Are Leicester playing fair with their finances?

As the financial fair play rules come into force, it seems the Leicester City are one of three Championship clubs to be caught-out by the new rules.

Having posted a loss of £14,299,000 for the last financial year, the club has some work to do if it is to avoid Football League penalties in the coming years.

Popular freelance blogger Mike McCarthy - who authors the FoxBlogger blog - believes that the best way for he Foxes to avoid penalties is to be promoted this term.

"All spending from 1st June 2013 will count towards the new Financial Fair Play limits. Therefore the quickest and best way for Leicester City to avoid Financial Fair Play penalties is to get promoted this season," writes McCarthy, "At the moment the signs are promising. City have made an excellent start and look to be settling in to a side both difficult to beat, and capable of scoring plenty of goals."

With promotion, then, Leicester's future would be all but assured and a foray into the Premier League would yield a huge increase in television rights money enabling the club to, perhaps, compete at the top level. However, without promotion there are a number of factors to consider, with the club's Thai owners holding the key to unlocking this particular quandary.

Leicester City's Income, 2011-12 Match Receipts – £6m Other Football Income – £6m Retailing and merchandise – £1.4m Conference, catering, etc. - £0.9m Sponsorship, advertising & other – £3.1m

"Let’s start with what the club takes in," continues McCarthy, "In 2010/11 the club received income [to a] total of £17.4m.

"How much scope is there for that income to rise? Attendances have been patchy, so match receipts are unlikely to have increased significantly despite increased ticket prices. The Championship TV deal which started this season is worth 26 per cent less than the old one, meaning the club will have less TV money to play with. The recession is also likely to have impacted on the club’s attempts to expand significantly on its retail business.

"The club say they’ve signed sponsorship deals with Air Asia, Amazing Thailand and King Power which “provide for a significant increase in the commercial income of the club” but contracts were signed some time after 1st June 2011 so the accounts give no details as to how large these deals are."

The question of whether Leicester City can meet the Financial Fair Play rules rests, then, on their performance on the pitch. The answer will only be known at the end of the season.

Quotes in this article are taken from the Foxblogger blog. For more information on Financial Fair Play and how it affects Leicester City, see this entry.