Much has been said and written about Rangers' finances over the summer. The Rangers Review asked Football Finance expert Kieran Maguire, an academic at the University of Liverpool, to cast his expert eye over the club's situation and explain how it is managing its bank balance.

There has been disquiet from some fans over the summer in relation to the amount of spending on new players by Rangers.

The club has just had a successful Europa League campaign in 2021/22 along with qualification for the group stages of the 2022/23 UEFA Champions League, and sales of Nathan Patterson, Calvin Bassey and Joe Aribo.

Adding those sums together gives some observers a gross figure in the region of £100 million over the two seasons, which some fans see as a windfall that could have been used to invest in player recruitment. But is it as simple as that…?

A look at the finances of Rangers suggests that the sums being quoted are more of a myth than reality.

Regular Income

Since 2012/13 the club has been in a recovery/growth phase as it moved through the divisions. Total revenue was only £19 million in 2012/13 but has grown steadily in recent years due to a combination of more matches, increased broadcasting income and new commercial deals.

However, Covid restricted growth in 2019/20 due to the curtailment of the season, and matches the following season took place behind closed doors, impacting upon ticket sales and associated matchday revenues. That shortfall in 2019/20 was effectively covered by shareholder loans, and at some point they will have to be repaid. Therefore, some of the money generated from the player sales and European progress will have been utilised to reduce debt.

Rangers Review: Total income by yearTotal income by year (Image: Kieran Maguire)

Rangers have one of the highest proportions of income generated from ticket sales of any club in Europe, due to the commitment of fans turning up every time a match is played at Ibrox. Compared to the Premier League in 2018/19, the most recent pre-covid season for which records are available, matchday income averages at 14 percent of the total, Rangers generated over 60 percent of their revenue from matchday.

Rangers Review: Match day as percentage of total incomeMatch day as percentage of total income (Image: Kieran Maguire)

Such a reliance on matchday income is both a virtue and a vice. Good in the sense that Rangers' fanbase is so committed, not so good when fans are unable to attend matches due to events such as Covid.

Whilst streaming passes helped to soften the blow in 2020/21, it was insufficient to make up the total shortfall.

For Rangers to increase their regular income, they need to either expand/enhance the stadium (expensive), use the stadium more regularly (Harry Styles concert etc, so a work in progress) and/or create more income streams, such as New Edmiston House (expensive and a work in progress). The club seem to be addressing all of these issues, but like most investment, it does not generate an immediate return on the pitch that some fans want to see.

Irregular Income

Participation in the SPFL is guaranteed, European competition and player sales are not. The Rangers board has to budget for a certain level of income, and like most big clubs, has an expected level of performance (Manchester United, for example, budget each year to make the last 16 of the Champions League, anything above is a bonus, anything less has consequences. If they fail to make the CL players have to take 25% pay cuts).

In the case of Rangers, the club is probably going to budget for a Europa League group campaign each year, and perhaps a couple of victories on top of that.

Based on the most recent figures seen from UEFA, prize money is distributed from four pools in the Europa League. The first pool is a fee for qualifying (€3.6m) The second pool is performance related and works out as €210,000 per point. If Rangers budget for six points that would give €1.3m. Last year Rangers, exceeded the budget by €420,000 by having two draws as well as two victories. Their progress to the final was worth an additional €11.5 million.

The third pool is determined by a ‘Ten Year Coefficient’ which is designed to protect the elite clubs in Europe should they have a bad season in UEFA competition. It is, as suggested, linked to the level of achievement over a rolling ten-year period. Rangers are disadvantaged here due to not competing in the current ten-year period until 2017/18. They would not have earned any more than anticipated.

In each competition, the clubs are ranked with the 32nd club earning one point, the 31st two points and so on, until the top ranked club earns 32 points. Each point in the Europa League in 2021/22 was worth about €130,000.

Finally, we have the market pool, which relates to the amount of money invested by a country’s national broadcaster. The more money paid for the rights, the more that country’s clubs are rewarded. BT Sport have paid the most for rights, which is good, but most of the market pool appears to go to English clubs. A conservative estimate of market pool for Rangers would be €2m in the Europa League.

Adding the figures together for 2021/22 gives a total prize money estimate of about €18 million (£15.5m). Add in nine home fixtures at Ibrox averaging £1.2m per match and the total from last season would be just over £25 million. Rangers would have budgeted for about £10 million, so there was a favourable balance of about £15 million, out of which bonuses would have had to be paid, which would have reduced the net figure to £12-13m. In the Champions League, the figures are bigger, but the opposition sides are tougher too. Rangers will have already earned €15.6m for qualifying for the group stage, and each coefficient point is worth about €1.1m. For the 2022/23 season in the Champions League Rangers are ranked 31st in the ten-year coefficients, and so will earn €2.2m from this pool.

In the Champions League group stage, each point earned is worth €930,000. Rangers are in a tough group so will not have budgeted for a significant sum here. But even four points would be worth €3.7m.

Add in the market pool, which again conservatively is estimated at €2m and a figure of €23-24m is reached. If Rangers can reach the knockout phase of the Champions League those figures are significantly increased (reaching the last 16 is worth another €9.6m for example). A more realistic, but still tough, achievement would be finishing third and then competing again in the Europa League knockout phase.

Whilst Rangers fans are delighted the club is playing in the Champions League, it does mean that some add-on fees have kicked in for players signed by the club, which again reduces the net gain from reaching the group stages of the competition.

Some fans have complained about the ticket prices for the group stage (£150-180), and the club is in a no-win situation. Having Liverpool, Napoli and Ajax coming to Ibrox would generate sales far in excess of the stadium’s capacity, so prices have been increased to maximise income and ideally spend the money wisely. UEFA and their sponsors do take a significant number of complimentary tickets, which is frustrating as the club would ideally want these sold to local fans and commercial partners.

Even so, Rangers, with (say) 48,000 tickets sold at each match to paying customers, should be able to generate at least £6 million from matchday income at Ibrox (VAT and concessions prices reduces the club revenues) for the group stages.

So, a worse case scenario is that Rangers would make about the same from a Champions League campaign in which they finish bottom of the group as from getting to the Europa League final.

Europe is great, but it is also expensive. UEFA are very strict in terms of the level of stewarding, police and so on when clubs play at home. Every match at Ibrox in UEFA competition costs the club an estimated £500,000. When Rangers play away in Europe, whilst they save on hosting costs, they then have the costs of chartering flights, accommodation and so on.

The third volatile revenue stream is from player trading. Until the last twelve months, and winning the ‘55’, Rangers have been in a recovery phase, and the focus has been on recruitment to progress the club, rather than a trading model as such.

The club has had a net spend since 2012/13 until 2020/21 of £48 million and player sales of £12.2m. During the same period Celtic had a negative net spend of £15 million and player sales of £122 million.

Rangers Review: Player sales income by yearPlayer sales income by year (Image: Kieran Maguire)

This is the area that Rangers are now attempting to address, with the sales of Patterson, Aribo and Bassey now starting to generate the fees that can help fund reinvestment, but there are still issues arising. In the case of Calvin Bassey, the quoted figure was £23 million, but this includes add-ons, so the guaranteed figure is about £19 million. Because he was sold below the age of 23, 5% of the fee (just under £1m) goes in solidarity payments in respect of UEFA based international transfers.

Transfers these days are always in instalments, so even from a good deal Rangers will probably get no more than half the fee (£9.5m) up front, with the remainder being paid in two or three annual instalments. Bassey did not put in a transfer request, so he…and his agent, will take a further slice of the fee. Rangers could therefore end up with just £7-8 million this summer from Bassey’s sale. This is a way of encouraging players from England to come to Ibrox, as if they impress on the domestic and European stage they will financially benefit if move on in their career.

Sources close to Everton (I work in Liverpool) tell me that the Patterson sale was in three equal instalments of about £3.7 million, although being at the club since he started his career there would not be an exit fee for him.

When a player is signed by Rangers, the focus is very much on the transfer fee, but again players and agents might expect some form of signing-on fee.

So, of the £100 million that has been quoted by some commentators, some was overstated, some was already budgeted for, some will not be earned and received until the outcome of the 2022/23 UEFA is finalised, and some will take a couple of years to arrive due to credit terms being applied.

Costs

Running a football club is expensive, it’s a talent industry and the talent follows the money. Rangers' wage bill almost quadrupled between 2016 and 202, as the club recruited and retained players and management on contracts that were needed to make it competitive for the SPFL title and Europe.

Rangers' wage bill was the second highest in Scotland over the last decade, but in order to be competitive, the gap with Celtic had to be reduced. Winning the Premiership in 2020/21 with a lower wage bill than their rivals was an achievement, especially given that bonuses would have been included in the £48 million total wage figure for the season.

Rangers Review: Wages by yearWages by year (Image: Kieran Maguire)

The accounts for 2021/22 are not yet published but expect to see wages rise further as the club will have paid bonuses to staff for reaching the Europa League final. The gap with Celtic has narrowed, but Rangers are finding that they are now having to pay more for recruiting players and offering them deals.

As a result of Brexit, Rangers can no longer recruit players from the EU so easily, and therefore they have to shop in the British player pool, which is more expensive. English clubs have the same issue, and they are now looking far more closely at recruiting players from Scotland as there are no visa/work permit issues to deal with, which has driven up transfer prices and wages in the Scottish market itself. This can be an advantage when Rangers are selling, but not when they are buying.

Rangers have a competitive wage bill by Scottish standards, but the £48 million total in 2021 is tiny by Premier League standards. Even when compared to a small club such as Crystal Palace, Rangers' wages are £80 million lower. Therefore, in order to attract players to the club from England, usually when they are out of contract, Rangers incentivise the deal by offering the player and agent a bigger slice of the transfer fee when he is sold.

Rangers Review: Rangers wages/income percentageRangers wages/income percentage (Image: Kieran Maguire)

Rangers also have to be cautious in relation to UEFA’s Financial Fair Play rules (now renamed Financial Sustainability Regulations, as UEFA have finally conceded that there was nothing ‘fair’ in FFP). The club is on a long watchlist, with many other clubs, including Manchester City, Chelsea and Barcelona, who are close to spending limits. This means that if wages are increased, it has to be cautiously, or risk fines, wage caps or worse from UEFA.

Player wages for 2022/23 are capped at 90% of income, and whilst this is achievable for Rangers, as the 2021 figures above are for a Covid year with no matchday income, they have less room for manoeuvre than some claim.

As well as selling players on credit, Rangers have recruited using this method too, and in their most recent accounts owed almost £10 million to other clubs.

Rangers Review: Player transfer creditorsPlayer transfer creditors (Image: Kieran Maguire)

Rangers have borrowed substantial sums in recent years to fund the recovery phase of the club, and whilst around £26 million have been converted into shares and thus will not involve any further cash obligations on the club, others, notably to Dave King’s Laird group, have had to be repaid. This has been a further drain on the club’s cash flow position.

Rangers Review: Rangers debt fundingRangers debt funding (Image: Kieran Maguire)

Conclusion

Rangers' recent success in terms of UEFA competition and player trading has allowed the club to move to being a sustainable business as opposed to one that was reliant on owner benevolence to provide both working and growth capital. It is in a much better position than a few years ago, but the devil in the detail suggests that being able to spend huge sums on player recruitment is neither achievable, or, if you look at the ‘spend, spend, spend’ strategies of clubs such as Barcelona and Everton, desirable.