Football clubs: skint as a parrot

One in five English Football League clubs is in 'poor financial health'. How is it not more? That's the £50m question...

by Dave Waller
Last Updated: 19 Apr 2012

A survey conducted by administrator Begbies Traynor, currently overseeing the administration of League Two strugglers Port Vale, has found that 13 of the UK’s 68 professional clubs outside the elite Premiership are showing signs of ‘distress’. And that doesn’t mean the players having a hissy fit at the weather because they can’t work out whether or not to wear a snood.

The issue is, however, player-related. The problem hinges on the unsustainable amount of cash the clubs are spending, much of which comprises the whopping wage bill that burdens the modern game. The result: an increasing number of clubs facing serious court actions, including winding-up petitions, late filing of accounts and ‘serious’ negative balances on their balance sheets. A total of 19% of clubs are in such trouble, compared to 1% of businesses in the wider economy.

Sadly accounting, like football, is a game of two halves – and the incoming half has to at least match the half going out. While these clubs’ Premier League cousins get to count on cash pouring in from TV and wealthy benefactors every year, the rest of them are forced to scramble around for crumbs, stuck between loyalty to their fans on the one hand, and increasingly unrealistic operating conditions on the other.

Of course the patterns at the top will have an inflationary effect down below. Last year Liverpool managed to get £50m (£50m, people!) for Fernando Torres, who has promptly gone on to underwhelm hilariously for Chelsea. A shrewd business move, you may say, offloading something that routinely fails to deliver, to a rival, for an obscene amount of cash. But that’s a hard argument to sustain when Liverpool spent slightly more than £50m to replace Torres with Andy Carroll and Louis Suarez, who’ve done next to nothing either (save for, in the case of the latter, help land the club in a nasty racism furore). As well as sabotaging their own chances, these clubs are helping to inflate the price of players across the board. Now even a below average player costs the kind of sums that would keep lower league strugglers in shorts and shin pads for a year.

Begbies has identified three financially distressed clubs in the Championship. While the survey is anonymous this total clearly includes Portsmouth, who only four years ago were winning the FA Cup. This weekend its administrator Trevor Birch warned that the Championship has become ‘a scene of carnage’ in financial terms, with everyone betting everything they have (or don’t) on promotion to the lucrative Premiership. ‘Clubs are losing between £5m and £10m a year and a third of them spending over 100% of turnover on wages,’ he said, adding that crowds and sponsorship levels were down, and that corporate hospitality has dropped by 20-30% for some clubs.

As Begbies partner Gerald Krasner points out, the sale of season tickets for next season could help clubs’ coffers in the short-term, ‘but that won't solve the underlying problems’. Indeed, not when the underlying problem essentially this: that the last semblance of financial sense departed the sport in the team coach long ago… 

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