The BookKeeper: Analyzing Manchester City’s Finances Amid a Season of Transformation

The Athletic has appointed Chris Weatherspoon as its inaugural football finance writer. A chartered accountant, Chris will be delving into the financial aspects of the sport as The BookKeeper. He will kick off this week with a series examining the financial status of some of the Premier League’s most prominent clubs.

Learn more about Chris, share your ideas with him, and check out his first piece on how Manchester United found itself in a financial predicament.

Last summer, following the triumphant wave of a record fourth consecutive English league title, Manchester City felt little need for significant changes. While competitors bolstered their squads and lavish spending became the norm in the Premier League, the reigning champions emerged as the division’s least spenders, contributing merely £23 million out of the £2.4 billion spent by top English clubs.

A restructuring would be essential, but City opted to wait. Even the transfer of Julian Alvarez to Atletico Madrid failed to dampen the optimism in the blue half of Manchester, especially since his transfer fee set the window’s record at £64 million ($83 million), potentially reaching £81 million.

Then the clouds gathered. City, who had been dominant under Pep Guardiola, faltered in the fall, finding themselves in seventh by Christmas. In the altered Champions League format, they narrowly avoided an early exit. Thus, like any wealthy entity facing a downturn, they went on a spending spree.

The effectiveness of retail therapy in enhancing mood is debated. A study from the University of Michigan published in late 2013 suggested that shopping could reduce lingering sadness by re-establishing a sense of personal control. By acquiring new items, shoppers might regain some agency in their lives, lifting their spirits.

That study, however, did not explore the finances of football clubs, leaving open the question of whether such control could mitigate the despair following a 5-1 loss to a major rival. Yet, City’s £50 million signing of Nico Gonzalez on deadline day likely provided a modest comfort to Guardiola and his team after the harrowing match against Arsenal.

City invested £183 million during the winter, marking the highest mid-season spending ever, second only to Chelsea’s £275 million two years prior. They were the only club to surpass £100 million in fees, outspending the next highest team, Al Nassr of the Saudi Pro League, by nearly three times. Domestically, City accounted for over 40% of the Premier League’s total spend. Moreover, they secured the best striker on Earth with a nine-and-a-half-year contract.

So, in an era of spending regulations, what impact did this have on their financial standing? And what is the overarching financial landscape for City amid a season filled with changes and legal disputes with the Premier League?

How could City afford to spend so much this winter?

Apart from the obvious reason—‘They are owned by an Emirati royal’—City’s ability to spend stems from years of financial success. There’s little concern that City’s credit cards will be declined anytime soon. Regarding profit and sustainability rules (PSR), unlike during UEFA’s initial introduction of financial limits in the early 2010s, City finds no cause for concern. The club’s owners have not injected money as shares since a £23 million boost in 2021. This means City can afford to incur a £15 million loss over three years, a threshold they easily surpass due to their profitability.

In the three years leading up to the end of last season, City reported a cumulative pre-tax profit of £195.9 million. Their PSR position strengthened further when allowable costs—such as infrastructure investment and women’s football—were deducted. Using a mix of estimates and disclosed figures, The Athletic estimates City’s PSR headroom from last season’s calculations to be about £324 million.

Consequently, they should face no hurdles regarding compliance this year either. City’s finances may be affected by their early exit from the Champions League and reduced domestic prize money, but participation in this summer’s Club World Cup could offset those losses. Unless they incur a staggering £287 million loss this season (spoiler: they won’t), they should remain unaffected by Premier League’s PSR requirements, even following their winter investment spree.

The £183 million spent on transfer fees is expected to approach £200 million once agent fees and other costs are accounted for, but it won’t all hit City’s financial statements this season. Omar Marmoush, Abdukodir Khusanov, Vitor Reis, and Nico were all signed on contracts spanning four-and-a-half years, meaning only £22 million of additional transfer fee costs will be reflected in City’s 2024-25 figures after amortisation (spreading acquisition costs over the contract duration).

This season’s accounts will also reflect substantial sales made by City in the summer. Alvarez’s transfer to Atletico generated a significant profit — likely at least £45 million or more — and the departures of Joao Cancelo and Liam Delap added further financial boosts.

City now also faces UEFA’s squad cost ratio rule, which limits clubs’ expenditures on their football staff. The governing body mandates a cap on ‘relevant turnover’ — 90% last season, 80% this season, and 70% from 2025-26 onward — yet allows clubs to count player-sale profits toward relevant turnover. While City’s headroom will be reduced from last year, it should still not pose any issues.

What do Manchester City’s recent finances look like?

Last season marked Manchester City’s fourth consecutive profit and their ninth in the last ten years. Despite experiencing a loss of £125 million in 2020 due to Covid-19, City has posted net pre-tax profits totaling £126.4 million over the past decade.

City stands as one of the most profitable clubs in both English and world football. When excluding one-off items like owner loan write-offs, only Liverpool (£136.2 million) has recorded a higher net profit across the last ten accounting periods.

City is among the few teams to have effectively bounced back from the pandemic after a challenging financial period. In the five years leading up to the Covid-19 outbreak, Premier League clubs were typically profitable. However, the pandemic led to stagnating or declining revenues against rising wage bills and other costs.

The financial repercussions were severe: of the 80 financial results for Premier League clubs reported from 2019-20 to 2022-23, only 20 were profitable. City accounted for three of these. In the years 2016-17 and 2017-18, all of the Premier League’s ‘Big Six’ were profitable. Since the pandemic, City has been the only club within that group to record a profit, aside from Liverpool in 2022, which was notably low at just £7.5 million.

This is impressive yet potentially misleading. While City has been consistently profitable, it’s essential to recognize this follows substantial losses after their takeover by the Abu Dhabi United Group (ADUG) in 2008. During the first six years of ADUG ownership, the club racked up a cumulative pre-tax loss of £601 million, which dwarfs the combined net loss of all other Premier League clubs by £56 million at £545 million, not accounting for two years of expected losses at Portsmouth during that time when they were in administration and did not publish their accounts.

City’s earlier heavy spending is old news but its effects linger. The club continues to benefit from impressive management of the transfer market; throughout their last seven profitable years, they recorded an operating loss in each, offset by substantial player sale profits. Last season’s transfer of Riyad Mahrez, Aymeric Laporte, Cole Palmer, and other young talents led to a record £139 million in profits from player sales. Over the past five years alone, they have accrued £436.8 million from selling players.

Revenue up again – even without a treble

City’s revenue hit another club record of £715 million last season. Although this represented only a £2.2 million increase from the previous year, any growth is commendable, especially following their treble-winning season. This revenue solidified City’s position as the second-highest income-generating club worldwide, though significant year-on-year growth at Real Madrid has allowed them to leap ahead by over £170 million.

City experienced minimal fluctuations in their three primary revenue streams, with matchday income rising five percent to £75.6 million. Meanwhile, commercial income grew by one percent to £344.7 million, though broadcast revenue dipped by two percent to £294.7 million. In the latter two categories, they dominate domestically, although their matchday income ranks only sixth-highest in the Premier League.

The club views matchday revenue as a crucial growth area, which is why they are significantly investing in expanding the Etihad Stadium and its surrounding area. City’s gate receipts still lag behind Manchester United by £61.5 million, with Tottenham Hotspur joining United, Arsenal, and Liverpool as the English clubs whose matchday revenues exceed £100 million.

The redevelopment initiatives at the Bernabeu have driven the heightened income at Real Madrid, one of several European rivals outpacing City in matchday revenue. According to the latest data, Bayern Munich and Barcelona (despite reduced attendances due to ongoing renovations at Camp Nou) also outgrew City in this area. These improvements will elevate the Etihad’s revenue potential. For now, season ticket prices saw an average increase of five percent for the 2024-25 season, continuing a trend where fans have absorbed increased costs for nearly all of the last ten years.

City’s exit in the Champions League quarter-finals impacted broadcast revenues, though £4 million of that loss was mitigated by December 2023’s success in the Club World Cup. City continues to excel and grow commercially, with last season’s commercial income of £344.7 million marking the highest in England for four consecutive years.

The commercial income figures have sparked extensive debate, forming the basis of many of the 129 charges against the club in their protracted legal battle with the Premier League. Allegations suggestCity disguised financial injections from majority shareholder Sheikh Mansour as sponsorship revenue. It’s crucial to note that the gravity of these charges is significant: City’s auditor, BDO LLP, has consistently signed off on the club’s accounts without issue, meaning any claims of misrepresenting commercial revenue would suggest City is engaging in practices far beyond simply breaching industry-specific financial regulations. City maintains their innocence.

The staggering increase in City’s commercial revenue since the 2008 takeover—over 1,000 percent—cannot be overlooked. While all major clubs have witnessed significant growth, City started from a relatively low base. Notably, only City and Paris Saint-Germain (the French club with state ties) have maintained pandemic-proof commercial revenue growth among Europe’s elite, with both clubs achieving a remarkable 1,000 percent commercial expansion since 2008.

The implications of City’s commercial rise are substantial. Over the past decade, they have amassed £2.54 billion in commercial revenue, surpassed only by United’s £2.67 billion—an advantage City is steadily eroding at a rate of £40 million annually. The gap to the closest rival, Liverpool (£1.67 billion), is enormous, granting City a significant competitive edge, thus making the scrutiny over the outcome of their court case all the more critical.

How wages compare – and the CFG disparity

City’s wage bill decreased last season by £10.3 million (two percent) to £412.6 million. This drop was expected, as the previous accounts factored in bonuses from their historic treble. Nevertheless, many anticipated a more pronounced decline for the 2023-24 season.

Few clubs disclose the proportion of their wage bills used for player salaries, and City is no different. However, a UEFA report from 2024 revealed that City allocated €389 million (£338 million; $430 million) of their 2022-23 wage bill to players, which represented 80 percent of the total wage expenditure. Applying this percentage to 2023-24 leads to a projected playing wage bill of £330 million.

Interestingly, UEFA’s latest ‘finance and investment landscape’ report presented a notable divergence from City’s financial declarations. It indicated City’s wages as the second-highest in Europe at €554 million, coming in behind PSG. Based on UEFA’s exchange rate, this would translate to a wage bill of £475.8 million—£63.2 million above City’s reported figures. This discrepancy highlights the difference between wages acknowledged by UEFA and those recorded in the club’s annual accounts.

This variation stems from UEFA’s reporting requirements, which necessitate clubs disclose any figures related to their football operations, including amounts originating from other legal entities. City’s annual statements cover the club exclusively, not other related legal entities that contribute to football activities. Consequently, City reports higher wages to UEFA than what appears in their club accounts in order to accurately reflect related football costs.

Entities under City Football Group (CFG), the parent company overseeing multiple clubs, likely account for much of the wage disparity. While City operates profitably, CFG overall has significantly higher losses, confirming that figures shared with UEFA often differ from those presented in club financial reports.

City’s wages remain the highest in the Premier League, as has been the case in four of the last five years. Last season marked the second consecutive year their wage bill surpassed £400 million, a feat achieved by only one other English club. Chelsea’s £404 million in 2023 included approximately £45 million in managerial turnover costs. City is a major payer, and this investment reflects positively on the pitch.

That said, they are not over-leveraging themselves; City’s wages accounted for 58 percent of revenue last season, a metric that has remained stable over most of the last decade. Moreover, they are not among the world’s top spenders. PSG, for instance, allocated approximately £565 million on wages in the 2023-24 season, despite not having Lionel Messi or Neymar in their ranks.

Pep’s net spend argument

Guardiola has been keen in recent difficult times to emphasize City’s relatively low net spend. Reviewing the past five years of club accounts highlights his perspective. Between 2020 and 2024, City invested £970.3 million on new players while recouping £570.5 million from sales, leaving a net spend of £399.9 million. This ranks them sixth in England, trailing Chelsea (£833.6 million from 2019 to 2023), Arsenal (£776.5 million, 2020-24), Manchester United (£713.1 million, 2020-24), Newcastle United (£492.2 million, 2020-24), and Tottenham Hotspur (£468.6 million, 2019-23).

There’s a purpose behind Guardiola indicating net spend, as this metric reflects well on his accomplishments at City. However, it does not encompass a club’s overall financial commitment. Correlation between transfer outlay and on-field success is tenuous, as wages have historically served as a better predictor of club performance. Moreover, implying a lower net spend suggests a club has to offload its stars and seek low-cost hidden gems, which has not been the narrative at the Etihad. City’s investment of £970.3 million in new players is only surpassed by Chelsea and narrowly by Arsenal (£991.7 million).

What City has substantially benefited from is the dividends of plans initiated over a decade ago. Their renowned youth facilities have been crucial in their strategy to elevate City into a top-tier club. The establishment of a highly revered academy is now translating into evident financial gains.

Over the last six years, six players—Taylor Harwood-Bellis, Romeo Lavia, James Trafford, Douglas Luiz, Gavin Bazunu, and Carlos Forbs—have transitioned from City’s ranks for eight-figure fees despite not having played a single minute in the Premier League. City earned £99 million from these transfers without factoring in potential sell-on clauses from subsequent moves.

Adding the £40 million received for Palmer from Chelsea, £15 million from Ipswich Town for Delap last summer, and £10.5 million from Southampton for Shea Charles brings the total to over £150 million for nine players with a cumulative Premier League career at City of scarcely more than six full games.

Surprisingly, Palmer is viewed by many as a player City regretted selling, but it’s important to highlight that Guardiola did not part ways with a key player. One of City’s financial triumphs has been their ability to generate significant funds from mainly untested young players.

City’s youth academy is now a benchmark for other clubs, many of which are eager to replicate its success—yet this must be recognized when discussing net spend. While transfer fees don’t necessarily guarantee future achievements (as evidenced by the cross-city rivals, United), it nonetheless stands to reason that a pricier squad should yield better results. At the end of June, City’s squad expenditure totaled £1.11 billion, the second-highest in Europe, surpassed only by Chelsea (£1.42 billion). Regardless of their net spending, City and Guardiola possess one of the most lavishly assembled squads in global football.

Legal case and what’s next?

With the exception of the Covid-impacted 2019-20 season, Manchester City’s revenue has risen each year since 2008. However, this trend may be at risk this season. Their exit from the Champions League prior to the round of 16, coupled with the unlikelihood of securing a fifth consecutive Premier League title, is expected to reduce their broadcast income.

Domestically, the reigning champions earned £175.9 million in Premier League distributions last season—a figure they may not reach this year. Currently, City ranks fifth, positioning them for a decreased merit payment of around £12 million. Furthermore, as of April 28, 2024, City has been selected for live TV broadcasts 23 times. With only four games remaining after that date, they cannot equal last season’s total of 28 selections, which means a decrease in income from television appearances (which typically yield around £1 million per game).

On the European front, City accrued €122 million from reaching the Champions League quarter-finals in the 2023-24 season. However, based on their current performance, this figure is likely to decline significantly, despite the new UEFA competition format potentially offering even more wealth to clubs. City won two and lost three matches in their eight league-stage games this season, in contrast to their previous year when they won all six group games before succumbing at the second knockout stage to Real Madrid. Even with the elevated prize pool, forecasts suggest City will earn only €75 million from the Champions League, their lowest in seven years.

Yet, a decline in income this season is not entirely certain. As observed, City’s commercial earnings continue to soar, and any downturn in broadcast revenue could be offset by their participation in the newly revamped Club World Cup. FIFA’s tournament spans the financial year’s end, with reports indicating City could receive £46 million just for participation and potentially up to £77 million if crowned the champions, suggesting the expanded Club World Cup could counterbalance the financial impacts of their underperformance elsewhere.

The ongoing high-profile court case with the Premier League has brought sustained scrutiny to the club’s finances.

For instance, the UEFA finance and investment report took note of kit and merchandising revenue, labeling it a proxy for gauging each club’s global support base.

The report emphasized that among the 20 clubs with the highest merchandising income, City derived the least percentage of their overall income from these channels.

While the UEFA document did not specify whether the figures represented net or gross amounts, a source familiar with the matter indicated that inconsistencies in club reporting could explain City’s lower ranking. The club outsources its merchandising activities to stichd, a licensee of the PUMA Group, resulting in them recording merchandise income on a net basis. According to the source, City’s standing regarding kit and merchandise income would improve should all clubs report on a gross basis.

Javier Tebas, La Liga’s president, has been more direct in his comments at the recent Business of Football Summit. Tebas expressed his apprehension that City obscures expenses through affiliated companies, revealing that La Liga reported the club to the European Commission in July 2023.

“My concern does not stem from APTs; I’m worried about the external entities where City’s costs are funneled,” he stated.

“They operate a scouting company and a marketing firm. These businesses charge City less. City’s costs are lower than they would be without this network of companies.

“Their focus is evading regulations and rules. We reported this to the European Union with documented evidence.”

City has refrained from commenting.

Concerning CFG, a comparison highlights that City’s financial performance contributes a larger portion of CFG’s overall income than its costs. CFG’s accounts, similar to City’s, undergo an annual audit, consistently receiving clean assessments.

Some observers interpreted City’s minimal summer spending as an indication the club anticipated an unfavorable judgment in the ongoing Premier League court case. However, this winter’s activity should dispel that theory. This assumption is further challenged by the club’s ongoing commitment to expanding the Etihad. As of June 2024, there were £73.8 million in assets under construction on the club’s balance sheet, alongside £169.3 million in committed infrastructure expenditures. The total investment for the project is expected to reach approximately £300 million. If City is indeed attempting to project an air of confidence ahead of a court verdict, it is a convincing act.

Such expenditures will not immediately affect the club’s PSR calculations; at least, not until work completes and operational costs start to reflect within the finances. Costs that do immediately impact—like amortized transfer fees and new wages, including the substantial contract of Erling Haaland—still won’t bring City near a breach.

The financial consequences of the court case, however, are much less certain. A victory for City would likely ensure the continuity of their financial ascent, while a defeat could dramatically alter the scenario.

Since their world was radically transformed a decade and a half ago, Manchester City has remained a compelling club to scrutinize off the pitch. There are few signs this trend will cease anytime soon.

(Top image: Eamonn Dalton for The Athletic, images: Getty Images)