The Top tier of the football division in England have recorded losses after a new accounting rule has been put into place due to Brexit.
The loss of £312 million is due to be announced, having changed to the new UK accounting rule, the worlds wealthiest footballing league is now facing issues with a drop in the sterling and the financial reporting council has warned companies they face similar complications according to the FT.
In the past the premier league would use derivatives to trade and manage exchange rate risks, the fact that the sterling has dropped in value has made TV contracts worth less with the company paying the clubs in sterling. But as the laws have change the risk associated with sterling has risen, the new rules have banned managing risk in derivatives and thus exchange rate fluctuations are more likely to effect UK premier league clubs.
According to the New rules companies using hedges to insure against unexpected exchange rates in the currency market has been scrapped. The contracts were valued at market prices annually instead of after when a deal has matured. As the contracts have matured after 31 July 2016, after the referendum values had declined 12%, turning profits into losses and thus any contract that has matured has reduced in valuation. If the pound remains unstable and unexpected drops occur, then the league could face further loses as the pound loses its value. The fact that a plan after Brexit is not just vital for the economy but it is vital for clubs in order to maintain their competitiveness in the footballing world. As the world of sport turns more into a financial system than years before investment was part of sport. The UK clubs would be happy to see better days as it could in the future effect their chances to maximize their capital.
However according to the Financial times these losses will not affect the clubs due to some contracts still remain open and new deals are being formulated such as the new domestic TV rights from Sky and BT which is worth £5.1 bn. These reports are warning lights to the Premier league that external forces can hugely affect the market profit and a contingency plan is needed in order to prevent further damage to a league that is loved by many.