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

The Tax Man cometh…

Posted by John Beech on February 23, 2012

There can be no doubt that the abbreviation HMRC is one which has hit pretty well every football fan’s radar screen recently.  There have been the two big Administrations at Portsmouth and Rangers.  Bubbling away in the background is not only the issue of whether clubs’ use of Employment Benefit Trusts constitutes tax evasion (and is hence illegal) or merely tax avoidance (perfectly legal), but also HMRC’s challenge to the legality of the Football Creditors Rule, which has seen it take substantial hits in its revenues since the Crown lost its ‘preferential creditor’ status in 2003, which resulted in ‘football creditors’ coming higher in the ‘pecking order’ when things went pear-shaped.  At present clubs in Administration face an obstructive HMRC when seeking to enter a CVA which would see HMRC being paid anything less than 100p in the pound.

Has the general approach of HMRC to football clubs changed over time?  It states its position pretty consistently, as it did thus with respect to Rangers: “We can’t discuss specific cases for legal reasons, but tax that has been deducted at source from the wages of players and support staff, such as ground keepers and physios, must be paid over to HMRC.  Any business that fails to meet that basic legal requirement puts the survival of the business at risk.

So, just what is HMRC’s track record over time in pursuing football clubs?  I’ve been researching its propensity to ‘present a winding-up petition’ against a football club, and how it’s changed in terms of frequency over the period since 1960.  Some of the outcomes are unsurprising, but others may be a little surprising.

The full data set is available here, and I will endeavour to keep this list up-to-date.  It covers all English and Welsh clubs, but not Scottish clubs, and has been developed by searching the London Gazette database.

Here are some thoughts on what I found:

  • HMRC and its predecessors (the Inland Revenue, who were responsible for collecting direct taxes such as income tax [including PAYE] and National Insurance contributions, and HM Customs & Excise, who were responsible for collecting indirect taxes, notably VAT, merged to form HMRC in April 2005) seem to have shown little favour towards League clubs, and even less to non-league clubs.
    In total since 1960, they have presented a total of 181 winding-up petitions, against League clubs on 58 occasions, and against non-league clubs on 123 occasions.
  • The frequency has varied considerably.  There were only two petitions presented in the 1960s, whereas in the peak decade to date, the 1990s, 62 were presented.
    (Images can be enlarged by clicking on them)
  • A year-by-year plot of petitions since 1990 reveal a more nuanced pattern.  After a burst of activity in 2002, HMRC seem to have eased off presenting petitions until taking up the challenge again seriously in 2009, with a greater proportion of League clubs being the object of HMRC’s interest.
  • My impression from the list of clubs involved is that there is something of a North/South divide, with a disproportionate number of Southern clubs in the list
  • HMRC has complained of ‘serial offenders’ and there is some evidence of this.  Bournemouth were on the receiving end of 5 petitions between 1995 and 1997; Chester City received 6 between 1986 and 2009; Crawley Town received 6 between 1973 and 2010; Doncaster Rovers received 4 between 1988 and 1994; Hartlepool United received 7 between 1982 and 1993; Hull City received 6 between 1992 and 2000; Margate received 4 between 2001 and 2010; Northwich Victoria received 4 between 1983 and 2008; Southend United received 4 between 2000 and 2011; and Stockport County received 4 between 1975 and 1999.

Looking at just the list of Winding-Up petitions of course tells only part of the story.  The size of the debt to the Tax Man has grown astronomically.  When Accrington Stanley withdrew from the Football League in 1962, the club owed the Tax Man roughly £4,500; Portsmouth owed HMRC approximately £11 million when they sought the protection of Administration in 2010.  The interesting question is why did HMRC hold back in the period up to 2009 and allow such large debts to grow.  It’s not as if they have a track record in the longer term of being tolerant with football clubs.

One petition in the list intrigues me, and I would appreciate any input from readers who know of the circumstances: in 1993 Customs & Excise presented a petition against Gorton and District Sunday League Football Club, and the club was indeed wound up as a result.

Posted in Debts, HMRC, Insolvency | Tagged: , , | 5 Comments »

That feeling of déjà vu at Pompey, all over again

Posted by John Beech on February 17, 2012

Portsmouth’s return to Administration today (1) for the second time in a smidgen under two years speaks volumes, especially coming in the week that Rangers, a rather more iconic club, suffered the ignominy of Administration too (2).  High profile those these events are, the phenomenon of financial problems is not confined to te top clubs.  This season so far we have also seen Darlington go into Administration, as have Rothwell Town way down the pyramid.  Prescot Cables have returned to amateur status mid-season, and poor Croydon Athletic have disappeared, at least for the moment.  (A full listing of English football clubs’ insolvency events in the modern era is available here; a warning, it does not make pleasant reading)

It would be easy to dismiss the case of Portsmouth as a special case (especially bad, that is).  The ‘club as company‘ has a long and shameful tradition.  It was formed in 1898 to replace the previous club, Royal Artillery, who were disbanded because of that delightful euphemism ‘financial irregularities’ – payments to players which were blatantly undermining their supposed amateur status.  Funny how history can return to haunt you.

By 1912 the owners were already in deep financial trouble, and the company was voluntarily wound up and promptly reformed, thus wiping out its debts (3), a procedure which is no longer legal, but was far from rare in those days.  The mind boggles at how football clubs today would behave if it were still a legal option like this open to them.  To use a ‘Partridgeism’, the club ‘bounced back’, entering the Football League in 1920, winning the FA Cup in 1939, and the old First Division title in 1949 and 1950.

The road was only downhill after that, obviously excepting the recent relatively spell in the Premier League and FA Cup win.  Sporting decline was followed by financial decline.  A series of owner/benefactors who failed in various degrees is a familiar mantra to Pompey fans – since 1973 the list reads John Deacon, Jim Gregory, Terry Venables, Martin Gregory, Milan Mandric, Sacha Gaydamak, Sulaiman Al Fahim, Ali Al Faraj, Balram Chainrai, and Vladimir Antonov.  Whatever criticisms can be made about them individually, the lack of any continuity has hardly been good for the club.  And there will doubtless be further criticism to come as the unravelling enquiries of both this period of Administration, and the previous one, tease more and more uncomfortable detail out of the wood work.

Of the 200+ files I have on English football clubs, Portsmouth’s is the biggest.  It would be convenient to say that this is because I am Pompey fan.  That would not  though be honest.  It’s because they have a spectacularly aberrant history of ownership and mismanagement.  ‘Spectacularly aberrant’ from normal business, that is.  Merely ‘worse than most’ with respect to other football clubs.

The themes which have dogged Portsmouth occur throughout my files, and all over this blog:

  • Owners who did not have deep enough pockets, and yet push clubs further into unsustainable financial positions
  • Owners unlikely to win ‘Ethical Businessman of the Year’ competitions
  • Owners who have clearly not read the dictum of Mr Micawber in David Copperfield (Charles Dickens was born in Portsmouth, so the reference is particularly appropriate)
  • Repeated failure to pay HMRC on time

Portsmouth’s latest ‘misadventure’ should provide a wake-up call.  But then so so should their one two years ago.  Will the governing bodies just hit ‘snooze’ again?  I like to think not, but, would you believe it, I’m not optimistic.

I can’t argue that the imposition of the Financial Fair Play protocol, or effective club licensing ,or an effective Fit and Proper Person Test would necessarily have avoided Pompey’s current discomfort.  Without them though, another round of insolvency events is inevitable.  It doesn’t have to be that way and nor should it be.

Surely the football world must finally wake up to sorting out, as its highest priority, its financial messes, by attacking the causes rather than the symptoms  rather than stressing over the number of English clubs left in European competition or who the next England manager should be.

Posted in Benefactors, Ethics, Financial doping, Fit and Proper Person tests, Globetrotterisation, Governance, History, Insolvency, Ownership | Tagged: , , , , , , , , | 4 Comments »

That elusive number of insolvent football clubs

Posted by John Beech on February 13, 2012

Today’s breaking news makes for grim reading.

First there are the reports that Portsmouth is to go into Administration again (1).  With the club’s bank account now frozen, players and other staff unpaid, and an early parachute payment in the offing, this comes as no great surprise.

Meanwhile, North of the Border, it is reported that Rangers are declaring their intention of going into Administration (2).  In theory at least, Administration might yet be avoided – they might manage to negotiate a deal with their creditors, but this seems unlikely as it involves HMRC and a sum of £49m , or they might find a new owner in the meantime (which seems almost as unlikely).  The process of ‘declaring intent ‘ provides a company with temporary protection from creditors.  Two precedents from English football spring to mind: Plymouth Argyle (who did subsequently go into Administration) and Coventry City in 2007 (who found a buyer in the nick of time, thus avoiding Administration).

Those interested in the complexities of what has been going on at Rangers should follow the excellent Rangerstaxcase blog.

It was the case of Coventry City that prompted me back then to find what proved to be an elusive number – the number of top flight clubs that had gone into Administration.  So elusive did it prove to be that I started compiling relevant data in an attempt to produce it myself.  The results of this research I have now added to the blog on a new page No. of Clubs, accessible by clicking on the link or from the top menu.  Please read the bumf at the top of that page before diving in!

Posted in Insolvency | Tagged: | 2 Comments »

The Magic of Football – still there in the Cups?

Posted by John Beech on January 27, 2012

It’s increasingly difficult to see any magic in the beautiful game other than black magic, especially when you look at it from a financial perspective.  You only need to think of the narrow escapes at Plymouth and Wrexham recently, and both Portsmouth and Darlington are standing on the edge of the precipice.

The Cups may be a different matter however.  Recently Louise Taylor suggested that the FA Cup Third Round had failed to cast any magic on fans (1).  Below I’ve taken her data and, in italics, added some more.  It struck me that whatever magic there might be would be associated with the possibility of a giant-killing, or, as the BBC have started to call it, a ‘cupset’.  Did the possibility of a cupset bring out the fans, especially in the case where the ‘minnow’ was playing at home.

Home Club

Tier

Away Club

Tier

Away – Home Tier

FA Cup attendance

Average league attendance

Difference

MK Dons

3

QPR

1

-2

19,506

8,217

11,289

Swindon Town

4

Wigan

1

-3

13,238

7,887

5,351

Bristol Rovers

4

Aston Villa

1

-3

10,883

6,122

4,761

Gillingham

4

Stoke

1

-3

9,872

5,482

4,390

Macclesfield Town

4

Bolton

1

-3

5,757

2,222

3,535

Fleetwood Town

5

Blackpool

2

-3

5,092

1,781

3,311

Dagenham & Redbridge

4

Millwall

2

-2

3,396

2,161

1,235

Crawley Town

4

Bristol City

2

-2

3,779

3,181

598

Brighton and Hove Albion

2

Wrexham

5

3

18,573

18,595

-22

Chelsea

1

Portsmouth

2

1

41,529

41,632

-103

Manchester City

1

Manchester United

1

0

46,808

47,013

-205

Doncaster Rovers

2

Notts County

3

1

9,535

9,750

-215

Peterborough United

2

Sunderland

1

-1

8,954

9,233

-279

Liverpool

1

Oldham

3

2

44,556

44,857

-301

Tottenham Hotspur

1

Cheltenham

4

3

35,672

36,071

-399

Sheffield Wednesday

3

West Ham

2

-1

17,916

20,041

-2,125

Barnsley

2

Swansea

1

-1

7,380

10,719

-3,339

Norwich City

1

Burnley

2

1

22,898

26,516

-3,618

Nottingham Forest

2

Leicester

2

0

18,477

22,224

-3,747

Watford

2

Bradford

4

2

8,935

12,731

-3,796

Birmingham City

2

Wolverhampton

1

-1

14,594

18,682

-4,088

Fulham

1

Charlton

3

2

20,317

25,315

-4,998

Middlesbrough

2

Shrewsbury

4

2

12,631

18,164

-5,533

Coventry City

2

Southampton

2

0

9,000

14,813

-5,813

Everton

1

Tamworth

5

4

27,564

33,407

-5,843

Reading

2

Stevenage

3

1

11,295

18,554

-7,259

Sheffield United

3

Salisbury

6

3

10,488

18,559

-8,071

Hull City

2

Ipswich

2

0

10,246

18,922

-8,676

West Bromwich Albion

1

Cardiff

2

1

12,454

24,794

-12,340

Derby County

2

Crystal Palace

2

0

10,113

26,133

-16,020

Newcastle United

1

Blackburn

1

0

30,876

48,866,

-17,990

Totals

2.29

2.32

1

522,334

602,644

-80,310

I have added the away teams, the tiers in which each team plays, and the difference between the tiers at each game.  The list has been sorted into an order from the greatest increase to the greatest drop in the number attending.

The results are not entirely surprising.  Where the home team is two or more divisions below the away team, the fans have turned out in extra numbers.  At games like Everton v. Tamworth and Sheffield United v. Salisbury, the home fans staying away outnumber any boost in the ‘minnow’s’ away following.  The two biggest differences are at matches between clubs in the same division.  Overall there is a fairly clear picture of the FA Cup lacking magic except when a home team might just cause a cupset.

Below is a graphic representation with a rather unscientific trendline.

It’s unscientific in that there are many variables at work here, including, for example, the distance away fans have to travel, and, in any case we are dealing with fairly small numbers of games.

One difficulty is that a scientific look at this phenomenon would require details of ticket allocations for away fans (and implicitly therefore home fans, given that stadium capacity is known) and the percentage of these which were sold.  Does anyone know a single source on the internet which gives these?  This would be an interesting topic for research as the outcomes would provide a basis for a scientific allocation of tickets for away fans.

Posted in Community, Fans | Tagged: , | Leave a Comment »

2011 – The Year in Insolvency Events

Posted by John Beech on December 31, 2011

Below is a round-up of the insolvency events I have logged during 2011.  The definition of insolvency event is a debatable one, and I prefer a descriptive rather than prescriptive one.  Broadly I would define an insolvency event as one which reflects a discontinuity in the operation of the ‘club as company’ caused by insufficient funding.

Where the Court or Companies House has been involved, I designate the insolvency event as ‘hard’ (and shown in bold), and, where this is not the case, I designate it as ‘soft’.

Repeat events at a particular club are italicised.  Any errors or omissions posted as comments will be corrected with due acknowledgement.

CLUB

DATE

INSOLVENCY EVENT

‘HARD’ OR ‘SOFT’

TIER

Leyton

12/01/2011

Expelled from Isthmian League because of debts; subsequently dissolved (see below)

S

8

Windsor & Eton

02/02/2011

Compulsory Liquidation

H

7

Plymouth Argyle

21/02/2011

Filed intent to enter Administration,
then did so

H

3

Eastwood Town

01/06/2011

Sold for £1

S

6

Rossendale United

18/06/2011

Expelled from North West Counties Football League because of debts

S

9

Gedling Town

25/06/2011

Again withdrew from East Midlands Counties Football League

S

10

Rushden & Diamonds

05/07/2011

Administration

H

5

Hucknall Town

14/07/2011

Reverted to amateur status

S

7

Leyton

17/07/2011

Dissolved

H

10

Dawlish Town

22/07/2011

Withdrew from Western League

S

9

Prescot Cables

16/10/2011

Returned to amateur status mid-season

S

8

Rothwell Town

17/10/2011

Administration

H

8

For comparison, this second table shows the insolvency events in 2010:

Crystal Palace

26/01/2010

Administration

H

2

Folkestone Invicta

05/02/2010

Entered CVA

H

8

Portsmouth

26/02/2010

Administration

H

1

Chester City

10/03/2010

Compulsory liquidation

H

5

Farsley Celtic

10/03/2010

Compulsory liquidation by Administrator

H

6

Grays Athletic

12/05/2010

Relegated from Conference National; sought to drop a further level to Isthmian League

S

5

Nelson

16/07/2010

Resigned from League; folded

S

9

Ashford Town (Kent)

20/07/2010

Administration

H

8

Gedling Town

25/10/2010

Withdrew from East Midlands Counties Football League

S

10

Atherstone Town

18/12/2010

Resigned from Southern League

 S

8

In an increase from 10 insolvency events to 13, although drop from 6 to 5 of ‘hard’ insolvency events.  These are in absolute terms fairly small numbers so it is difficult to generalise with any certainty.  Nonetheless they are large enough as percentages of the total numbers of clubs in the various to warrant some albeit speculative comment.

Although the insolvency events at Portsmouth and Plymouth Argyle in particular of the bigger clubs have attracted much media coverage, the incidence of insolvency events in clubs in tiers 7, 8, 9 and 10 is rarely even noted other than by local newspapers.  It would easy to dismiss their higher level of incidence as simply a reflection of the fact that there are far more clubs in each of these lower tiers.  While that is certainly part of the explanation, it must be remembered that we are not quite comparing like with like.  At these levels there are no broadcasting rights to be lost through relegation, and the difference in financial scale of operation between successive tiers is low.  Indeed, the business plan B in case of relegation will not be significantly different from the business plan A of staying up.  There should therefore be proportionately fewer insolvency events.

In my view there are  surprisingly high number of insolvency events at the level of semi-professional clubs.  The smaller budgets should be easier to manage, and any shortfall of revenues should be relatively easily absorbable if the club is owned by a local ‘benefactor’.  Even a whip-round with collecting buckets should be enough to ward off an impending insolvency issue, unlike at, for example, Portsmouth, with their debts rising at one point to a reported £135 million.

On the one hand, lower tier clubs exhibit a greater realism than Football clubs, as evidenced by the number of ‘soft’ events with clubs simply dropping a tier voluntarily.  On the other hand, they can be driven into financial doping by a ‘benefactor’, leaving them with entirely unsustainable business models when the ‘benefactor’ either loses interest is unwilling or unable to continue the club’s enforced ‘habit’ for cash injections.

I certainly see the same worrying signs in the football sector as I have done for more years than I care to remember.  Higher level clubs remain as vulnerable as ever, and lower level clubs seem to be becoming more vulnerable.  As the year turns, a number of clubs are in imminent threat, the most obvious being Darlington (1).  At higher levels, few would discount Portsmouth as a prime candidate for Administration unless a ‘benefactor’ buyer can be found, and the club launches off down yet another ownership cycle.

In a nutshell, I fear another depressing year for fans at too many clubs.  Here’s hoping that the various versions of financial fair play protocols can begin to bite and force clubs into sustainable business models.  Let’s also hope that all the words recently expended on football governance by politicians lead finally to an effective licensing system which includes an effective fit and proper persons test.

All best wishes to blog readers for the New Year.

Posted in Insolvency | Tagged: | 3 Comments »

Round the Lower Levels Part 2

Posted by John Beech on December 21, 2011

At last, Part 2 of my overview of what is happening from a broad financial perspective.  Part 1 ran alphabetically up to Prescot Cables, and is available here.  With a slight jump backwards, we pick it up with:

  • Port Vale
    An interesting case of ‘fan ownership’.  Valiant 2001 bought the club from the Administrators in 2003 (1) – the club had debts of £2.4m and was said to be losing £500,000 a year (2) – and in doing so avoided the real threat that football might have disappeared from Vale Park (3).
    Survival has been a battle, with the problem of sponsors not paying and a threatened takeover (4), and the need for a loan from Stoke City Council (5).  Nevertheless the club managed to complete its CVA in May 2005 and to come out of Administration in October 2006.  Meanwhile local boy Robbie Williams had bought shares for an undisclosed sum (6).  However Chairman Bill Bratt had “taken the club as far as I can” by September 2008 (7), but was denying takeover rumours the following month (8).
    Into the New Year and a row was brewing over the apparently different involvement with local rivals Stoke City by the council (9).  Bratt attempted to clarify the club’s difficulties here, and pointed out his already considerable commitment to the club (10).
    Fan opposition to the way the board was running the club mounted, and Bratt pointed out the obvious:

    Supporters have protested against the board in recent weeks, and Bratt said it could be potentially destructive.
    “If we go, what happens? We fold immediately. If that’s what they want, they could take the club down, not the board,” said Bratt.
    He added: “I’m quite happy to walk away from this club right now, but the banks and creditors would come in straight away, and there’s no Plan B in place. (11)

    Plans B, C and D have however emerged in recent years – the failed attempts by various parties to invest in the club (Harlequin Properties (12); Mike Newton (13); Mo Chaudry (14); and most recently Blue Sky International (15)), although there has been investment by Peter Miller (16).
    All the uncertainty has prompted an attempt by fans to oust the board (17).
    All very sad.  The days of fan-benefactors like Jack Hayward, Jack Walker and Steve Gibson seem to have gone, and fans need to be clear in discriminating between ‘fan-owned’ and ‘Supporters Trust owned’.

  • Portsmouth
    I’d planned to avoid blogging about Pompey until the situation became clearer, but it hardly seems reasonable not to comment in this context.
    The immediate situation sounds reasonable, with the immediate possibility of points deduction probably not on the Football League’s agenda (see previous posting).  The issue is just how long the ‘immediate’ will last – current indications are that it will all too brief, with time and money running out sometime next month.  Whether Keith Harris will have been able to weave his magic in finding a buyer before then (18) seems unlikely – Pompey are hardly the most attractive of clubs to buy in their present mess (19).  I have it on good authority that even the liquidation of the ‘oldco’ is proving to be contentious.
    Administration for the club (as opposed to the existing Administration of CSI) looks increasingly likely, with its inevitable 10 points deduction, threat to keeping up the CVA payments (and further points deduction).
    Increasingly liquidation and resurrection by the Pompey Supporters Trust looks the only viable longer-term scenario.
  • Rossendale United
    The club did not reapply for membership of the North West Counties Football League at the start of this season (20), and a new club is being resurrected (21).  News is scant, any local informed input would be appreciated.  See also my posting in March where I argued that the club was a classic case of Benefactor Withdrawal Syndrome (BWS).
  • Rothwell Town
    In October the Rowellian Football Social Club (trading as Rothwell Town Football Club) did go into Administration (22).  Again, any local informed input would be appreciated.
  • Rushden & Diamonds
    Following their expulsion from the Conference (23), the club tried but failed to get into the Southern Premier League (24), and went into Administration (25).  That appears to be the end of the club in this manifestation, but an AFC Rushden is being formed (26).
    This seems to be another case BWS, although perhaps with twists yet to emerge…
  • Southend United
    In November the club announced “Roots Hall Development Moves Closer” (27).  So, nothing new there then.  Meanwhile, the Fossetts Fantasy Farm project has been “has been removed from the [Council’s] capital programme until the certainty of developer contribution can be ascertained” (28).
  • Truro City
    The club owned by Kevin Heaney, wannabe owner of Plymouth Argyle, is in deep, deep trouble.  Wages have been unpaid (29) and the ‘Stadium for Cornwall’ project now has a big question mark hanging over it (30).
    HMRC are chasing tax debts of over £100.000, and the club has until January 16 to come up with the money or face a winding-up order (31).
  • Wakefield
    A not entirely unfamiliar story here too (32), with unpaid wages and money owed by a sponsor (33).

All too worryingly, I could start going round the alphabet again, with various tales of various woes at Barnet (34), Cheltenham (35), Chorley (36), Coventry (37), Croydon Athletic (38) and Dorchester Town (39), although at least the last of these has a positive side, a possible takeover by Dorchester Town Supporters Trust.

It looks as if the race is definitely on for the club to face the first insolvency event of 2012.  February is the second highest peak for insolvency events (behind may), so it could well be a close run thing.

I’m beginning to wind down (or is it up?) for Christmas, so, in case I don’t post again in the next few days, a very Happy Christmas, or Bah Humbug (delete as you consider appropriate), to all readers.

Posted in Benefactors, Debts, HMRC, Insolvency, Ownership, Stadium | Tagged: , , , , , | 1 Comment »

Pompey and the potential for points deduction

Posted by John Beech on November 29, 2011

Having carefully got through as far as Prescot Cables in the first half of my round up of clubs in trouble below the Premier League, I had rather assumed that I could at least get Part 2 published before returning to the subject of Portsmouth.  Clearly that was not meant to be.  So here are some first thoughts on what will be an ongoing saga of, well, Pompeyesque proportions.

For most fans there will be the question of points deduction, a matter for the Football League.  As it stands, at least for the moment, the company which owns Pompey, Portsmouth Football Club (2010) Limited, is not in Administration, as it is at pains to point out in its official statement (1); it is the parent company, Convers Sports Initiative plc, which is (2).  It is the issue of how closely the two companies are linked that the Football League will have to rule on.

The obvious precedent to spring to mind is that of deadly rivals Southampton, where the decision was that the company owning the club and the parent company were so intimately involved that the club should suffer points deduction on account of the parent company going into Administration.  It’s worth quoting from the Football League’s statement (3) at the time:

The [Grant Thornton] report [on which the decision was based] concluded, among other things, that:

1.The Holding Company has no income of its own; all revenue and expenditure is derived from the operation of Southampton Football Club Limited (SFC) and the associated stadium company.

2.The Holding company is solvent in its own right. It only becomes insolvent when account is taken of the position of SFC and the other group companies.

3.The three entities (the Holding Company, SFC and the stadium company) comprise the football club and they are inextricably linked as one economic entity.

If we compare the situation at Southampton then with the situation at Portsmouth now, there are major differences.  At Portsmouth currently:

  1. CSI does have income of its own and definitely does not derive all its income and expenditure from Portsmouth Football Club (2010)
  2. CSI is insolvent in its own right; its insolvency does not arise because of any insolvency on the part of Portsmouth Football Club (2010)  [I grant you that it’s hardly a cash cow, but it’s not Portsmouth that has brought CSI down]
  3. CSI and Portsmouth Football Club (2010) are not inextricably linked as one economic entity; CSI’s website shows their structure (4) to consist of a number of unrelated subsidiaries: Boom!, DGB Convers, GP Week, Leaders, Power Play Golf, Sportpost and WRC, as well as Portsmouth FC

On this basis, there is a strong case that CSI’s Administration should not result in a points deduction for Portsmouth.

If Portsmouth Football Club (2010) should itself seek protection by going into Administration, that would be entirely different matter, and points deduction would without doubt be incurred.  The Football League has no precise published tariff, but I would expect something in the region of 17 to 20 points.  How likely is that to happen?  The Administrators of CSI will almost certainly be looking to sell off its components, and Portsmouth is in effect already ‘on the market’.  With the added complication of Portpin and Balram Chainrai’s involvement in the insolvency of CSI though, it’s not a club that will be fighting off suitors.  In the meantime, the club “has funding in place for the short term, but will now be seeking alternative investment for its longer-term requirements”.

Not a very encouraging situation, but what’s new for Pompey fans?

[For new readers, I make clear that I am Portsmouth fan and a member of the Pompey Supporters Trust.  The thoughts above are, nonetheless,  my thoughts from the perspective of an academic researcher.]

Posted in Football League, Governance, Insolvency, Points deduction | Tagged: , , , | 16 Comments »

Round the lower levels Part 1

Posted by John Beech on November 28, 2011

Plenty has been happening once you look down the football pyramid since I last gave a general overview.  The continually flashing lights on my radar screen have of course been Plymouth Argyle and Wrexham, although, for entirely different reasons, I have resisted the very strong temptation to blog on these two clubs.  In the case of Plymouth, I have been put off by the plethora of non-news that has been churned out over the last few months – it seemed as if 90% of this consisted of Peter Ridsdale purring that one of two takeover attempts was due to completed ‘next wekk’.  At Wrexham, in distinct contrast, real news was happening at a staggering rate – I did actually start a posting, but, while, I was writing it, two press releases issued which made my opening paragraph redundant.  In any case, my friends over at Twohundredpercent gave (happenings and non-happenings) at both clubs excellent coverage.

A third nebula seems to heading towards my radar screen – the ever-dependable Portsmouth, but with one Henry James Redknapp due in court shortly, I’ll hold back for the moment at least.

It’s not as if the radar screen has been otherwise blank though.  In alphabetical order of clubs then:

  • Astley Bridge
    (I haven’t managed to identify which league the club plays in – any offers?)
    The club, which has been around since 1892 (1), is under threat thanks to thieves who stole the club’s pitch mower (2).  The club cannot afford the alternative of having the council mow their three pitches at a charge of £1500 for five cuts.
  • Bournemouth
    The club has failed to buy back its Dean Court stadium which it was forced to sell and lease back almost six years ago (3).  Meanwhile, 50% of the club’s shares have been sold to a 41 year-old Russian petrochemicals trader (4), and chairman Eddie Mitchell purred “His arrival brings security to the club”.  Is it just the Pompey fan in me that finds this less than reassuring?  I hope so.
  • Carlisle
    Carlisle have formidable issues with the existing Brunton Park stadium, not least the threat of a repeat of the 2005 flooding (5).  Just over two years ago the club was losing £1.2m a year and facing gates down to just over 6,000 (6).  By March 2010, gates were down to around 5,200 and budget cuts had to be imposed (7).
    Now we have the results of a feasibility study (8) and ‘Project Blue Yonder’, which would see the building of a new 12,000-seater stadium (9).  Certainly this appears more realistic than Plymouth Argyle’s ill-fated plans for a 40,000+ stadium, but not a great deal more so – Plymouth has a population of just over 250,000 whereas Carlisle’s population is just over the 100,000 mark.
    No easy solutions to the club’s dilemma I’m afraid.
  • Dawlish Town
    I’m a bit thin on information here, but a link (10) said that the club had withdrawn from the Western League Premier Division in July.
    The club website (11) is still live, but does not appear to have been updated recently.  With doubtless no intended irony, it still has a link to an item headed “Chairman dreams of promotion and new stadium
    Their Wikipedia entry (12) begins with that damning phrase “Dawlish Town A.F.C. was a football club…
    A Facebook page (13) implies that the club has disappeared, and a new FC Dawlish Town is being formed.
    Can anyone with local knowledge expand on this?
  • Harlow Town
    A winding-up petition from HMRC was dismissed in court o 14 November because the club had paid its tax bill (15).  This followed on entering a CVA in September 2009 (16).
    See also postings passim.
  • Hucknall Town
    After a particularly turbulent period last season (16), the club has new owners (17) who talk of turning into a community club.   There is even talk, perhaps just a tad OTT, of the club as a ‘sleeping giant’ (18).  All in all, things a lot a rosier nonetheless.
  • Kettering Town
    Ah, the inimitably enigmatic Imran Ladak!  See postings passim.
    Having solved the impending problem of the end of their ease, Ladak took the club to Rushden’s Nene Park (19), which everyone hoped would see the start of a new period of stability (for Kettering, at least)
    Ladak is now ‘open to offers’ for the club (20), the entire team is transfer listed (21), players are partly unpaid (22), and as a result it has been transfer embargoed (23)
    Who can guess what Ladak will do next?  This, after all, is the man who brought in Gazza to run the club, sacking him after six games (24).
  • Prescot Cables
    This Community Interest Club has taken the decision to return to being an amateur club, the financial pressure having built up following the lack of a sponsor (25).

Part 2 will be coming to a screen near you shortly.  I’ve now more or less recovered from the failure of my laptop’s CPU and hence its scrapping, so normal service should now be resumed.

Posted in Debts, Insolvency, Ownership, Stadium | Tagged: , , , | 4 Comments »

A not quite 24 carat golden age of football ethics?

Posted by John Beech on November 16, 2011

Received wisdom seems to be that, once the baton of running FIFA was passed on from safe and reliable English hands, there was a rapid descent into a quagmire of unethical goings on.  Even Uncle Sepp himself now admits that FIFA “has had a rough time of late” and concedes that there is now “the need for change and the urgent need for sweeping reforms” (1).  He concludes “FIFA remains committed to walking the walk and won’t get stuck in solely talking the talk. By December, this will become clear for all to see. Until then, I invite everybody to bear with us so that we can clean house and come back to the public with facts that allow FIFA to enter a new decade of doing business. And never again revert to doing “business as usual”.”  Whether he himself decides to ‘walk the walk’ is anybody’s guess.

I’m just back from a work trip and have been reading en route Sir Stanley Rous’s autobiography Football Worlds, published in 1978, a couple of years after he had been replaced as FIFA’s President by João Havelange.  A couple of passages particularly caught my eye as they reveal that back then all was not 100% squeaky clean.  Consider this first quote:

In Nasser’s day I was once present to watch a game there when the Sudan played Egypt in the final of a competition.  My host was General Mostafa, later Vice-President of FIFA, and an enthusiastic crowd of 110,000 worked themselves to a pitch of excitement when the winner had to be drawn by lot after the game had ended with the scores level.  The referee was blindfolded before making the draw, and a great roar of cheers greeted his pulling out the slip with Egypt on it.

When the General returned from the field I congratulated him on the luck of the draw.  He replied that there was no luck involved as, by agreement, both pieces of paper had Egypt written on them.  He may have been joking, but the Sudanese officials showed no sign of disappointment and the result made the day for Nasser and the spectators.

This, for some reason, brought to mind a different recent occasion when, rather than two identical slips of paper, a voting card had only one choice on it.

Sir Stanley was not averse to telling a story against himself.  He writes this from his days refereeing, concerning a game between Millwall and Charlton:

At a crucial point in the game I saw a defender’s hand fist the ball away in a goalmouth melee.  As I blew the whistle for a penalty the players untangled themselves and looked at me in surprise.  It was then that I realised that it was the goalkeeper, not a full-back, who had punched the ball.  So I walked past the penalty spot, past the goalposts, to the edge of the crowd and called at the top of my voice: ‘If the man with the whistle blows it again I will have him removed.’  Then I restarted the game by dropping the ball and the mistake was retrieved without disaster.

A more innocent age perhaps, or perhaps not, than the kind of confessions that can appear in autobiographies today (2) – a reference to Matt Le Tissier, to save you clicking through.

Overall, one would have to conclude that, compared to today’s ills, it was generally a much more ethical football scene, but not some Halcyon era of perfect ethics.

Posted in Ethics, FIFA, Governance, History | Tagged: , , , | 5 Comments »

Wages and the distortion of the pyramid

Posted by John Beech on October 30, 2011

The data just published by Sporting Intelligence (sourced from internal PFA files) adds more fuel to my argument that the football pyramid is becoming utterly distorted in the sense that the scale of finance in the different tiers is being ludicrously stretched.  In a recent public lecture as part of the  Coventry Sporting Conversation series (a podcast is available here beginning at 02:05 mins.), I put the case that the lifting of the maximum wage started to stretch the level of financial activity across the tiers, and that when the Premier League broke away and negotiated its own broadcasting rights this process accelerated dramatically.

While the Sporting Intelligence data in its tabular form excited me, it was when I put into Excel and produced some graphs that I got really excited.  The full set of data on average players’ basic wages , together with UK average wages as a benchmark is shown here:


(All graphs can be enlarged by double-clicking on them)

At first glance it is obvious that things started to change with the appearance of the Premier League, but if we plot pre-Premier League and post-Premier League separately, the change can be seen as an acceleration of the existing trend:


The most striking features of the data emerge when you compare the average basic wages over time in each tier with the average UK wages.  The Premier League data confirms the stereotype of the ability to live the Ferrari-driving playboy lifestyle:

In 1984/85 the average Premier League player was earning two-and-a-half times the average UK wage, but by 2009/10 this had grown to 34 times the average OK wage, with no sign of slowing down.

On the other hand, life for a player in today’s League 2 is rather different from this stereotype:

Starting from a position in 1984/85 of below the average UK wage, things did slowly get better until the dawn of the Premier League.  Apart from a strange positive blip in 2003/04 (and no, I can’t explain it either), his lot has been scarcely different from the average UK worker’s wage.  Given that a footballer has a limited career, I wonder how a League 2 player ever manages to get a mortgage and buy a house, especially if he’s a goalkeeper – other data I have shows that goalkeepers are the worst-paid players.

This distortion in wages up and down the pyramid is simply a reflection of the disparity in revenues.  Of course higher levels deserve higher broadcasting rights and should be able to pay higher wages to attract the best talent, but when the size of the difference between tiers has become so vast, the traditional view of a club having some ambition and a local businessman to back them has long gone.  The only way upwards to the top is with an Arab prince or a Russian oligarch.  This is of course hardly news, but the data above makes abundantly clear that unless 92 Arab princes or Russian oligarchs come along, performance on the pitch will continue to be grossly distorted by the richness or otherwise of a club’s benefactor.  That is, unless change in governance takes place, and Financial Fair Play is imposed rigorously up and down the pyramid, financial doping is stopped, and a measure of sporting competitive balance returns to the game.

Posted in Benefactors, Financial doping, Wages | Tagged: , , | 18 Comments »

Stadium developments (and redevelopments)

Posted by John Beech on October 24, 2011

In the last couple of weeks, stadiums, both those which are newly planned and those where there has been or will be redevelopment, have being popping up on my radar screen with surprising regularity.

The saga of what to do with the Olympic stadium shows no signs of reaching resolution.  Sadly we seem to be drifting into an Athens 2004 legacy situation.  When I visited last year, the lady from the company still tasked with the legacy management of the infrastructure told me, with refreshing honesty, “You will have read a lot of bad things in the press about our legacy issues.  All of them are true.  But there also some good things.

Basically the problem had been that everyone was too busy preparing the Games sites to worry about legacy until after the Games had taken place.  No one could accuse LOCOG of not thinking about legacy – it’s just that their thoughts have never quite got round to making decisions.

Two issues trouble me with our stadium:

  • Why is there still any question of any club other than Leyton Orient moving there?  For West Ham or Tottenham to move there would be a clear breach of Premier League or Football League rules (see previous posting).  Simply ignoring this most fundamental point does not in any way legitimise the situation.
  • What of the issue of public money being spent on installing a football club there, and the blatant prejudging of who is to go there by Bojo (1)?  If FIFA were in any way consistent in condemning political interference (and note my use of the subjunctive), we should be seeing the legendary FIFA gunboats heading up the Thames any day now.

Meanwhile, across London, Chelsea are faced with an unusual situation as they plan to move from Stamford Bridge – the way that the Stamford Bridge stadium ownership was tied up Ken Bates to prevent it being sold.  This was undoubtedly his greatest footballing contribution, although pedants might question my use of a superlative that implies he made three good footballing contributions.  This looks to be a saga in the making because of the failure to keep records up to date (2), and the club will face opposition from its fans (3), focused into the Say No CPO group.  The club management must have been off sick when Marketing101 was scheduled.

Close by, Fulham have announced plans to redevelop part of Craven Cottage (4).  This pursuit of the ‘Molineux model’ rather than following a high risk ‘new stadium’ strategy is to be commended.  The alternative is the infinitely depressing ‘Fossetts Farm model’ (see postings passim or Southend United’s own New Stadium webpage).

When planning turns to stadium development or redevelopment, much depends on the attitude of the local council.  Three current cases are:

  • Plymouth Argyle, where the local council has agreed to pay £1.6m for Home Park and rent it back to the club for £135,000 a year.  This will hopefully facilitate a last-ditch rescue, but it should be remembered that the club had bought the ground from the council for £2.7m in 2006 (5).
  • Swansea City, where the council-owned Liberty Stadium is rented to Swansea City and the Ospreys, and continues to be run at a loss (6).  Can any reader with a deeper local knowledge explain this unlikely scenario?
  • Doncaster, where the council-owned Keepmoat Stadium seems to be creating a worrying financial burden for Doncaster council tax payers (7).  Again, any deeper local insight would be appreciated.

What is disturbing in all of this is the reliance on the public purse.  Any talk of ‘rich clubs’ is a joke in the broader footballing context.  Mind you, mention of ‘rich clubs’ and the public purse must raise a reminder of the shockingly bad deal (from the perspective of Manchester council tax payers) struck between the local council and Manchester City.

Posted in Assets, Stadium | Tagged: , | 5 Comments »

Unsung heroes

Posted by John Beech on October 14, 2011

The news that Plymouth Argyle’s players and administrative staff are still failing to get their full pay (1) is not, of course, really news at all.  This situation has been going on for roughly a year.  It’s a message of despair that has become as familiar as Peter Ridsdale cooing that he expects a deal to be finalised very shortly.

There are still those who do not break out in sympathy with the players at least – you know the sort of stuff: “Overpaid prima donnas.  Serves then right.  No sympathy whatsoever.”  This is of course nonsense.  Plymouth Argyle is not a Premier League club, and the majority of players are on salaries that do not even begin to approach the telephone numbers that Premier League players command.  They do have the professional Footballers Association supporting them though.  Still, it’s hardly easy to adjust to dramatic changes in family income whatever your salary is.  I should know: I once had no choice but to make the first Mrs. Beech redundant from our shared workplace.

The administrative staff will undoubtedly be on generally lower salaries, and I have even more sympathy for them.  Apart from being worse off financially, they didn’t sign up to a profession where a transfer to somewhere else in the country was going to be an industry norm.  I’m sure most of them are local folk, who have more than demonstrated their loyalty to a club which is not just their employer but a club that they care about.  They are the real unsung heroes.

In a different news story today, another super-loyal administrator (in the non-insolvency sense of the word) has left his club/employer after an amazing 38 years – now there’s loyalty.  This is the case of Portsmouth’s Club Secretary, Paul Weld (2) .  As the club website points out: “Paul has worked through nine changes of ownership, 19 different managers (22 if you include Frank Burrows, Alan Ball and Harry Redknapp, all of whom managed Pompey twice), encompassing two periods of administration, four relegations, four promotions, one FA Cup final triumph, one FA Cup final defeat and a season in Europe!”  No doubt it was the two periods of Administration that must have caused the greatest stress in the Weld household.  Why did he remain so loyal when there must have been more secure job opportunities open to him over the years?  Well, “A Pompey fan, Paul was an active member of the London Supporters’ Club before arriving at Fratton Park from the Football Association as assistant to the then secretary Jimmy Dickinson, before taking over as club secretary.”  So, someone to whom it was clearly more than ‘just a job’.  And here’s a hint, Paul – yours is an autobiography that I can’t wait to read.

I’m sure there are similar stories to be told at a myriad of clubs.  Let’s not forget these unsung heroes, especially in the troubling circumstances of the current Plymouth Argyle administrative staff.  A club is much more than just the team who turn on Saturdays.  Let’s hope that those directly involved in the takeover negotiations can bring a rapid close to the brinkmanship and haggling, and show a little humanity to their loyal staff and their families.

Posted in Community, Human Resource Management, Identity, Insolvency, Investors | Tagged: , , , , | Leave a Comment »

A hint of significant change at FIFA?

Posted by John Beech on October 8, 2011

Well, don’t hold your breath, but there is just a possibility.

The conferences I usually attend are for academics, and any confrontation is usually so subtle that it needs to be decoded.  Which is one reason I particularly enjoy the two-yearly Play the Game conferences, with their exciting mix of investigative journalists, academics and sports practitioners.  The latter group normally does not include anyone from FIFA, but the conference which has just finished in Köln proved to be a notable exception.  The Play the Game organisation, for those unfamiliar with it, describes itself as “an international conference and communication initiative aiming to strengthen the ethical foundation of sport and promote democracy, transparency and freedom of expression in sport” (1).

Sepp Blatter had been invited, but with stunning predictability he turned the invitation down “due to a great amount of similar demands” (2).  If he meant demands that he face his critics over the way FIFA is mismanaged, that’s probably understandable.

On Thursday, however, in a joint session with presentations by the indominatable Andrew Jennings, long-time scourge of FIFA, and his opposite number in Germany, Jens Weinreich, who should be in the audience but Walter di Georgio, FIFA’s newly appointed Director of Communications (now there’s a job I wouldn’t want!), sitting just two rows behind me.

Confrontation was inevitable, especially when Jennings, produced a list of what he said was 167 bribes recorded by the Zug Prosecutor’s office, which he (Jennings) is fighting to get published (3).  Di Gregorio took understandable exception to Jennings’s assertion that FIFA had the classic characteristics of a Mafia family.  Worse was to come when Jennings and di Georgio clashed over the reason for Jennings being banned by FIFA from its press conferences; this concluded with Jennings shouting “Liar!” from the podium.

It will be interesting to see whether di Georgio comes good on his offer to speak to the next Play the Game conference in 2013.  Apart from anything else, he will no doubt have to survive a post-conference debriefing with Blatter, which I’d love to be a fly-on-the-wall at!  Assuming Jennings is finally successful in publishing the Zug court documents – there is a slow Swiss legal process to go through yet – we will have to see whether Blatter survives.

Among other football-related topics discussed at the conference was a two-hour session entitled Financial fair play, or football’s foolish plan, chaired by Supporters Direct Europe’s Antonia Hagemann.  Speakers were, in order, Sefton Perry (UEFA’s Benchmarking Manger for Club Licensing), Professor Stefan Szymanski, myself, and Christian Müller (until recently the Chief Financial Officer of the German Football Association [DFL]).  The four presentations and the following discussion can be viewed here, following an incongruous 30 seconds beer advertisement.  My own contribution is at about 40 minutes in.

The final session of the conference turned to a key issue for all sports today, that of ‘quis custodiet ipsos custodies?‘ or ‘who guards the guardians?’.  The outcome was a call to the IOC to gather all stakeholders to draft a code for good governance in sport (4).  While I welcome such a move in general, I have a problem with it being under the auspices of the IOC.  How likely is this to find a positive response from ‘barely Olympic sports’ such as football and tennis, and non-Olympic sports such as F1, the rugby codes, North American sports and golf?  At the heart of this is the fact that the major professional sports do not fit well with the sports already engaged with the IOC.  And of course there is, for English football, the whole ‘Home Nations’ issue, an already touchy subject.

Posted in FIFA, Governance, UEFA | Tagged: , , | 1 Comment »

Manchester United and the Monkees

Posted by John Beech on October 3, 2011

A comparison that doesn’t fully stand up to scrutiny, I promptly concede, but the ‘soulless’ way Manchester United is run as a business must trouble many a fan of what was once ‘the beautiful game’, and has often in the past been referred to as ‘the people’s game’.

An article in the Financial Times really caught my eye (1) – an interview with Richard Arnold, United’s Commercial Director by the redoubtable Roger Blitz.

It wasn’t the business plan that Richard Arnold was setting forth was other than a sensible one in business terms, but here was someone who has ‘sold his football soul’, if, that is, he had had one.

It was the calculating and almost cynical way he viewed his ‘customer base’, and the language he used.  Here was someone who made no distinction between running a sports business and running any other kind of business – a distinction which I believe to be vital (and bear in mind that I have been teaching and researching sport management, working in a university Business School, forponsored over fifteen years).  Yes, there is much common ground, but sport businesses are a distinct variety of business, not least because their customers see themselves as having psychological ownership of the product.

God help the present and future fans of Manchester United who are to be milked like a cash cow, even when incurring charges on their club-s credit card.  And just how comfortable does Sir Alex Ferguson (see my previous posting) feel working for them.  I caught sight of him, appearing, rather incongruously, in a video shown last week at the annual Labour Party conference.  He has long been a Labour Party supporter, and, for the benefit of overseas readers of this blog, the Labour Party for many, many years played Left Half in British politics.

Another football supremo also caught my eye since my last posting- the peerless Peter Ridsdale.  He was claiming that “he yearns for a life out of the public eye” (3).  Had this claim appeared in the form of a press release by fax from some rural hideaway out of the public spotlight?  No, in fact he was sitting “sipping coffee in Cardiff’s Mercure Holland House hotel” giving a press interview.  How torn the Spinmeister must be in deciding whether to follow his yearning.

Posted in Globetrotterisation, Marketing | Tagged: , | 2 Comments »

“Completely vindicated”? Well, not quite completely

Posted by John Beech on September 29, 2011

The press have been quick to quote Peter Ridsale as saying that he had been “completely vindicated” following the dropping of charges fraud brought against him by Cardiff Training Standards Department (see BBC and This is Plymouth for example).

In my book, in this case that fine arbiter of plain English, the Oxford Advanced Learner’s Dictionary, the primary definition of ‘vindicate’ is “clear of blame or suspicion“.

Undoubtedly he has been “completely vindicated” of ‘blame’ as the charges have been withdrawn, and he continues to be able to be a director of a football club.  He can continue to weave his own brand of magic, honed at Leeds United, Barnsley and Cardiff City.

Whether he has been cleared of ‘suspicion’ is, in my opinion, not quite so clear-cut however.  Further down in the press reports the reason the charges were dropped is revealed.  A council spokesman is quoted thus: “On paper, there was a case to answer, however, the council has recently obtained further evidence from prosecution witnesses and taken the advice of a leading counsel.  After a thorough analysis of this new evidence, and due to the reluctance of those supporters who raised concerns to provide witness statements, the council considered that a conviction after trial was unlikely.  Consequently, the council has decided to discontinue the prosecution.”  In these circumstances it would seem likely that there will those who still harbour a suspicion, possibly including some at Cardiff Trading Standards Department, and so ‘complete vindication’ is an interesting use of the language.

To remove both ‘blame’ and ‘suspicion’ it can be argued that the case would have had to have gone to trial, and ‘not guilty verdicts’ returned for all three charges.  Ridsdale had previously said “I will be vigorously rebutting the charges” (1).  He must surely be ruing the fact that the charges were dropped, and he was denied his opportunity to have his cases heard and to be ‘completely vindicated’.

Posted in Ethics, Fit and Proper Person tests | Tagged: , | 3 Comments »

 
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