The Manchester Derby: City's $355M Free Cash Flow against United’s $800M Debt

Man City has become a winning machine, while structural changes, including ownership, have hindered Man United's winning streak. Off the field, can this rivalry spark as much intrigue and drama as it does on the field?

In English football, the rivalry between Manchester United and Manchester City generates intense debate.

Man United once used to dominate English football. However, the team's fortunes changed when Sir Alex Ferguson retired in 2013. Since then, United hasn't won the Premier League title! Meanwhile, Manchester City, once dubbed the "noisy neighbors" by the United fans, has claimed the Premier League title four times in the last five years.

This rivalry is fierce, driven by passion and love for the sport. Wouldn't it be intriguing to consider it in a financial context as well?

After all, football isn't just a globally beloved sport; it's also a business where financial strength can rival on-field performance.

English Football is a $7B Industry!

Football is a “very lucrative” business in Europe, with the ‘Big Five’ top-leagues (from England, Germany, Italy, France, and Spain) commanding 58% of the market share.

The Premier League, England’s top professional football league, is the wealthiest. It reported a $7.36B profit in 2024—with revenues coming in from commercial, matchday, and broadcasting sources.

The biggest expenditures are player transfers, stadium, and resources development. In the summer transfer window¹ of 2023 alone, Premier League teams spent a total of $3.5B on player transfers. The top spenders were Chelsea ($855M), Man United ($755M), and Arsenal ($700M).

Now that we’ve provided a quick overview of the industry landscape, let’s shift our focus to the major financial yardstick to analyze any organization’s treasury performance—the Free Cash Flow (FCF).

In 2023, Manchester City's FCF was 3x That of Manchester United's

Man City has a five-year average FCF of $347M. Man United’s is $125M, which is about a third of City’s. From 2019 to 2023, United’s FCF had a negative CAGR of -24.65%. Man City also had a negative FCF growth, but with a CAGR of -8%. Overall, Man City has maintained an FCF greater than United’s and the decline in Man City’s FCF is less severe as compared to United’s in 2020.

The decline resulted from Covid-19 lockdowns that required football clubs worldwide to ban mass gatherings in stadiums, hampering matchday revenue collection.

If you look closely at the line chart above, it clearly shows Man United’s FCF recorded at -$31.62M in 2020. This means that United didn’t generate enough Net Operating Cash Flow that year to cover its capital expenditures.

It’s a goal for Manchester City. But, why is Man United lagging behind?

Evaluating Man City’s performance over Man United

1. Manchester City’s outperformance on the field: In the last five years, Man City has won the Premier League 4 out of 5 times. Meanwhile, Man United has barely been able to keep its place in the top three. This has contributed to growth in City’s FCF post-Covid, from 2020 to 2023, at a CAGR of 15%. In the same time frame, United’s FCF grew at only 7%.
2. Stability in management with Pep Guardiola: Man City has had a remarkable era² under Pep. So far, he has accumulated 16 major trophies at City, with a win percentage of 73.6%. On the other hand, in the last 10 years, United has had five managers, two chief executives, and one set of owners, the Glazers. They’ve spent $1.83B on transfers and $73M on managers while accruing a debt of nearly $1B. Still, no title though³ .
3. Manchester City is getting better commercial deals: Commercial income means revenue earned from advertising, partnerships, t-shirt sales. Man City’s commercial income is up 50% since 2019 and now makes up 48% of the total revenue. Manchester City posted a commercial income⁴ of $437M for the 2022/23 season – higher than Man United ($388M), Real Madrid ($355M), Liverpool ($307M) and every other club.

While Manchester City outperformed Manchester United in terms of Free Cash Flow, another significant aspect to consider is each club’s Debt trends. Let’s take a look into it as well!

Manchester United's Debt is 3x That of Manchester City's

Man United’s debt increased steadily from ($644M) in 2019 to ($791M) in 2023—at a five-year CAGR of 5.29%. The average debt during this time was at ($718M).

In contrast, Man City’s debt started at ($123.36M) in 2019 and jumped to ($257.18M) in 2020. It then reduced for the next three years, reaching ($235M) in 2023. The CAGR was 18%.

Man City accumulates debt at a higher rate than Man United. However, both manage their debt at varying levels, indicating United’s preference for growth fueled by debt, which can be attributed to certain factors: Newly acquired by a new owner, Covid lockdowns, and not winning the league even after signing star players with huge transfer fees.

Reasons for Manchester United’s High Debt

1. Signing “Star” players: In the past five years, Man United has invested $974M to sign star players like Harry Maguire ($102M) , Jadon Sancho ($93M), and Casemerio ($90M). In 2023, Man United had an outstanding transfer payment debt of $407M⁵.
2. The Glazer family’s acquisition of Manchester United: Before the Glazer ownership⁶, United had been virtually debt-free from 1931 until 2005. In 2020/21, United had to pay $27M in interest payments. Only Barcelona and Atletico Madrid have more interest payments to pay than United.
3. The Covid Shock: English football was badly affected by Covid⁷. In 2020, United’s sales revenue dropped by 21% and FCF also turned negative at -$31M. To absorb this shock⁷, United had to borrow more to finance its operations.

Next, let’s analyze the management of long-term and short-term liabilities by both clubs to understand their financial position better.

For Every Dollar of Liability, Manchester City Holds $9 in Assets

Manchester United’s Current Ratio from 2019 to 2023 ranges between 0.16 and 0.36, averaging 0.23. This figure is much lower than the recommended ratio value of “1”. Manchester United may struggle to meet its short-term obligations as its current liabilities surpass its current assets.

On the other hand, Manchester City’s Current Ratio during the same period fluctuates between 2.07 and 19.54, with a high average of 8.69. This indicates that Manchester City’s short-term financial position is stronger, with current assets significantly greater than current liabilities.

Why is Manchester City’s Current Ratio exceptionally good?

1. Asset Management: Manchester United’s assets decreased significantly, with a CAGR of -15.98% from 2019 to 2023. In contrast, CIty’s assets increased with a CAGR of 29.78% in the same period. Manchester City has a larger pool of current assets compared to Manchester United. This involves inventory, accounts receivable, and cash and cash equivalents.
2. Liability Management: In the fiscal year of 2023, Manchester United reported total liabilities amounting to $1.5 billion. Conversely, Manchester City reported much lower liabilities, only totaling $70 million. It inflates the ratio value for Man City, which indicates a healthier financial situation compared to Man United.

For Every Dollar of Equity, Manchester United Carries a Debt of $12

Manchester United’s debt ratio grew from 2.61 in 2019 to 11.65 in 2023, showing an increasing dependence on debt for funds. The sharp rise from 3.61 in 2021 to 9.17 in 2022 points to a major uptick in total liabilities.

In contrast, Manchester City’s debt ratio was much lower, staying between 0.01 and 0.18 during the same period. The low ratio shows a more cautious funding approach, with the club leaning more on self-generated funds, instead of debt.

Why is there such a stark difference in the two clubs’ debt to equity ratios?

1. Manchester United’s high Debt to Equity ratio can be due to:
   • Aggressive investments in player transfers and infrastructure
   • The financial impact of Covid-19 which reduced their revenue streams, increasing reliance on debt
   • Man United’s higher Debt to Equity Ratio suggests a higher risk tolerance, as more debt can lead to higher potential returns but also higher risk.
2. Manchester City’s low Debt to Equity ratio can be attributed to:
   • Significant investment from their wealthy ownership, reducing the need for high levels of debt
   • Successful revenue generation strategies, such as lucrative sponsorship deals and high commercial revenue, which help maintain low debt levels

Man City Won! Is It Too Late for Man Utd?

Manchester City currently enjoys a strong financial position, thanks to its higher Free Cash Flow, low debt levels, and healthy liquidity ratios. Manchester United’s financials are signaling potential challenges—due to its high debt and lower liquidity levels. While City continues to enhance its financial stability, United needs to address its financial complexities to regain its historic stature both on and off the field.

So, the question arises, what’s next for Manchester United?

While Manchester United is currently facing financial challenges, fortunes can turn quickly. Manchester United has always been a top football club with a rich history. It has been home to many great players like Christiano Ronaldo, David Beckham, and Wayne Rooney.

With the right management and financial strategies, there is every possibility for it to overcome these obstacles and return to their former glory. It’s certainly a big challenge, but if there’s one thing Manchester United has shown time and time again, it’s that they thrive under pressure.

So, is it too late for Manchester United? Absolutely not. The next chapter in their illustrious history is just waiting to be written.

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