarkable reversal from a decade earlier.
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Ratcliffe, who bought about a 25 per cent stake in Manchester United early last year, might have seemed a sensible choice as a co-shareholder for the Glazer family given his business record. But rejuvenating a football team requires more than standard corporate measures such as streamlining processes or cutting the cost base. It requires much more cultural and strategic change. This is clear from the very financial accounts Ratcliffe has been tasked with turning around.
There is no mystery as to why United’s finances have deteriorated so rapidly in recent years. On the revenue side, commercial and match-day income have held up well. But broadcast incomes — largely determined by the club’s progress on the pitch — have fallen markedly.
Multiyear downturns are not entirely unheard of among football’s financial giants, but the length and depth of United’s decline is unprecedented going back to the 1980s. No erstwhile dominant club has fallen this far.
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The club’s poor finishing position in the Premier League alone is on course to wipe £46mn of revenues across this and last season. Failure to qualify for the highly lucrative Champions League tournament has put it a further £90mn into the red over the past three years, according to analysis by football finance expert Kieron O’Connor. And if, as seems likely, United fails to qualify for any of next season’s European competitions, that would mean another £80mn of foregone income.
Football-related reasons also account for ballooning costs. The club’s recruitment policy has been particularly dire, both on and off the pitch. United has spent more money on redundancy payouts for failed managerial and executive appointments in the past decade than any other club in Europe, including almost £30mn in the last three seasons.
As for players, the picture is even worse. More than half the club’s most expensive signings in the past decade have been failures, going on to spend less than a third of the available time on the pitch.
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This is a worse record than any other major club across Europe, and amounts to tens of millions wasted per year. No club has a spotless record in the transfer market. But United’s £81mn annual accounting charge attributable to signings who are not active on the field of play is roughly double the average for peer clubs at home and abroad.
Particularly striking is that the market value of players signed by United tends to depreciate almost immediately upon arrival, instead of rising as is the case for most peers. Whether an indication of paying over the odds, or that the club’s on-pitch malfunctions are causing players’ performance to deteriorate at Old Trafford, the data paints a damning picture.
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Over the past three years, adding together the annual £45mn in lost broadcast revenues from poor results, £5mn in compensation packages for failed recruitment at the managerial and executive level and a further £40mn in wasted transfer fees, we arrive at £90mn per season for the costs of dysfunction, equating to almost 90 per cent of the club’s annual losses over the same period.
Ratcliffe’s most high-profile proposed remedies to date on the business side have involved cost reductions — cutting jobs for non-footballing employees and scrapping free lunches for club staff. But old-school corporate cost-cutting fails to address the underlying reasons behind the club’s deterioration both on the pitch and in the accounts. Turmoil on the sporting side has prevented any joined-up thinking about the club’s identity and player recruitment.
Ratcliffe brought in a new manager last November, but results have been scarcely better, if not worse. Continued decline on the pitch will comfortably drown out the proceeds from a few deleted cost items.
john.burn-murdoch@ft.com, @jburnmurdoch
Wasted transfer fees methodology
Annual losses due to poor player recruitment were calculated by taking the cost of players purchased (in accordance with accounting principles, this is calculated by dividing a player’s transfer fee by the number of years on their contract), and multiplying this by the share of matches these players did not participate in. In essence: the amount of money coming out of the club’s accounts for players who do not play.
The resulting annual total for Manchester United was then compared to the average for peer clubs to estimate United’s “wasted” spending on under-utilised players in excess of the normal range.
