Following on from the article we posted earlier in the week about the disgraced former owner of Rangers FC – Link to article and his 15-year disqualification, we thought we’d take a closer look at the financial plight of football clubs in general. Unfortunately, our findings do not make easy reading.
A recent report into the health of the finances of teams competing in the English Football League, found one in ten clubs are under “severe financial pressure”, driving many to the brink of insolvency and administration. This represents a 33 percent increase in the number of troubled clubs compared with the same period last year.
Financial Fair Play rules
Last season (2013/2014) was the first to have the new Financial Fair Play rules in place. The rules dictate that any clubs filing a loss more than £3million over the course of the season, plus an extra £5million if guaranteed by the owner, would be punished by a transfer embargo.
Despite the potential retributions, the research found a total of eight clubs, one in nine of the 72 clubs in the Championship and Leagues One and Two, is in severe financial distress. Currently, the bountiful rewards that come with playing in the Premiership have been sufficient to keep the country’s top teams in the black.
A bad omen for the rest of the season
The financial expert who conducted the survey believes tough times lie ahead: “The end of the season is always a more telling time for the underlying financial health of football clubs that tend to pull in more cash at the start of the season when sponsorship, season ticket and television payments land.
“To see levels of critical distress rising is never welcome, and it would be a surprise if many of these troubled clubs avoided administration, sale or a comprehensive restructuring over the course of the season.”
Some football clubs have found themselves in the financial mire since the turn of the year. Bristol City, Leeds United, Hereford United, Heart of Midlothian and Dundee United have all undergone one form of insolvency or restructuring process.
It’s not all bad news…
Aldershot Town Football Club has completed its Company Voluntary Arrangement (CVA) two years ahead of schedule. Last year the club was relegated from the Football League. Then, just five days later, Aldershot entered into administration with debts totalling £1.4million.
The club was sold out of administration in August 2013 to a consortium led by former chairman Shashid Azeem. Former board members, Russ Howell, John Leppard and Tony Knights were also involved.
The new board of directors brought the Company Voluntary Arrangement to an end by clearing the club’s debts and repaying their creditors, many of whom were long-term Aldershot town supporters.
A statement on the club’s website said: “This brings to a close what has been a challenging administration process, with a need to satisfy Conference rules to ensure probity in the game.
“We can also report that, as forecast in January, we have delivered a modest profit in our first full year of trading. We hope these positive developments provide reassurance for staff, supporters and sponsors as we aim to steer our club towards long-term sustainability.”
Despite a ten point deduction for entering into administration during the 2013/14 season, Aldershot Town finished 19th and survived the drop.
With all billions generated in the football scene, you may imagine what is going wrong? It is no coincidence that a recent survey of the Premier League by Barclays Bank showed a trade deficit of £375m. In simple terms, clubs are spending £375m more on foreign players than foreign clubs spend on UK players. Putting aside the devastating impact on English football and team this is only part of the problem. The vast majority of supporter’s money, which it has to be said is earned by working in ‘real’ jobs working for long hours is diverted away from the football clubs and owners and ‘invested’, if that is the word, into a grossly over- valued commodity (footballers). There is evidence that the UK is falling out of love with football as fans get more and more disillusioned, so the fall in revenue will apply more pressure.
The millions paid for this commodity should be invested into the business to grow home produced players and for the grounds, facilities etc. unfortunately it is squandered on WAGs, Agents and fashion or luxury items – totally lost revenue.
The lost revenue applies pressure to the clubs owners to borrow more and frankly a lot of owners by out of a passion for the club itself not to make money. Subsequently, a lot of owners do not have the financial acumen or skill sets to manage this scenario.
Top learning tips
- Do not pay more for your goods than they are worth – commit to research and have a plan and stick to it
- Manage the short term needs effectively but don’t forget to invest for the future – your plan should have a long term goal too
- Never neglect your customers and always under promise and over deliver – not the other way around or you will lose them
- If the company cash-flow is being strangled by the overheads then cut the overheads back – be ruthless
- Of course, everybody wants to be the number one but sometimes you have to accept paying your way and being middle of the road is enough
- No member of staff or individual is bigger than the company no matter how good they