Liverpool and the rest of European football's biggest clubs are heading for a 'new financial reality', according to a UEFA report.
European football's governing body has published its latest Club Licensing Benchmark Report which has taken a closer look at the impact of the coronavirus pandemic across European football's leagues.
UEFA's report has revealed that top tier clubs have taken a hit of £6.2bn in revenue, a figure that could rise to as high as £7bn, figures that have prompted them to pledge to put measures in place to make clubs operate in a more financially prudent way, with potential new regulations to be introduced to curb transfer spending and soaring wage bills.
UEFA president Aleksander Ceferin said: "The unity and respect shown by European football will be crucial to its recovery, as will our assessment of the financial damage caused by the pandemic.
"This report outlines how broadcast penalties, empty stadiums, reduced commercial revenues, and the collapse in transfer profits have led to a projected €7.2 billion (£6.2bn) shortfall in top-division professional club revenues, with pain shared equally among top and lower tier clubs, only partly compensated by cost savings.
"Competition structures that destroy value, offering to give with one hand while taking away with five hands, are certainly not the answer.
"The whole football ecosystem, at professional, amateur and youth levels, has been heavily disrupted by the pandemic. This requires concerted efforts and a co-ordinated response throughout the football pyramid. Solidarity, not self-interest, must prevail and will win the day.
"We are now operating in a new financial reality, and it is evident that our current financial fair play regulations will need to be adapted and updated. Financial sustainability will remain our goal, and UEFA will continue to work as a team with European football to equip our sport with new rules for a bright new future."
Since the onset of the pandemic in March 2020, clubs across Europe have been wrangling with the financial fall out.
The Premier League saw competition postponed in March before returning in June through 'Project Restart'. But clubs took a hit financially as broadcasters required rebates from clubs, which will be payable by 2022, and clubs missed out on broadcast payments within their accounting period owing to them being pushed back.
Matchday revenues were hit, with stadiums off limits to fans for the remainder of the 2019/20 season and the near entirety of the 2020/21 campaign, with the 10,000 fans welcomed back to Anfield on Sunday for the final day win over Crystal Palace being the most that the stadium has seen since the Champions League defeat by Atletico Madrid on March 11, 2020.
The Premier League has fared better in terms of the losses occurred from having stadiums closed, with matchday revenues in English football's top tier equating to less than that of rival European Leagues.
Matchday revenue makes up around 13 per cent of Liverpool's overall revenue, a figure that would put them in a bracket with eight other Premier League clubs who bring in between 10 and 20 per cent from matchdays. Seven Premier League clubs had a five to 10 per cent reliance on matchday income, with four less than five per cent. Only one club had a reliance of more than 20 per cent on matchday revenues.
The impact of the pandemic brought the curtain down on what had been a staggering period of growth for European football from 2010 to 2019, where revenues had risen by 80 per cent.
For Liverpool, who posted a £46m pre-tax loss in their latest accounts largely due to the pandemic, revenues for the end of the 2010/11 season, the first for owners Fenway Sports Group, stood at £184m. Since then they have risen by 166 per cent to £490m on the back of the growth of the broadcast rights for the Premier League both domestically and internationally, as well as enhanced scope for commercial partnerships. The Reds have very much been a part of that rise.
Their elevation back to the very top table of European football saw them become key players in the doomed plot to form a European Super League earlier this year, a plan that was shot down in 48 hours after turning toxic and receiving a fierce backlash from fans and governing bodies.
Liverpool, like the rest of the 12 involved, had wanted to ensure their participation in elite competition and remove the element of jeopardy attached to Champions League qualification. And with the Premier League set to lose £1.7bn as a result of the pandemic, FSG and the other five involved had wanted to try and offset some of the losses experienced by getting a new competition off the ground.
That hasn't happened and such was the backlash it appears to have been kicked into touch for the time being at least.
But even the biggest clubs haven't been immune from the impact of the pandemic, with Liverpool, Manchester City, Manchester United, Arsenal and Tottenham Hotspur all posting heavy losses, while in Spain Barcelona and Real Madrid's near £1bn debt problems have required huge financial restructure and brought an end to the era of the Galactico and reckless spend.
Transfer fees and wages will be the focus for UEFA moving forward.
Financial Fair Play, while it has curbed some spend, has done little to address the growing chasm at the top, and when clubs have been investigated for breaching rules there has been little in the way of punitive action.
For Liverpool, FSG's perceived lack of transfer spend has been an issue with fans for a number of years, with the US owners' player trading model not always well received when it shows them being unable to match what their rivals spend in the transfer market.
But if fees are to be regulated that could work in Liverpool's favour, after all in financial terms and in terms of being run as a business that is sustainable, they would score more highly than most at the top level with UEFA.
The issue that could present itself with Liverpool is that of wages.
While transfer spend has been lower than their rivals, wages have gone on a steep upward trajectory in recent years, a trend that has been exacerbated by the incentivised nature of contracts and bonus payments being paid out for success.
At Anfield wage have risen from £310 to £325m in the latest accounts, a figure that puts them behind only Manchester City in the Premier League when it comes to the money paid out on wages to players. City's wage bill currently stands at £351m.
Since 2015, Liverpool's wage bill has shot up by 95 per cent, growing at a far steeper rate that the 64 per cent rise in revenues during the same period, with overall revenue standing at £490m for the latest accounts.
Next years accounts, for the year ending May 2021, will likely see another jump in wages due to bonus payments made to players for winning the Premier League.
UEFA could introduce some level of salary capping or a potential luxury tax as is seen in some US leagues, where financial penalties are incurred on an increasing scale for each breach of the threshold. But with some clubs likely to be more willing to meet those penalties, such as Manchester City and Paris Saint-Germain, will it really be a deterrent for all?
Being stricter on the punishment around breaches will likely be high on the agenda, with clubs who are spending too much in relation to their overall revenue targeted. But addressing issues such as that would require a near complete reset of some leagues such as the Championship, where some clubs can spend well in excess of 100 per cent of their revenues on player wages, making them huge loss makers and unstainable businesses.
