The Athletic has appointed Chris Weatherspoon as its first dedicated football finance writer. Chris is a chartered accountant who will be using his professional 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 two articles exploring the books at Manchester United and Manchester City.
Arsenal’s return to the top table of English football has been a long time coming. Two decades have passed since they last won the Premier League title — few who watched their famed ‘Invincibles’ team of 2003-04 would have predicted that would be the last of Arsene Wenger’s league successes.
Yet football, and perhaps English football more than anywhere else, has changed dramatically since those days of Thierry Henry, Dennis Bergkamp and Robert Pires.
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Financially, Arsenal have had to deal with the seemingly bottomless wealth of first Chelsea and then Manchester City, two rivals whose various periods of domestic dominance were at least in some part built on the back of Arsenal’s hard work, given they raided Wenger for many of his best players.
The influx of outside money at those two clubs starkly contrasted with Arsenal’s continued efforts at sustainability. The results on the pitch were inevitable.
Another off-field factor held back Arsenal, albeit inadvertently. Moving from Highbury into a state-of-the-art stadium in the early 2000s was always going to see them bear costs that would have an impact on their ability to compete for trophies, but the arrival of oligarchical and state wealth at the same time made it a greater burden.
The Emirates Stadium remains one of the best grounds in the country but for many years, the building costs weighed heavy, leaving space for other clubs to steam in. Between 2005 and 2022, Arsenal managed just one second-place finish in the league. Wenger, once a deity among fans, left at the end of the 2017-18 season under a cloud of hostility.
Nearly two decades on from the doors of the Emirates officially opening, Arsenal are a club transformed.
Under the guidance of manager Mikel Arteta, they have risen from six seasons spent bouncing between fifth and eighth-place finishes to resuming their role as genuine title contenders. They have been pipped at the post in each of the past two completed campaigns by one of the greatest club teams in world football.
As night follows day, so improvements on the field have been shadowed off it; Arsenal boasted football’s seventh-highest revenue figure last season, a four-place jump on three years ago and their highest ranking since 2017. With new sponsorships inked and Champions League money flowing into the club again, their income will grow again this season.
Arsenal are now regular loss-makers – so what’s their PSR position?
Despite that positive headline, Arsenal’s latest financials saw the club book another loss, with their pre-tax deficit last season totalling £17.7million ($23m).
The financial results of most Premier League clubs tumbled following the onset of the Covid-19 pandemic in 2020. Arsenal were no exception but their loss-making actually began before then. After 16 consecutive years of profitability, they have now booked six annual pre-tax losses in succession. Across those six years, the club have lost £328.7million — almost wiping out the £385.0m surplus of the previous 16.
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Again, the pandemic made its mark, especially on 2021’s club-record £127.2million loss, but the past six years have followed one particular moment: Kroenke Sports & Entertainment (KSE) assuming full control of the club. Arsenal delisted from public ownership and re-registered as a private company in October 2018. Since then, under KSE’s sole stewardship, Arsenal have invested heavily in their squad and, in the case of last season, enjoyed significant revenue growth.
Is the shift to repeated deficits cause for concern? Are the Kroenkes financially illiterate? Probably not. Instead, after years of constraint, KSE has sanctioned efforts to bring the club into line with Europe’s footballing elite.
Of course, utter the phrase ‘pre-tax losses’ in the game today and you’ll soon be thumped over the head with an acronym.
Where financial losses stray, soon mentions of profit and sustainability rules (PSR) must follow. Naturally, given Arsenal have been loss-making for six years, PSR is a concern for their owners and fans alike, but there’s nothing too much to worry about —even though they cannot claim losses as high as they might do.
Owners can provide ‘secure funding’ (usually by way of share issues) to increase their club’s PSR loss limit, up to a maximum loss of £105million over a three-year cycle. Instead, most of KSE’s funding has been via loans, which doesn’t constitute secure funding, with the exception of a £5.4m capital contribution (which does) in 2023. Consequently, Arsenal are limited to PSR losses over the past three seasons of £20.4m — the £15m lower limit available to all clubs, plus that capital contribution. Even so, for the PSR period spanning 2021-24, we estimate that, after deductions for capital expenditure, academy, community and women’s teams costs, Arsenal booked a PSR profit of around £28m — £48m clear of a breach.
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As for the current season, The Athletic estimates Arsenal could lose up to £97million and remain compliant with the Premier League’s PSR rules. That seems a fairly remote possibility, though it’s worth highlighting that they are subject to UEFA’s financial regulations too. European football’s governing body puts limits on squad expenditure — we project, based on player wages comprising 70 per cent of the total wage bill, that Arsenal were at around 60 per cent last season against a limit of 90 per cent — and losses, which are generally lower than the Premier League’s ones.
After deductions, we again expect Arsenal to be fine, although the club are carefully managing their current and future positions.
Soaring revenues reflect their on-pitch rise
Arsenal’s revenue increase last season was, in a word, huge. The world’s biggest clubs breaking their revenue records is hardly a rarity, but the extent of the improvement in their case was remarkable: turnover hit £616.6million in 2023-24, an annual increase of £150m, nearly a third. Even with the prize money and commercial benefits of Champions League football, that is still a massive uplift for a club who already boasted the 10th-highest income in world football.
Income increased across all three main revenue streams: matchday, broadcast and commercial. Mirroring that broader club record, Arsenal hit new highs in each stream. TV money was the highest at £262.3million but there was roughly 30 per cent growth across the board.
At the Emirates, gate receipts soared. Arsenal’s home has generated a nine-figure sum for the club on several occasions but last season’s £131.7million matchday income was a big increase on 2022-23 (£102.6m).
That was the byproduct of a couple of things.
For starters, Arsenal played one more home game last season (25) than in 2022-23. Four Europa League matches at the Emirates were replaced with five in the Champions League, enabling the club to charge higher prices for viewing a more prestigious competition. On top of that, Arsenal made ticketing changes in 2023-24, reducing the number of matches covered by a season ticket from 26 to 22 and implementing an increase in general admission season ticket prices of, on average, five per cent.
The result was Arsenal’s highest single-season gate receipts (by far) and the club leapt to second for matchday income domestically, having trailed Tottenham Hotspur in each of the last two seasons. Their matchday revenue was just £5.5million behind Manchester United’s last year, marking a significant narrowing between the two clubs: the gap had been over £30m in each of the previous two seasons. Though the Emirates may have held the club back for several years, the benefits of moving there are increasingly apparent. Since the stadium opened in 2006, Arsenal have booked combined gate receipts of £1.652bn, over four times its initial £390m build cost.
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More predictable but no less important was the rise in TV money. The difference between the Europa League and the Champions League is stark. Arsenal earned £80.4million in broadcast revenue from last season’s run to the Champions League quarter-finals, over three times their takings for reaching the prior round of the Europa League in 2022-23.
Arguably most important was a surge in Arsenal’s commercial income.
Elite clubs have increasingly turned to sponsorship and marketing deals as a plentiful source of potential revenue, and Arsenal’s £218.3million commercial income marks both a big jump for the club and them catching up to domestic rivals. That likely still places Arsenal at the bottom of England’s ‘Big Six’ commercially, but they’ve closed the gap significantly. Chelsea’s commercial income was over £40m more than Arsenal’s in 2023; the distance between them now is around £7m.
Arsenal’s commercial revenues were driven by a kit supplier deal with Adidas (worth £75million per year), Emirates’ front-of-shirt sponsorship (£40m), Sobha Realty’s training-centre naming rights deal (£15m) and Visit Rwanda’s sleeve sponsorship (£10m).
Growth now and beyond looks certain too.
That Emirates deal was renewed at £60million per year, starting this season, while the club are expected to improve on sleeve sponsorship takings once the Visit Rwanda contract ends this summer.
A rising wage bill — yet still at the lower end of the elite
Believe it or not, the general improvement in on-pitch performances has also helped lighten the mood inside the Emirates. Financially, it is a club’s wage bill that tends to dictate where they’ll finish in a given season, yet Arsenal have been bucking that trend — and in a good way, too.
Arsenal’s wages had hovered around the £230million mark for years, increasing just £11.5m between 2018 and 2023. That was, in part, due to their lack of Champions League football and the attendant contractual bonuses qualifying for it brings. Matters changed in 2023-24, as the return to Europe’s elite competition coincided with a £93m (40 per cent) increase in the wage bill. Squad investment and renewed terms for star players including Bukayo Saka and William Saliba pushed staff costs to a record high.
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Even so, that still only served to bring Arsenal closer to their rivals. The wage bills at Manchester City and Chelsea have topped £400million in recent years, while Liverpool (£387m last season) are closing in on that mark, too. Arsenal are spending more than they ever have on salaries, yet still trail several clubs they have surpassed on the field recently.
In the past two seasons, Arsenal under Arteta have significantly over-performed their wage bill. In 2022-23, they finished as runners-up with only the Premier League’s sixth-highest staff costs. Last year, they were second again with the fifth-highest.
That’s only a partial telling of the achievement too.
Consider that in each of those seasons, Arteta’s men provided the sole meaningful challenge to Manchester City’s domestic dominance and did so, particularly in that first year, with a wage bill that was hardly in the same ballpark as the champions’. In that treble-winning season for City, their wage bill was £188million ahead of Arsenal’s. That gap narrowed significantly last season, both as City’s staff costs fell slightly while Arsenal’s jumped, but was still £85m.
In each of those years, Arsenal had more administrative staff than City — underlining the stark difference in how much the clubs were paying their players.
From transfer misers to one of the biggest spenders
Arsenal’s spending in the transfer market has ramped up in recent years, another sign they are stepping out of the long shadow of their stadium build.
While net spend isn’t actually all that useful a metric on its own, it is telling that in six of Arsenal’s first seven years playing at the Emirates, their net transfer spend sat in the bottom half of the Premier League. In those circumstances, continually qualifying for the Champions League year-on-year was no mean feat.
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Since the 2018-19 season, with KSE assuming sole ownership, Arsenal have undertaken a clear shift in strategy, parting with a net £857.2million transfer spend. That’s the second-highest in English football, only trailing Chelsea, and not far shy of trebling the club’s net spend in the previous six years (£310.5m). On a gross basis, Arsenal have now spent £991.7m in the past five years, a sum which puts them ahead of both City (£970.3m) and neighbours United (£918.3m). Chelsea’s £1.458bn spend from 2019 to 2023 is still way off in the distance, but, at the Emirates, a club who were once relative misers in terms of transfers have considerably loosened the purse strings.
Up to the end of May last year, Arsenal’s existing squad had been assembled for £882.4million. That’s a big figure, though a look around the division helps explain why the club have felt the need to invest so heavily.
Even with the second-highest transfer outlay of recent years, Arsenal’s squad is only ranked fourth when it comes to the cost of assembling it, with each of the two Manchester clubs’ historic spending ensuring theirs were still costlier than the one at Arteta’s disposal. City and Chelsea had each spent over £1billion on their existing squads at the date of their most recent accounts, while the cost of United’s ticked over that mark in the first quarter of the current season.
Arsenal’s transfer spending has been lofty, but they’ve also been playing catch-up.
Shareholder loans are low-interest and now top £300m – but is that the whole story?
Recent months have seen a growing focus on shareholder loans, with Premier League clubs voting in November to bring them into line with how other associated party transactions (APTs) are treated.
Clubs will be required to account for shareholder loans at fair market value (FMV), meaning those that don’t currently do so stand to take a hit in the form of increased interest costs. That will impact not only a club’s bottom lines but, by extension, their PSR calculations too.
Arsenal now owe £324.1million to KSE, with the owner having provided another £61.9m in cash loans last season.
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The club would therefore seem ripe for punishment under the amended APT rules. Yet Arsenal voted in favour of the changes. Manchester City, with no shareholder loans on their books, voted against them. If that seems strange, consider the nuances of these new rules. The APT amendments — which adapted prior regulations recently struck down as ‘void and unenforceable’ — dictated that only loans drawn down from owners after November 22, 2024, are required to be recorded at FMV. Any monies drawn down before then, while potentially subject to an FMV assessment, would not require adjustments to club figures.
Or at least they don’t right now. City’s seemingly never-ending courtroom tussles with the Premier League took on a new dimension recently, with the club seeking to have those November amendments declared null and void too.
Any further changes from that challenge remain to be seen but, at the moment, Arsenal’s existing £324.1m owing to their owners won’t incur increased costs. Any amounts drawn down since November 22 last year will have to be accounted for at FMV, but only those additional drawdowns. What could have amounted to a sizeable sum — at one point, there were suggestions that interest costs adjustments might be backdated across the entire span of the loans, something City (and any others in support of their view) are expected to push for if the November amendments are declared unlawful — getting whacked onto the club’s PSR calculation will instead be much smaller, if present at all.
If that seems unfair, then it’s worth considering what that money borrowed from KSE was actually for. Or the bulk of it at least.
The loans came on board in the 2020-21 season, but weren’t new debt. Before that season, Arsenal were already carrying £218million in debt, £187m of that being bonds related to the Emirates Stadium build. Those bonds were linked to gate revenues, which nosedived due to the pandemic. KSE stepped in and refinanced the loans, incurring a £32m break cost (the amount the club were charged for ending the loans earlier than planned) in the process, meaning just about all of Arsenal’s debt is now owed to their owners.
Before that refinancing, KSE was already owed £15million, and the total amount due to the owners has risen from £201.6m in 2021 to £324.1m at the end of last season. That extra £122.5m has primarily gone toward squad strengthening, so there’s an argument Arsenal have gained a sporting advantage. Yet that would ignore the price of KSE restructuring those debts in 2021; the £32m in break costs is currently far more than the club would have incurred in interest if the additional amount loaned since had been recorded at FMV, though that argument will wane the longer the shareholder loans remain in place.
What’s more, the loans from KSE aren’t interest-free.
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In each of the past four financial years, Arsenal have incurred interest costs on ‘Other’ items (which includes the KSE loans), with these hitting £7.8m last season. As a percentage of the average loan balance across last season, that’s an effective interest rate of 2.7 per cent. Not market rate, granted, but not a free ride either.
What next?
Despite another annual loss, Arsenal’s most recent accounts reflect a club on the up.
With revenue soaring and those losses coming down, all as the team become much more competitive on the pitch, it’s clear the Arsenal of today are some way removed from the situation when KSE first assumed full control six and a half years ago.
Whether the relative largesse of the period since then continues remains to be seen. It is no secret that KSE, like other Premier League owners with sporting interests on both sides of the Atlantic, are keen to reach a point of sustainability. There’s little likelihood of their £324million loan being repaid any time soon, but Arsenal’s transfer activity this season points to slowing activity. They spent a net £21m in the summer, then nothing in the winter window.
Even so, it seems unlikely they won’t invest in the squad again for next season. Football is increasingly an arms race, so it would make little sense for KSE and Arsenal to spend as much as they have in the past half-decade only to then turn the taps off completely. For all the club’s growth, they’ve still not won top honours at home or abroad, outside the 2019-20 FA Cup; reining in spending would make that task rather more difficult, and you can be sure their competitors wouldn’t follow suit.
Promisingly, Arsenal’s day-to-day operating cash flow has ballooned recently, increasing the likelihood the first team can remain competitive even if KSE chooses to slow its own input. The club’s £176.1million cash generated from operations in 2023-24 might well be a Premier League high for that season, and takes them past the most recent figures at historically strong cash-generators Tottenham (£131.2m) and Manchester United (£121.2m).
Much of that increased cash came via their Champions League return. Arsenal’s upcoming two-leg quarter-final against Real Madrid might not be viewed with much envy, but getting to the last eight is estimated to have made the club at least another €100million (£84m/$109m) in prize money. Get past the reigning champions and they’ll bank a further €15m for reaching the semis, with €18.5m on offer for a spot in May’s final and a further €6.5m if they were to win it all.
Even if they go out against Madrid next month, this season looks to be the most lucrative European campaign in Arsenal’s history. Their estimated prize money from UEFA competition over the past two seasons, £164.4million, is almost as much as the previous six combined (£165.8m).
Arsenal fans might ask why the club didn’t invest in much-needed striking options in the winter transfer window.
It’s a valid question but they have spent sizeably in recent years. Perhaps no deal made financial sense in the winter. Those supporters can expect more spending from their club this summer.
(Top photos: Getty Images; design: Eamonn Dalton)
