Just how many more?
Posted by John Beech on June 2, 2009
Anyone who knows me will confirm that I am not by nature a pessimist – a cynic maybe, but not a pessimist.
Reviewing my data on insolvency events offers little to encourage any optimism however. I have to date logged 107 insolvency events involving 88 clubs since 1982. 10 have been this season; 8 have been in April or May this year.
For the record, those this season, with ludicrously over-simplistic analysis, are:
- Ringmer – November
A long-running dispute over the ownership of their stadium remains unresolved and has crippled the club’s ability to operate. (1)
- Darlington – February
Club struggles to operate a grandiose and inappropriately large ‘new’ stadium. (2 and 3)
- Southampton – April
Debts arising from the construction of the new stadium coupled with relegation force the holding company into Administration. (4 and subsequent blog postings)
- Stockport County – April
Taken into Administration when one of the backers of the club withdrew support and foreclosed on the loan. (5)
- Gresley Rovers – May
Debts reported to be as high as £400,000 force the club to resign from the UniBond Division One South. (6)
- Fisher Athletic – May
Already homelss, the club is wound up owing HMRC £250,000. (7)
- Darwen – May
Wound up over two debts amounting to just over £20,000. (8)
- Northwich Victoria – May
Barely surviving and at one point locked out of their stadium by the previous owner, the club is finally forced into Administration. (9)
- Chester City – May
Into voluntary Administration, the club has faced a transfer embargo had been relegated. The owner has ‘previous’ with Barrow. (10)
- AFC Hornchurch – May
Main sponsor has gone bankrupt and insurmountable debts prove too much to service. A resurrectionist club, only five years old. (11)
[I would pleased to hear of any I have missed - I have a note, for example, of Racing Club Warwick having entered Administration, but have been unable to confirm this.]
Each case is of course unique, but with so many cases in such a short time – and so many other clubs flirting with insolvency – some generalisations can be made. Starting from ‘within the club’ and moving to the external operating environment, the following occur to me regarding clubs in financial trouble:
- ‘Benefactors’ are sometimes far from that, but the whiff of a big cash injection may throw financial caution to the wind.
- Clubs fail to recognise that taxes must be paid and HMRC knows where they live.
- Clubs rely on ‘soft debt’ which turns out not to be quite as ‘soft’ as they had imagined.
- Clubs lose ownership of their stadium through this, and fall out with ex-benefactors, especially when the ex-benefactor is facing financial hardship in his core business.
- Clubs have unrealistic aspirations, and plan inappropriately large and expensive new stadiums.
- Clubs fail to have a Plan B for the possibility of relegation.
- Clubs do not recognise that, in the distorted world of pyramid finances, promotion brings costs that may outweigh increases in revenues.
Clubs do not bear all the responsibility for the last point of course. At the root of this problem is the breakaway of the Premier League almost twenty years ago. Phil Gartside proposes a new format Premier League with with 34 English clubs plus Rangers and Celtic – surely what we need is a return to a unified league structure and hence a more sensible distribution of broadcasting rights. We also need reasonable, realistic and effective financial controls, and effective ‘fit and proper person’ tests.
It’s time to treat the causes rather than the symptoms of financial embarrassment.