Football finance expert forecasts Leeds United 'challenges' as billion-pound 'credit card' strategy revealed

The Whites released their 2022/23 financial accounts on Wednesday evening to much intrigue and scrutiny as the club reported a relatively modest £33.7 million loss for the year.

Leeds are currently in the midst of the tightest promotion battle in recent Championship history, vying for supremacy against Ipswich Town and Leicester City for one of the two automatic promotion spots.

Given the finances associated with Premier League participation, a place in the top flight is especially lucrative and extremely sought-after by each of those clubs competing for the automatics. Leeds' latest set of accounts reveal just how gainful top flight participation can be and quite how necessary it could prove from a balance sheet standpoint.

Speaking to the YEP, football business expert Maguire cast his verdict on the financial permutations of promotion, or failing to achieve an immediate return to the Premier League, as well as his thoughts on Leeds' Profitability and Sustainability (PSR) headroom, which has become a hot topic in English football this season.

"If the club don't go up, there are going to be challenges, but a lot comes down to how much the 49ers are willing to say: 'We'll just deal with it as and when and we'll provide funding for the club to carry on as normal.'

"I don't see any PSR problems, as they did sell players at a profit. I don't think fans need to worry about a firesale from the point of [complying with] PSR."

A firesale of the club's first-team players could prove to be the financial makeweight if promotion is not attained this summer, however, as Leeds outstanding payments and general liabilities would make life in the second tier for a second consecutive season somewhat difficult.

Leeds owe a sum in the region of £73 million to other clubs in transfer instalments up to the year end June 2024, with an additional £116 million in instalments due further down the line. Leeds' most recent set of accounts revealed £111.5 million in broadcast television revenue and Premier League central distribution payments; sources of income which will be much lower and missing from next year's accounts, respectively, due to their relegation from the top flight.

On the topic of Leeds' outstanding transfer instalments, which comes to approximately £190 million in full, Maguire said: "I think it explains the strategy of Leeds because we know [Andrea] Radrizzani was looking for an exit.

"It [the financing] wasn't coming from him. It was a case of using the club credit card. The numbers are shooting up across the Premier League - £1.8bn [owed in transfer instalments] at end of 2022 to £2.6bn at end of 2023, before Chelsea have even released their accounts and I'm expecting ludicrous numbers.

"Clubs have identified this as a way of keeping managers and fans happy but not taking a big cash hit in the short term."

Leeds' accounts indicate some potential cash-flow issues in future, although as Maguire explained this could be mitigated by a 49ers injection, of which they have the capacity to do so. Where the club may be forced into more prudent financial practice is if they wish to avoid being forced into selling their best players each season. While Leeds' losses are in no way comparable to those suffered by other clubs who've sailed too close to the wind, incurring PSR breaches and competitive sanctions, they have done so largely through profitable player sales.

"Overall, by PL standards they're [losses] reasonably modest. We saw Everton and Leicester lose £90 million, Spurs lost 90, so for Leeds just to lose 33 was okay. Having said that, it was due to huge player sales which allowed them to get to that position - you cannot do that season in season out and expect to perform on the pitch, unless you have a production line. Even Brighton are finding that out and they are the poster-boys for having a player development model.

"Player sales papered over the cracks for running the club at a loss of £106 million in the Premier League," Maguire added.

On the whole, Leeds' accounts displayed healthy commercial revenues and strong gate receipts, much of which will have been unaffected by dropping into the Championship, however failure to promote makes negotiating future sponsorship deals and charging Premier League prices harder to justify. The club are also liable to pay out a fee of up to £22 million in bonuses should the club win promotion back to the top flight.

Tyler Adams and Luis Sinisterra’s sales during the course of this season, both of which were in the region of £20 million, will go some way to alleviating any immediate financial pressure or necessity to sell star players this coming summer. Their fees, while unlikely to have been paid up front, will cover a chunk of the club’s 2023/24 wage bill which is one of the highest in the Championship but much lower than the £146 million committed to remuneration last season, due to mandatory relegation wage reduction clauses in players’ contracts.