The BookKeeper – Exploring Manchester City’s finances during a season of change

The Athletic has appointed Chris Weatherspoon as its first dedicated football finance writer. Chris is a chartered accountant who will be using his financial acumen as The BookKeeper to explore the money behind the game. He is starting with a series this week analysing the financial health of some of the Premier League’s biggest clubs.

You can read more about Chris and pitch him your ideas, and his first article exploring how Manchester United ended up in a financial mess.

Last summer, in the afterglow of a record fourth consecutive English league title, Manchester City didn’t feel the need to do much. As rivals strengthened and Premier League splurging continued, the reigning champions were the division’s lowest spenders. Of the £2.4billion spent by England’s top clubs, City accounted for just £23million of it.

A rebuild would be necessary but City could wait another year. Even the departure of Julian Alvarez to Atletico Madrid did little to dim sunny dispositions in the blue half of Manchester, not least as his sale brought in world football’s biggest fee of the window — £64m ($83m), potentially rising to £81m.

Then the rains came. City, imperious under Pep Guardiola for so long, imploded in the autumn and on Christmas Day, sat seventh. In the revamped Champions League, they were in danger of going out at the first hurdle (avoided, just). And so, like any rich protagonist in a rut, they went shopping.

The effects of retail therapy on mood improvement are debatable. A University of Michigan study published in late 2013 found residual sadness was reduced by shopping because it gave the shopper what the paper termed “personal control restoration”. Through the act of buying things, individuals regained some agency over their lives, so they felt less sad.

The study didn’t cover football clubs, so the question of whether control restoration might sufficiently offset the misery felt after a 5-1 defeat at one of your biggest rivals was omitted, but City’s £50m deadline-day signing of Nico Gonzalez presumably acted as a small salve to Guardiola and staff following a chastening 24 hours beforehand against Arsenal.

City spent £183m in the winter, the highest-ever mid-season spend behind Chelsea’s £275m two years ago. City were the only club to top £100m in fees, disbursing almost three times as much as next-highest spending Al Nassr of the Saudi Pro League (whose entire outlay went on coaxing Jhon Duran from Aston Villa). Domestically, City accounted for over two-fifths of the Premier League’s spend. Oh, and they also tied down the best striker on Earth to a nine-and-a-half-year contract.

So in a world of spending regulations, what did this do to their financial position? And what is the broader picture for City during a season of change in which they are also fighting legal battles with the Premier League.

How could City afford to spend so much this winter?

Other than the glaringly obvious, ‘They’re owned by an Emirati royal’ answer, City’s could splurge thanks to years of financial prosperity. There’s little fear of City’s club credit cards being declined any time soon. And as for profit and sustainability rules (PSR), unlike when UEFA first introduced financial limits in the early 2010s, City have nothing to concern themselves with. The club’s owners haven’t put money in as shares since a £23m injection in 2021, meaning City can only lose up to £15m of their own money over three years — but the club are so profitable such matters are hardly on their radar.

In the three years to the end of last season, City booked a cumulative pre-tax profit of £195.9m, a PSR position made stronger once allowable costs, such as investment infrastructure and women’s football, are deducted. Using a combination of estimates and figures disclosed in the accounts, The Athletic projects City’s PSR headroom in last season’s calculation came to around £324m.

Correspondingly, they’ll have zero trouble with compliance this year, too. City’s finances will be impacted by their exit from the Champions League and they’re likely to drop domestic prize money but this summer’s Club World Cup could cover those shortfalls anyway. Unless they posted a £287m loss this season (newsflash: they won’t), they’ll be fine on the Premier League’s PSR, even after the winter spree.

The £183m they spent in transfer fees will be closer to £200m once agent payments and other associated costs are included, but that’s not £200m hitting City’s books this season. Omar Marmoush, Abdukodir Khusanov, Vitor Reis and Nico were signed on four-and-a-half year deals, so only £22m of extra transfer fee costs should land in City’s 2024-25 figures after amortisation (spreading the cost of acquiring a player over the length of their contract).

This season’s accounts will also include significant sales City made in the summer. Alvarez’s move to Atletico ensured a chunky profit on sale — likely at least £45m, possibly more — and the departures of Joao Cancelo and Liam Delap generated yet more money to boost the bottom line.

City are also now subject to UEFA’s squad cost ratio rule, which seeks to limit how much clubs can spend on their football staff. European football’s governing body will only allow clubs to spend a certain amount of ‘relevant turnover’ — 90 per cent last season, 80 per cent this and 70 per cent from 2025-26 onwards — but crucially, it allows clubs to count player-sale profits towards relevant turnover. City’s headroom here will be reduced from last year, but still shouldn’t pose a problem.

What do Manchester City’s recent finances look like? 

Last season was Manchester City’s fourth consecutive year of posting a profit, and their ninth in the last 10, although the one loss-making year in 2020 comprised a hefty, Covid-19-induced £125m deficit. Even including that big loss, City have booked net pre-tax profits of £126.4m in the last decade.

City are one of English and world football’s most consistently profitable clubs. If we strip out skewing — one-off items, such as owner loan write-offs — the only Premier League club to have posted a higher net profit over their last 10 accounting periods is Liverpool (£136.2m).

City are one of only a handful of teams to have successfully rebounded from the pandemic. In the five seasons before the Covid-19 outbreak, Premier League clubs were generally profitable. Then the virus arrived and revenues stagnated or fell as wage bills and other costs kept growing.

The impact on club finances was galling: of the 80 financial results for Premier League clubs announced from 2019-20 to 2022-23, just 20 were profitable. City accounted for three of those. In 2016-17 and 2017-18, all of the Premier League’s ‘Big Six’ were profitable. Since the pandemic shutdown, the only club among that cohort to post a profit other than City was Liverpool in 2022, and that was on the low side at just £7.5m.

That’s impressive, while potentially misrepresentative. City have been a profitable club for a while but it is worth remembering what it comes on the back of: heavy losses in the years after being taken over by the Abu Dhabi United Group (ADUG) in 2008. The first six years of ADUG ownership, unrestrained by any domestic ‘financial fair play’ regulations, saw City rack up a cumulative pre-tax loss of £601m. To put that sum into context, the net loss of every other Premier League club combined in those six years was £56m lower, at £545m, albeit that does omit two years of expected losses at Portsmouth, who entered administration during that time and didn’t publish their accounts.

City investing heavily back then is old news but its impact continues to be felt today. The club’s ongoing profitability derives from their excellent navigation of the transfer market; in each of their last seven profitable years, City booked an operating loss, with that propelled into the black by chunky player sale profits. Last season, by selling Riyad Mahrez, Aymeric Laporte, Cole Palmer and a slew of other youngsters, City’s profit on player sales figure hit a club-record £139m. In the past five years alone, player sale profits stand at £436.8m.

Revenue up again – even without a treble

City’s revenue increased again last season to another club record of £715m. That was only a £2.2m increase on 2022-23, but any growth is impressive given it came on the back of their treble-winning season. That £715m was enough for City to retain their position of generating the second-highest income in world football, though enormous year-on-year growth at Real Madrid means the Spanish giants’ income now sits over £170m ahead of anyone else.

City saw minimal change across all three main revenue streams, with matchday income up five per cent to £75.6m, commercial income up one per cent to £344.7m and broadcast income falling two per cent to £294.7m. In each of the latter two categories, they lead the way domestically, though that matchday revenue figure is only the Premier League’s sixth-highest.

City view that as a significant growth area, and it’s one of the reasons the club is investing heavily in expanding the Etihad Stadium and the surrounding area. City’s gate receipts trail Manchester United by £61.5m, and Tottenham Hotspur joined United, Arsenal and Liverpool as the English clubs whose annual matchday revenues top £100m.

The regeneration project carried out at the Bernabeu drove the surging income at Real Madrid, one of several European rivals who make more money on matchdays than City. Based on the latest available figures, Bayern Munich and Barcelona (even despite having their attendances slashed while the Camp Nou is renovated) took more at the gate than City. Those ongoing works will improve the Etihad’s standing. For now, season ticket prices rose by an average of five per cent for 2024-25, continuing a theme whereby supporters have borne extra costs in nearly all of the last 10 seasons.

Falling at the quarter-final stage of last season’s Champions League hit City’s broadcast income, though £4m of that was offset by Club World Cup success in December 2023. Commercially is where they continue to excel and grow. Last season’s figure of £344.7m was the highest in England for the fourth year running.

City’s commercial income figures have been a cause of much debate in the past, and they form the basis of a hefty chunk of the 129 charges levelled at the club in their ongoing legal battle with the Premier League. They stand accused of disguising cash injections from majority owner Sheikh Mansour as sponsorship income. It’s worth noting here the gravity of those charges: City’s auditor, BDO LLP, has repeatedly signed off on the club’s accounts without issue, so any suggestion of misstating commercial income figures is to accuse City of going far beyond just breaching some industry-specific (and oft-criticised) financial rules. City deny any wrongdoing.

The club’s increase in commercial revenues since the 2008 takeover remains staggering, having risen by over 1,000 per cent. All big clubs have seen huge rises and City were starting from a particularly low base. Even so, critics point to how among Europe’s elite it was only at City and Paris Saint-Germain — the French club who also have state ties — that commercial revenues remained pandemic-proof. Among the continent’s most prominent clubs, only City and PSG have enjoyed 1,000 per cent commercial growth since 2008.

The impact of City’s commercial growth can hardly be understated. Across the past decade, they’ve booked £2.54bn in commercial revenues, a figure eclipsed domestically only by United’s £2.67bn — an advantage City are now eating into at a rate of £40m per season. Everyone else is a long way back, with Liverpool (£1.67bn) the only club within £1bn of their Mancunian rivals. That’s a huge edge to have, so it’s little wonder City’s rivals will be watching the outcome of that court case with a keen eye.

How wages compare – and the CFG disparity

City’s salary bill fell last season, down £10.3m (two per cent) to £412.6m. A reduction was unsurprising — the previous set of accounts included bonuses from the historic treble — but the expectation was the drop in 2023-24 would have been more pronounced.

Few clubs disclose how much of their wage bills are consumed by the playing squad. City are no different but there was some information released in a 2024 UEFA report that detailed the quantum of various clubs’ player wages (the relevant page of the report has since been removed from the version available on UEFA’s website — why it was removed is unknown). According to that, City spent €389m (£338m; $430m) of their 2022-23 wage bill on players. That was 80 per cent of the season’s overall bill, so applying the same proportion to 2023-24 gets us to a playing wage bill of £330m.

On the topic of UEFA documents, the governing body’s most recent ‘finance and investment landscape’ report included a notable divergence from City’s financial statements. In there, City’s wages were listed as Europe’s second-highest at €554m, only trailing PSG. Using UEFA’s exchange rate, that translates to a wage bill of £475.8m — £63.2m higher than the figure per City’s accounts. In other words, there’s a material difference between the wages reported to UEFA and those in the club’s annual accounts.

That difference is explained by UEFA’s reporting requirements. The governing body employs a ‘reporting perimeter’, which asks that clubs report any figures ‘in respect of (that club’s) football activities’, including any amounts that occur under the auspice of other legal entities. By contrast, City’s published accounts cover the club individually but none of the other active legal entities related to the club, some of which evidently contribute to football activities. City therefore report a higher wage bill to UEFA than is seen in their individual club accounts in order to appropriately record those football-related costs.

Those other entities likely sit within City Football Group (CFG), City’s parent company that oversees the multi-club structure. Where City, the club, now make continual profits, CFG as a whole is significantly loss-making; the wage bill found in the UEFA report confirms figures given by clubs to the governing body might bear little resemblance to a club’s published accounts.

City’s wages were still the highest in the Premier League (illustrated in the graphic above), as they have been in four of the last five years. Last season was also the second successive year their wage bill was above £400m, a feat only one other English club has achieved — and Chelsea’s £404m in 2023 included around £45m in managerial change costs. City are big payers, and they see positive results on the pitch as a result.

That said, it’s not like they’re over-leveraging themselves. City’s wages to revenue metric stood at 58 per cent last season, a level it has hovered around for most of the last decade. They also aren’t really close to world football’s biggest spenders but nobody is. PSG spent roughly £565m on wages in 2023-24, even without Lionel Messi or Neymar on their books. 

Pep’s net spend argument

Guardiola has been keen during the recent malaise to highlight City’s relatively low net spend. Using the last five years of club accounts, it’s easy to see where he’s coming from. Between 2020 and 2024 City spent £970.3m on new players and recouped £570.5m in sales, a net spend of £399.9m. That put them sixth in England, behind Chelsea (£833.6m from 2019 to 2023), Arsenal (£776.5m, 2020-24), Manchester United (£713.1m, 2020-24), Newcastle United (£492.2m, 2020-24) and Spurs (£468.6m, 2019-23).

There’s a reason Guardiola highlights net spend — that particular measure paints his achievements at City in an even better light — but it does not assess a club’s overall financial outlay. For one, correlation between transfer spending and on-pitch success is sketchy (wages have historically been a better barometer for how a club will perform). For two, the implication of a lower net spend is that a club has needed to rid itself of its stars and find hidden gems on the cheap — that hasn’t been the case at the Etihad. City’s £970.3m on new players was only topped by Chelsea’s largesse and, rather more narrowly, by Arsenal (£991.7m).

Where City have benefited significantly is in reaping the rewards of plans laid over a decade ago. The club’s youth facilities are world-renowned and formed a key plank of the owners’ strategy to build City into one of the best clubs on the planet. Establishing the club’s academy as one of football’s most revered is paying clear financial benefits.

In the last six years, six players — Taylor Harwood-Bellis, Romeo Lavia, James Trafford, Douglas Luiz, Gavin Bazunu and Carlos Forbs — have left City’s setup for eight-figure fees despite not playing a single minute of Premier League football in sky blue. City banked £99m in transfer fees, and that’s without considering any sell-on clauses that may soon or already have accrued from subsequent moves.

Add in the £40m received for Palmer from Chelsea, the £15m Ipswich Town paid for Delap last summer and £10.5m from Southampton for Shea Charles and you’re at over £150m for nine players with a combined Premier League career for City of scarcely more than six full games.

Palmer, paradoxically, is one many people now think City were silly to sell, but it’s not as if Guardiola parted with a key player. One of City’s greatest financial successes has been their ability to generate vast sums for largely untried young players.

City’s production line is the envy of most clubs, with plenty now trying to copy them — but it needs to be acknowledged when citing net spend. While transfer fees aren’t indicative of future success (and cross-city rivals United are the poster boys for that), it still stands to reason that the costlier a squad, the better they should be. To the end of June, City’s squad cost stood at £1.11bn, the second-highest in Europe, only surpassed by Chelsea (£1.42bn). City and Guardiola, regardless of their net spend, possess one of the most expensively assembled squads in world football.

Legal case and what’s next?