Relegation will no doubt adversely impact Southampton’s financial position in a massive wat as huge income streams from the Premier League will be nullified.
The club recorded a turnover of £151m last season, of which £115m came from broadcast revenue, £17m from matchday and £18m from commercial activities, in comparison with Nottingham Forest, who finished the same season third in the Championship, had a total turnover of just under £30m, of which £12m came from broadcast and league solidary payments, and £8.2m from ticket sales.
The cost of running the football club will also fall, with current and new player wages, agent fees and transfer costs all significantly lower in the Championship.
And Saints will have the benefit of Premier League parachute payments next season and for two more years if they remain in the Championship. These can make a big difference.
But this compensation does not shield relegated clubs from a significant drop in turnover. When Fulham were in the Championship in the 2021-2022 season, their turnover, which included the first year of parachute payments after their 2021 relegation, still slumped to £72m from £116m the year before.
Matchday and hospitality income will also decline. When Saints were last in the second tier, their average attendance was around 5,500 lower than the 32,300 capacity of St Mary’s. On the plus side, there are three more league games and earlier rounds to play in cup competitions.
Inevitably, it is money from player sales in the 2023 summer transfer window that will be a big positive part of Saints’ profit and loss account next year, perhaps helping the club make a profit for the first time since 2018.
After entering into sale and purchase agreements for players with net transactions amounting to £100m since July 2022, big-name exits over the summer will contribute valuable cash inflows and reduce future payroll commitments that otherwise are likely to be unsustainable in the Championship.
While player wages are not individually disclosed in club financial statements, the total staff costs for Southampton for the year ending 30 June 2022 were £113m compared to £58m for Forest and £61m for AFC Bournemouth in those clubs’ last year in the Championship before promotion.
The new era will also see Saints having to meet Football League financial fair play rules which are signed off by the club auditor. This is where adjusted club cash flow losses for the financial year cannot exceed certain thresholds.
Non-compliance may result in fines, transfer bans and points deductions, as incurred by Championship-relegated Reading this season. However, since cash flow from player sales are included in FFP calculations, they can be a useful tool to wipe out excess operating losses.
Owners Sport Republic have already vowed to commit to a long-term project with the aim of restoring their top-flight status in the event of relegation. Earlier this month, they inject £15m new ordinary share capital into the club, on top of £48m since September.