Football Management

Commentary on the management of over 160 English football clubs by Dr John Beech, winner of the FSF Writer of the Year Award 2009/10 Twitter: @JohnBeech Curator of Scoop.it! Football Finance

Brighton

Posted by John Beech on June 1, 2009

It’s difficult not to feel sympathetic towards the lot of Brighton fans.

The start of the eighties had seen them in the top flight, and, in 1983, FA Cup runners-up. By 1987 they were facing life in the old Division 3. They made it back to Division 2 at the end of the season, but were relegated again in 1992.

In the nineteen eighties and early nineties the club was not well managed financially – an all too familiar tale of a club on the slide in playing terms. In 1982/83 they had the eighth highest wages bill in England although already in the second flight (A Survey of Football League Clubs by Jordan Information Services, 1985). By 1992 the club was £2.5m in debt and losing £1,000 a week, and facing a series of winding up orders.

The then owners decided the way forward was to sell the ground, the Goldstone, for redevelopment as retail warehouses. Unfortunately they omitted to arrange for a new stadium to actually be built. The background to their long period without a ground is well covered by Tim Carder on the Clubs in Crisis website (1).

To cut a very long and depressing story short, the club is expected to begin playing at the brand new 22,500 seater Falmer stadium in August 2011 (2), an event which will certainly be cause for some celebration, but the latest turn of events does give me some cause for concern.

Their most recently published accounts (30 June 2008, for the preceding financial year) show them as having made a profit of £877,000 on a turnover of £4,056,000, a distinct improvement on the previous year when they had made a loss of nearly £3 million on a similar turnover. Their long-term loans debt had however risen to £11,312,000.

In mid-May this year, a new Chairman was announced – multi-millionaire Tony Bloom (3). The cost of Falmer is reported to have risen to £93 million, but Tony Bloom has made an interest-free loan to the club of £80 million. It is this that I would find worrying if I were a Brighton fan.

This loan is the equivalent of twenty times the club’s turnover. To give this a sense of perspective, if you and your partner’s joint income were, say, £50,000, wouldn’t you have some measure of concern at being given a mortgage of £1 million by your bank? Might you not start to have concerns about the wisdom of your bank?

Certainly long-term interest free loans can allow a club to survive where otherwise it might have gone under. Readers of this blog will recall that I questioned the arguments of Hereford United’s Chairman Graham Turner, who said that the club has learned to live within its means following a period in Administration, while calling for a second punishment for Stockport County, one which Hereford had not suffered (4). Hereford’s long-term liabilities at the end of May 1999 were £1,265,257. At the end of May 2008 they stood at £1,246,522, and had averaged £1,261,091 over this period. This strikes me as actually living within someone else’s means, but clearly it works as a financial model for Hereford. The scale is, in any case, rather less than it now is at Brighton.

Let me make it absolutely clear that I am not casting any aspersions on the motives of Tony Bloom, or indeed on those backing Hereford United. The risk for the club lies in the possibility that the benefactor’s circumstances may change. The issue is whether such models are ultimately sustainable. The fact that the benefactor makes loans rather than invests in shares must surely mean that there is at least some possibility that the loan will have to be repaid. It is hard to see how this might be achieved at Brighton should Tony Bloom fall on hard times and want his loan repaid. The obvious example of this change in circumstances is at Rotherham, where the club ended up without a stadium and in Administration when the Booth family withdrew its backing.

Another concern I have with so-called soft debt is the way it distorts sporting competition. With some clubs having rosy financial cushions pushed under them, at least for the immediate future, how is this fair in sporting terms to clubs who do not have ‘sugar daddies’ to indulge them?

If professional football becomes simply a Battle of the Wallets, it becomes increasingly difficult to see it as sport.

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2 Responses to “Brighton”

  1. Allan Brown said

    I think it’s fair to say that when the owners decided to sell the Goldstone, it wasn’t because of historic debt, but because of a naked asset-strip – one of the most blatant in recent history, and one of seminal importance because it created a campaign far beyond Brighton that this was wrong. Disgracefully, one of the protagonists David Bellotti (a former Lib Dem MP) still has a position in polite society, recently being Chair of Bath Council.

    But the wider point holds – for every bad man like Bellotti or Bill Archer, more problematic are the sugar daddies. Not only do they distort competition, but they introduce a terrible note of uncertainty.

    For all clubs trying to do things the right way, spending within the historic cost and expenditure base of the club, a club living beyond its means thanks to the temporary support of that owner makes it near-impossible for them to survive, unless they too get their own sugar daddy. Ultimately, football becomes an arms race for who can acquire the most significant buy-now, pay sometime in the future ‘benefactor’. In this, the madness is aided by tax rules which allow people to write off loans to loss-making football clubs against tax in more profitable areas of their business activity; this is only possible if it is a loan, which creates the second problem – what happens when the money is needed? It’s either a block to a takeover, as owners want their own funds back as a condition of sale, even though the club is basically insolvent, or else they pull up the drawbridge with a moments’ notice leaving the club with a black hole to fill.

    A more strategic view would say that sugar daddy expenditure is not simply a matter for a club, a benefactor and his wallet, but a structural issue for the game. But football doesn’t do strategic views; its time horizon means that it only cares for the cash today, and tomorrow will be the time to deal with tomorrow’s problems.

  2. John Beech said

    I couldn’t agree more.

    As you peel away the layers of blame, neither the government nor the governing bodies come out of this well.

    The only concern expressed from within the game, i.e. Chairmen of clubs, is whether there should be a further punishment for clubs who fall into Administration, a classic case of trying to treat the symptoms of the malaise rather than the causes.

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