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Adam Baden ■ The Offshore Game 

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The Offshore Game 

The paper looked at the annual returns of all 134 teams in the professional football leagues of Scotland and England, to discover how many had a significant ownership from offshore. By looking of the annual reports of the clubs with offshore ownership, the paper sought to find how much money was invested in the club from offshore sources in the form of equity and loans. The locations of companies holding shares in football clubs were found in a variety of places, from the British Virgin Islands, the Cayman Islands, to places like Malaysia, Malta, Thailand and India. The report suggests that football regulators should take steps to make sure that clubs are run on a more sustainable basis, and that the finances of clubs are open, transparent and responsible. 

The paper looked at the annual returns of all 134 teams in the professional football leagues of Scotland and England, to discover how many had a significant ownership from offshore. By looking of the annual reports of the clubs with offshore ownership, the paper sought to find how much money was invested in the club from offshore sources in the form of equity and loans. The teams were ranked by using an index that took account of how much finance they had coming from offshore and the location of the companies providing the money. In total, the research uncovered £3bn in offshore finance in the UK’s professional leagues. This finance was found in 34 of the teams investigated, or just about one in every four teams. Manchester United had the most offshore finance, accounting for third of the value of the league with just over £1bn.

To create the offshore league, the paper also used the Tax Justice Network’s Financial Secrecy Index to look at the secrecy of offshore financial centers from where their money came from.
The locations of companies holding shares in football clubs were found in a variety of places, from the British Virgin Islands, the Cayman Islands, to places like Malaysia, Malta, Thailand and India.
 The clubs used a mixture of types of finance. Debt, loans which carry a fixed obligation to repay, and equity, shareholdings, where an investor agrees to put in money for a share in the profits of the club. The total finance figure breaks down into £1.1bn in debt and £1.8bn in equity. However, the equity figure is vastly dependent on three teams, Arsenal, Manchester United and Manchester City who between them have £1.5bn in equity held by offshore vehicles. The use of debt as a means of finance should be of particular concern to fans. Clubs do not need to pay shareholders if they do not have the money to do so, but if a club cannot meet its debt obligations it could be bankrupted. Some of the clubs were highly dependent on loans from offshore companies.

The authors believe that the debt is part of a wider problem which Football Associations need to deal with, perhaps through putting a cap on the amount of debt clubs can take out. Tax havens are by their nature lightly regulated and untransparent. Given the long history of financial difficulties football clubs in the UK have faced it should be of concern to regulators that so much money in football comes from offshore financial centers. The report suggests that football regulators should take steps to make sure that clubs are run on a more sustainable basis, and that the Clubs should submit financial reports to the Football Associations that include details of the beneficial ownership of both the shares in clubs and the loans received by clubs. 

Key findings

  • Manchester United had the most offshore finance, accounting for third of the value of the league with just over £1bn. 
  • Taking the financial secrecy of the countries where the companies providing finance were based into account, it was Manchester City that topped the offshore league. 
  • The locations of companies holding shares in football clubs were found in a variety of places, from the traditional offshore financial centres of the British Virgin Islands, the Cayman Islands, Jersey and Guernsey to places like Malaysia, Malta, Thailand and India. 
  • The clubs used a mixture of types of finance. Debt, loans which carry a fixed obligation to repay, and equity, shareholdings, where an investor agrees to put in money for a share in the profits of the club. 
  • The total finance figure breaks down into £1.1bn in debt and £1.8bn in equity. However, the equity figure is vastly dependent on three teams, Arsenal, Manchester United and Manchester City who between them have £1.5bn in equity held by offshore vehicles. 

Key recommendations

  • Football regulators should take steps to make sure that clubs are run on a more sustainable basis, and that the finances of clubs are open, transparent and responsible. 
  • Clubs should submit financial reports to the Football Associations that include details of the beneficial ownership of both the shares in clubs and the loans received by clubs. The reports should also include details of any related party transactions between the club and their owners.
  • The regulators should then make these reports public so that the fans have an easy to access source of information about the finances of the game. 
  • Regulators, fans and government need to address the key issues of the distribution of wealth between clubs, whether particular forms of ownership should be excluded from football, and what forms of outside assistance to clubs from local councils, governments or private interests are acceptable. 
  • The Football Associations should consider imposing limits on the amount of debt clubs can take out and should have the power to block debt financed takeovers of clubs

Additional resources

The Offshore Game website: https://www.theoffshoregame.net/