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

Posts Tagged ‘UEFA’

A little, light UEFAnomics

Posted by John Beech on June 24, 2012

(with doff of cap to my chum Stefan Szymanski and his co-author Simon Kuypers, the second edition of whose fascinating book Soccernomics is just hitting the book stands)

With the Euros now in full swing, much media emphasis has been placed on the cultural differences of the various competing nations.  With justification, there has been much concern placed on racism.  The investigative and selective Panorama programme highlighted this, although a similar programme might have been made about England by Polish or Ukrainian broadcasters, to be met with howls of indignation in England.  Clearly there is an issue here, but the scale of the issue is very difficult to gauge, especially from the UK.  It’s not this issue that I am looking at though, but at another ‘cultural’ one.  Having spent some of my early years living and working in Central Europe, and having made work visits to Eastern Europe in the period leading up to the fall of communism and subsequently – last week I was in Bucharest, and I’m currently in St Petersburg – I’ve found myself wondering whether Eastern Europe had ‘caught up’ with Western Europe in footballing terms.  If the emergence of democracy had resulted in improved social conditions, such as in the areas of education, disposable income, access to sports facilities, etc., now being on a par with Western Europe, this should be reflected in the qualifiers for Euro 2012, and in their FIFA rankings as an indicator of form leading up to the Euros.

Country

FIFA ranking
(July 2012)

FIFA points
(July 2012)

Qualified?

Spain

1

1456

Y

Germany

3

1288

Y

Netherlands

4

1234

Y

England

6

1185

Y

Croatia

8

1053

Y

Denmark

9

1019

Y

Portugal

10

996

Y

Italy

12

977

Y

Russia

13

975

Y

France

14

964

Y

Greece

15

953

Y

Sweden

17

910

Y

Republic of Ireland

18

907

Y

Switzerland

21

868

Norway

26

787

Czech Republic

27

771

Y

Bosnia-Herzegovina

29

756

Slovenia

30

742

Hungary

31

735

Turkey

33

732

Serbia

34

725

Wales

38

658

Slovakia

39

649

Scotland

41

611

Montenegro

50

581

Armenia

51

579

Ukraine

52

572

Y(H)

Romania

52

572

Belgium

54

564

Estonia

57

528

Austria

58

524

Poland

62

518

Y(H)

Belarus

69

497

Finland

75

464

Latvia

76

459

Albania

79

451

Israel

81

427

Lithuania

88

380

Bulgaria

90

373

Georgia

95

359

Macedonia

101

338

Northern Ireland

103

336

Azerbaijan

112

300

Luxembourg

121

283

Faroe Islands

122

279

Cyprus

125

266

Iceland

131

248

Moldova

140

212

Kazakhstan

141

209

Malta

147

195

Liechtenstein

148

177

Andorra

199

15

San Marino

206

0

[Y = Yes; Y(H) = Yes, as host]

The first conclusions that one must come to are that FIFA points correlate pretty strongly with qualification for Euro 2012 (which is hardly surprising as the qualifying games are included in the FIFA points), and that Poland and Ukraine were unlikely to have qualified had they not been the co-hosts.  The Czech Republic were the ‘tail-end Charlies’ in qualifying, and Switzerland, and to a lesser extent Norway, must feel disappointed at not qualifying given their recent form.

The first stage of the Euros, in its round robin format, should also show some correspondence with form (the knock-out stage probably less so).  The following table is sorted by points achieved in the first round at the Euros.

Country

FIFA ranking (July 2012)

FIFA points (July 2012)

Qualified?

First round points

Germany

3

1288

Y

9

Spain

1

1456

Y

7

England

6

1185

Y

7

Portugal

10

996

Y

6

Czech Republic

27

771

Y

6

Italy

12

977

Y

5

Croatia

8

1053

Y

4

Russia

13

975

Y

4

France

14

964

Y

4

Greece

15

953

Y

4

Denmark

9

1019

Y

3

Sweden

17

910

Y

3

Ukraine

52

572

Y(H)

3

Poland

62

518

Y(H)

2

Netherlands

4

1234

Y

0

Republic of Ireland

18

907

Y

0

Netherlands fans have the most right to feel disappointed at their team failing to progress, those of the Czech Republic the most elated.

The first difficulty in setting about looking at the relative strengths of different blocks of countries arises with the fact that the ‘E’ in UEFA is not quite the Europe we learned about in school.  As with the Eurovision Song Contest, the boundaries of Europe have been stretched.  While it may be obvious that UEFA includes Ukraine, it is perhaps less obvious that UEFAland actually stretches as far as the border between Kazakhstan and China.

I have divided the countries into the following blocks: the old Western Europe (WE); the old Eastern Europe (EE); the old Soviet Union (SB); the old Yugoslavia (Yu), which always maintained a position on non-alliance and was a country which always allowed its players to work for Western European clubs; and the others (Oth) who do not fit into the main categories – Israel and Turkey.

To add the ‘UEFAnomics’ dimension, I added a column showing the population of each country based on latest actuals or estimates, and, to allow for size, a column showing the number of FIFA points per million people.  The latter is, of course, a very crude indicator, and does not allow for the anomalies at the ends of the spectrum – the ‘minnows’, where the random talent of individuals has a much stronger relevance to success, and the ‘giants’, where the sheer size of the country makes it perhaps difficult to identify all individual players’ talents.  I’ll make the same disclaimer that Peter Snow used to make for the famous Swingometer – “Remember, it’s just for fun”.

Country

FIFA ranking (July 2012)

FIFA points (July 2012)

Qualified?

First round points

Population

Points / 000,000s of Population

Block

Faroe Islands

122

279

49,267

56,630

WE

Liechtenstein

148

177

36,010

49,153

WE

Montenegro

50

581

625,266

9,292

Yu

Iceland

131

248

320,060

7,749

WE

Luxembourg

121

283

509,074

5,559

WE

Malta

147

195

452,515

4,309

WE

Estonia

57

528

1,340,194

3,940

SB

Slovenia

30

742

2,050,189

3,619

Yu

Cyprus

125

266

838,897

3,171

WE

Croatia

8

1053

Y

4

4,290,612

2,454

Yu

Wales

38

658

3,006,400

2,189

WE

Latvia

76

459

2,217,053

2,070

SB

Republic of Ireland

18

907

Y

0

4,588,252

1,977

WE

Bosnia-Herzegovina

29

756

3,839,737

1,969

Yu

Northern Ireland

103

336

1,799,392

1,867

WE

Denmark

9

1019

Y

3

5,543,453

1,838

WE

Andorra

199

15

84,082

1,784

WE

Armenia

51

579

3,262,200

1,775

SB

Macedonia

101

338

2,055,004

1,645

Yu

Albania

79

451

2,831,741

1,593

EE

Norway

26

787

4,985,870

1,578

WE

Lithuania

88

380

3,187,176

1,192

SB

Slovakia

39

649

5,445,324

1,192

EE

Scotland

41

611

5,254,800

1,163

WE

Switzerland

21

868

7,952,600

1,091

WE

Serbia

34

725

7,120,666

1,018

Yu

Sweden

17

910

Y

3

9,415,295

967

WE

Portugal

10

996

Y

6

10,578,776

942

WE

Finland

75

464

5,404,956

858

WE

Greece

15

953

Y

4

11,305,118

843

WE

Georgia

95

359

4,469,200

803

SB

Hungary

31

735

10,014,324

734

EE

Netherlands

4

1234

Y

0

16,847,007

732

WE

Czech Republic

27

771

Y

6

10,562,214

730

EE

Austria

58

524

8,414,638

623

WE

Moldova

140

212

3,559,500

596

SB

Israel

81

427

7,869,900

543

Oth

Belarus

69

497

9,503,807

523

SB

Belgium

54

564

11,007,020

512

WE

Bulgaria

90

373

7,364,570

506

EE

Azerbaijan

112

300

9,165,000

327

SB

Spain

1

1456

Y

7

46,030,109

316

WE

Romania

52

572

19,042,936

300

EE

England

6

1185

Y

7

52,234,000

227

WE

Italy

12

977

Y

5

60,681,514

161

WE

Germany

3

1288

Y

9

81,799,600

157

WE

France

14

964

Y

4

65350000

148

WE

Poland

62

518

Y(H)

2

38,186,860

136

EE

Kazakhstan

141

209

16,600,000

126

SB

Ukraine

52

572

Y(H)

3

45,888,000

125

SB

Turkey

33

732

74,724,269

98

Oth

Russia

13

975

Y

4

143,030,106

68

SB

San Marino

206

0

31,887

0

WE

Can the Faroe Islanders really be the top achievers?  Well, certainly they are no longer the minnows who could be relied on to roll over and be thrashed, as Scotland infamously discovered.

I find it particularly interesting that the top four achievers who qualified were Croatia, the Republic of Ireland, Denmark and Sweden – all deserve credit for qualifying for the Euros and commiserations for not making it beyond the first round.  Russia, on the other hand, emerge as massive underachievers.

Finally, to return to my original query, I’ve sorted the table by country block (putting Israel and Turkey to one side).

Western Europe:

Country

FIFA ranking (July 2012)

FIFA points (July 2012)

Qualified?

First round points

Population

Points / 000,000s of Population

Faroe Islands

122

279

49,267

56,630

Liechtenstein

148

177

36,010

49,153

Iceland

131

248

320,060

7,749

Luxembourg

121

283

509,074

5,559

Malta

147

195

452,515

4,309

Cyprus

125

266

838,897

3,171

Wales

38

658

3,006,400

2,189

Republic of Ireland

18

907

Y

0

4,588,252

1,977

Northern Ireland

103

336

1,799,392

1,867

Denmark

9

1019

Y

3

5,543,453

1,838

Andorra

199

15

84,082

1,784

Norway

26

787

4,985,870

1,578

Scotland

41

611

5,254,800

1,163

Switzerland

21

868

7,952,600

1,091

Sweden

17

910

Y

3

9,415,295

967

Portugal

10

996

Y

6

10,578,776

942

Finland

75

464

5,404,956

858

Greece

15

953

Y

4

11,305,118

843

Netherlands

4

1234

Y

0

16,847,007

732

Austria

58

524

8,414,638

623

Belgium

54

564

11,007,020

512

Spain

1

1456

Y

7

46,030,109

316

England

6

1185

Y

7

52,234,000

227

Italy

12

977

Y

5

60,681,514

161

Germany

3

1288

Y

9

81,799,600

157

France

14

964

Y

4

65,350,000

148

San Marino

206

0

31,887

0

(Average population of country in Western European block: 15,352,615)

Eastern Europe:

Country

FIFA ranking (July 2012)

FIFA points (July 2012)

Qualified?

First round points

Population

Points / 000,000s of Population

Albania

79

451

2,831,741

1,593

Slovakia

39

649

5,445,324

1,192

Hungary

31

735

10,014,324

734

Czech Republic

27

771

Y

6

10,562,214

730

Bulgaria

90

373

7,364,570

506

Romania

52

572

19,042,936

300

Poland

62

518

Y(H)

2

38,186,860

136

Average population of country in Eastern European block: 13,349,710

Former Soviet block:

Country

FIFA ranking (July 2012)

FIFA points (July 2012)

Qualified?

First round points

Population

Points / 000,000s of Population

Estonia

57

528

1,340,194

3,940

Latvia

76

459

2,217,053

2,070

Armenia

51

579

3,262,200

1,775

Lithuania

88

380

3,187,176

1,192

Georgia

95

359

4,469,200

803

Moldova

140

212

3,559,500

596

Belarus

69

497

9,503,807

523

Azerbaijan

112

300

9,165,000

327

Kazakhstan

141

209

16,600,000

126

Ukraine

52

572

Y(H)

3

45,888,000

125

Russia

13

975

Y

4

143,030,106

68

(Average population of country in former Soviet block: 22,020,203; average population of country in former Soviet block excluding Russia: 9,919,203)

Former Yugoslavia:

Country

FIFA ranking (July 2012)

FIFA points (July 2012)

Qualified?

First round points

Population

Points / 000,000s of Population

Montenegro

50

581

625,266

9,292

Slovenia

30

742

2,050,189

3,619

Croatia

8

1053

Y

4

4,290,612

2,454

Bosnia-Herzegovina

29

756

3,839,737

1,969

Macedonia

101

338

2,055,004

1,645

Serbia

34

725

7,120,666

1,018

(Average population of country in former Yugoslav block: 3,330,246)

The results are not entirely surprising.  With the exceptions of Croatia, the Czech Republic and Russia, all the teams who made it to the Euros through competition were from Western Europe.

Is this an indication that Eastern Europe has not caught up with Western Europe over the last twenty years?  Well, possibly, but there are other reasons, notably the issue of the population of each country.  The next table ranks countries by population.

Country

FIFA ranking (July 2012)

FIFA points (July 2012)

Qualified?

First round points

Population

Points / 000,000s of Population

Block

Russia

13

975

Y

4

143,030,106

68

SB

Germany

3

1288

Y

9

81,799,600

157

WE

Turkey

33

732

74,724,269

98

Oth

France

14

964

Y

4

65350000

148

WE

Italy

12

977

Y

5

60,681,514

161

WE

England

6

1185

Y

7

52,234,000

227

WE

Spain

1

1456

Y

7

46,030,109

316

WE

Ukraine

52

572

Y(H)

3

45,888,000

125

SB

Poland

62

518

Y(H)

2

38,186,860

136

EE

Romania

52

572

19,042,936

300

EE

Netherlands

4

1234

Y

0

16,847,007

732

WE

Kazakhstan

141

209

16,600,000

126

SB

Greece

15

953

Y

4

11,305,118

843

WE

Belgium

54

564

11,007,020

512

WE

Portugal

10

996

Y

6

10,578,776

942

WE

Czech Republic

27

771

Y

6

10,562,214

730

EE

Of the 16 largest countries in Euroland, only Poland (at no. 9 in population), Romania (no.10) and the Czech Republic (no.16) appear in the list, together with Russia (no.1), Ukraine (no.8) and Kazakhstan (no.12) from the old Soviet block, the remainder consisting of nine Western European countries plus Turkey.  Could it be that Eastern Europe suffers in football success from consisting of smaller countries?

Of the 16 largest countries in Euroland, only Poland (at no. 9 in population), Romania (no.10) and the Czech Republic (no.16) appear in the list, together with Russia (no.1), Ukraine (no.8) and Kazakhstan (no.12) from the old Soviet block, the remainder consisting of nine Western European countries plus Turkey.  Could it be that Eastern Europe suffers in football success from consisting of smaller countries?  Consider which countries have actually reached the finals:

Country

Winners

Runners-up

Finalists

Germany

3

3

6

Soviet Union

1

3

4

Spain

2

1

3

Czech Republic

1

1

2

France

2

2

Italy

1

1

2

Denmark

1

1

Greece

1

1

Netherlands

1

1

Yugoslavia

2

2

Belgium

1

1

Portugal

1

1

[Yugoslavia were losing finalists in 1960 and 1968.  A reconstituted Yugoslavia today would have a combined population today of 19,981,474, ranking it as the tenth largest UEFA country by population.]

These musings, of course, prove nothing, but they do suggest that being big helps, and, if you are an Eastern European country, you are generally a bit disadvantaged in this respect.  This has implications for Euro 2016 when the number of countries qualifying will increase from 16 to 24.  Eastern European countries will be no better placed to win, but statistically we should expect to see them make up a greater percentage of the qualifying countries, which will be good for them in terms of exposure and international experience.

As for this evening, well, using UEFA points as a predictor of form, England seem to have the edge.  Maybe I shouldn’t tempt providence though, and, in any case, form is a worse predictor in the knockout stages than in the first round because it is being applied to a single game rather than three games

[Apologies for way the tables appear - WordPress.com is not very helpful at formating tables prepared in Word]

Posted in UEFA | Tagged: | 3 Comments »

The new broken-time payments

Posted by John Beech on March 24, 2012

The decision by UEFA to increase significantly the compensation fee paid to clubs for releasing their players to play in Euro 2012 (1) – for Euro 2008, the total compensation was €43.5 million; for Euro 2012 a total of €55 million had been proposed, but the figure is now to be €100 million (£83.4 million) following pressure from the European Club Association (ECA) (2) – is not entirely unexpected, and not entirely unreasonable. I have my concerns about it though…

Professional football was born on the back of the issue of broken-time payments – compensating amateur players for time they had had to take off from their day-jobs. It’s hardly inconsistent, over a century on, that clubs would seek broken-time payments for players released for international duty.

Nor is it inconsistent that, in a post-commercialised football age, the selection of a player for international duty has little to do with honour and duty, but rather more to do with maximising revenues for the national team.

Certainly international duty, notably with respect to the African Cup of Nations, can have a worrying impact on particular clubs.

There is also the issue of injury while on international duty, although this seems to be resolving itself by the number of declared injuries which somehow heal themselves miraculously quickly once the ‘threat’ of international duty has passed.

By and large then, my view is one from a natural perspective of a mixture of realism and cynicism.

My concern is more at the level of unintended consequences. I’m in the middle of a major research project looking at the concentration in certain European football leagues. Notwithstanding the current difficulties of one of the two clubs, Scottish football, for example, offers no exemplar of healthy competitive balance in its top tier. Since the Scottish Premier League was founded for the 1998/99 season, there has so far been just one single appearance, as runner-up, by a team other than the Auld Firm in the top two at the end of the season (it was Hearts in 2005/06 in case you are scratching your head). The last time another club won the Championship was back in 1983/84 (Alex Ferguson’s Aberdeen), and you have to go back to 1903/04 to find the last season that neither club was winner or runner-up (since you ask, the winner was Third Lanark and the runner-up Hearts; you will be less surprised that Rangers were third and Celtic fourth). While the Auld Firm’s stranglehold on their domestic Championship is the strongest in Europe, the majority of European national leagues suffer from ‘Big 2’, ‘Big 3’ or ‘Big 4’ syndrome (see also posting passim), a fact that is contrary to the principle of maintaining competitive balance within a league.

The reasons that leagues became dominated by a handful of clubs are varied, and the dominance usually dates back to a pre-commercialised era. Our research is beginning to show that the maintenance of dominance in a national league is strongly correlated with the distribution of the broadcasting revenues of the Champions League and the Europa league (and of course their predecessors). In short, rewarding clubs financially for simply being the top clubs reinforces their position, by ensuring that the rich clubs get ever richer, and can hence, afford, the better payers.

As these enhanced UEFA fees to clubs for Euro 2012 will, albeit on a smaller scale, have the same, presumably unintended, outcome, it concerns me that the lack of competitive balance in European national leagues is once again being reinforced, something which is NOT good for the game.

Posted in Revenues, UEFA | Tagged: , | 4 Comments »

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 »

A fish rots from the head down

Posted by John Beech on February 4, 2011

Watching the transfer window lurch to its conclusion has not been an edifying experience – I didn’t have high expectations mind you, and my thoughts were possibly coloured by the constantly breaking internet connection at the hotel in Central Europe where I am staying.

Certainly I was slightly surprised to read last Friday, from my position of intermittent ignorance, that Premier League spending had been “restrained” (1) according to Deloitte.  This of course was before the surreal outbreak of activity which saw Torres transferred to Chelsea for some opaque figure, possibly with as high a valuation as £70m (2), and Carroll transferred to Liverpool for £35m (3).  These transfers certainly helped to restore the inflationary trend of the past few years (4).  While an argument can be made in defence of Liverpool’s position, it is not encouraging to find Alan Pardew ‘vowing’ (I hate the word, but am clearly out of line with most journalists) to spend all the money on new players (5).  Much less encouraging was the report in The Times of India that the Torres transfer had been personally funded by Roman Abramovich (6), this at a club that is ‘strong’ despite losses of £70m (7).

Where does all this leave Financial Fair Play and an end to financial doping?  Well, UEFA apparently seem unconcerned, stating that they have “full confidence that the clubs are increasingly aware of the nature of the financial fair play rules, which aim to encourage clubs to balance their incomes and expenses over a period of time covering 4-6 transfer windows” (8).  I can’t honestly say that I share that level of confidence.  It seems to me that some clubs are pushing spending to the limit and are making no attempt to keep the spirit of financial fair play.

The continuing lack of restraint the top of the pyramid simply continues to stretch the vertical integrity of the football pyramid.  The guaranteed payments by the respective leagues show the increasing distortion.  A Premier League club is guaranteed a payment of at least £41m, a Championship club receives just under £5m, and a League 1 club £1m.  No wonder that ‘ambition’ pushes lower level clubs to unsustainable levels of expenditure.  Breaking point has been reached in some cases and is nearby in others.  A cull through my intermittent bookmarks of the last ten days highlights a few cases:

  • Clevedon Town
    The club is facing a mass exodus of players because of their worrying financial situation (9), exacerbated by Jack Frost.
  • Histon
    The club was recently visited by the bailiffs, although was apparently “all just a misunderstanding” (10).
  • Kidderminster Harriers
    An on/off deal to save the club is, as I write, off, and players are unpaid (11).
  • Leyton FC
    The club has been forced to withdraw from the Isthmian League Division 1 North mid-season (12).
  • Plymouth Argyle
    The club is now dependent on survival on funding finally turning up from its absentee Japanese investors (13).  Under threat from HMRC and with other debts, the future of the club is by no means certain.
  • Welling United
    The club has faced allegations that players wages have not been paid on time (14).
  • Windsor and Eton
    A sad case this – the club was in no position to contest a winding up petition from HMRC (15) and is now no more (although there is talk already of a resurrection club).  Whatever criticism may be levelled at the club’s directors, it is difficult to disagree with President Barry Davies’s assertion that “Not enough money in football these days filters down.

It’s the minnows that are really suffering, and will continue to suffer until the highest level of football gets itself in order.

[Normal service should be resumed when I return to the comfort zone of my own wifi system in the early hours of Sunday morning.  This posting is thanks to the University of Applied Sciences in Kufstein, Tirol, Austria.]

Posted in Cashflow, Governance, HMRC, Insolvency, Premier League, Resurrection, Transfers, UEFA | Tagged: , , , , , , , | 7 Comments »

Groundhog Day for the Trotters?

Posted by John Beech on November 12, 2010

Reading through my Bolton file certainly makes for consistent reading, although ‘consistently inconsistent’ might be more accurate.

We have to balance the books” he told us as far back as 2003 (1), adding “We can’t afford to spend any money we haven’t got. We’re not going to go down that route.”  A fan of Mr Micawber then.  Unfortunately, less than a fortnight later it emerged that Burden Leisure, the parent company of Bolton Wanderers, had debts of about £38m and the wage bill had risen from £5.2m to £21.7m during the previous financial year (2).

Later that month the Bolton financial model became clear – put your faith in a benefactor (3), but not some ‘johnny foreigner’, a thoroughly pukka British benefactor, Eddie Davies, a life-long Bolton fan, who lives in, erm, the Isle of Man.  As Gartside put it, “Without Ed’s support we would be watching a very different standard of football…  We can now sit down with the banks and have serious talks about restructuring our debts.

These themes – living within your means and depending on a good old British benefactor – constitute the consistency in that regularly recur in the years since.

This week we have seen the latest Burden Leisure figures published (4) – turnover from football operations was £54.0million, which was £2.2million higher than the 2009 total of £51.8million; the retained loss for the year was £35.4million; and the cost of retaining existing players resulted in the cost of wages increasing by 14% in the year to a total of £46.4 million from the 2009 total of £40.9million.

No wonder then that one of Gartside’s favourite themes of late has been the need for a salaries cap in the Premier League.  Bolton have certainly been one of the better behaved clubs in this respect, managing to keep wages/revenues at under 60% from 2004/05 to 2008/09 (see table here), an achievement shared only by Manchester United, Tottenham, Arsenal and Liverpool.

So ‘where is the inconsistency?’ you ask.  The calls for restraint on wages and keeping within ones income are fine and deserve to be more widely supported.  The living on debt mountain sustained by a rich benefactor are not – they are forms of financial doping, attempting to disrupt competitive balance by the use of unearned money.  The inconsistency is beautifully expressed by Gartside himself, suggesting that UEFA’s Financial Fair Play protocol is not quite what is wanted: “There are ways of tweaking it that would suit the English game better.  Owners should be allowed to invest in equity.  So if you, as an owner, want to buy a striker for 10 million (pounds) that shouldn’t be a problem. But what you then can’t do is pay him extortionate wages that take you out of the breakeven situation.”  His logic is one that escapes me.

Posted in Costs, Debts, Ethics, UEFA, Wages | Tagged: , , , , | 2 Comments »

Whelan and Wigan

Posted by John Beech on May 4, 2010

With reform of football being part of the current zeitgeist, and political parties showing some interest in the topic at least until Thursday evening (see The Times They Are A-Changin’ 3, it does not come as a complete surprise that the Premier League, in the form of certain of its club Chairmen, should begin to stick their heads above the parapet and start using the R word – that’s as in Reform, rather than Relegation.  Wigan Athletic’s Dave Whelan has made the early running.

He is reported by euFootball.biz as saying on the subject of debt “People say the Premier League has got to be curtailed in what it can do and what it can’t do but it’s no use just saying ‘Don’t interfere’….As a league, you just can’t have clubs going into administration. Let’s get a figure, 20 or 25 per cent, and say that you can’t borrow any more than that percentage of your turnover.” (1).  For the clubs that fail to comply he suggests “If you do that you get penalty points. That would clamp on everything. That gives the bigger clubs greater scope to borrow money and it puts a restriction on smaller clubs like us, Hull and Portsmouth“.

Not only has he failed to spot that Portsmouth’s nine point deduction did not actually punish them by condemning them to relegation – they are relegated already even if the nine points were to be magically restored – but he fails to appreciate that points deduction is essentially dysfunctional as a sanction (see my research on this here if you have any lingering doubts).

He also seems to have conveniently forgotten how Wigan, a Northern Premier league club until 1978, comes to be in the Premier League.  Whelan bought he club in 1995 when they were in the old Division 3, then the fourth tier.  The club’s accounts give an interesting picture of how they have climbed to the top.  The club managed to grow its turnover slowly but steadily, reaching a level of just over £4m in 2004/05, the season in which they won the Championship.  Since then, turnover, having made the obvious initial leap with greatly enhanced broadcasting revenues through PL membership, has continued to rise steadily, reaching £46m for 2008/09. the most recent season for which financial data is currently available.

Has the meteoric rise been financed from revenues, without the acquisition of large debts?  In Whellan’s words “The club owe me something like £50m to £60m and I’m turning that into shares so that if I sell them it doesn’t affect the football club. I’ll never get all my money back” (2).  I’m sure it’s his natural modesty that stops him mentioning in this statement of his own largesse, putting him in the same mold as, well, if not quite Abramovich then almost in the league of Middlesbrough’s Steve Gibson, that it comes entirely coincidentally with his appearance at No.1 in the new Sunday Times Sport Rich List (3).

But what of Wigan’s debts?  Their accounts make no mention of any directors’ loans, suggesting that a more accurate statement would have been that the club owes Whelan’s companies £50m to £60m.

Wigan’s long-term liabilities were £8m in 1999/00, and have grown steadily since, standing at £47m in 2008/09, together with current liabilities of £42m.  With a turnover of £46m for the same period, it’s rather hard to see where he has plucked this figure of 25% of turnover being the upper limit of debt that he is so strongly advocating.

Wigan Athletic is then perhaps not a model of best practice for others to follow.  Neither is it with respect to the other plank of UEFA’s Financial Fair Play Protocol – keeping wages to within 60% of revenues.  For 2008/09 Wigan’s ratio was 81.5%.  In 2004/05 when they won the Championship and gained promotion to the Premier League, they spent over £8m on wages and salaries against revenues of just over £4m – the ratio was actually 204.3%, which makes ‘cheating’ Portsmouth’s profligacy with money it ‘didn’t have’ and a ratio of 109% seem almost modest.

Not that any of this necessarily detracts from the argument Whelan is making; it merely raises questions about the advocate.  Debt is undoubtedly out of control in the majority of Premier League clubs, and some means of reigning in that in, and preventing its recurrence, is sorely needed.

To me however the source of the problem lies not in the principle of debt per se – there is absolutely no sound argument that can be made, for example, against Arsenal borrowing money to finance the Emirates with a sound business model to sustain the debt – but in the source of the money borrowed.  When ‘benefactors’ ‘invest’ in clubs, there is no rigorous examination of whether the debt is sustainable, and the lender is in effect the guarantor of the loan!

A debt cap certainly has its attractions, but until clubs are only allowed to incur debt by borrowing from independent sources who will scrutinise whether there is an effective business model in place to ensure that the debt is repaid, we will continue to see wide-scale financial doping, and the occasional ‘victim’ of ‘benefactors’ who either can’t or won’t continue pouring money into their club.

Posted in Benefactors, Debts, Governance, Premier League, UEFA, Wages | Tagged: , , , , , | Leave a Comment »

Drinking at the last chance saloon… (Pompey or the whole sector?)

Posted by John Beech on February 28, 2010

The world of football management has been attracting more than its fair share of clichés and unlikely metaphors of late, and who am I to disappoint.

Focus on Friday (English Football’s ‘Black Friday’?) was, unsurprisingly, on Fratton Park, where the media had gathered to report the utterly predictable and inevitable slide into Administration of a Premier League club for the first time.  Oddly there was little sense that this event was unsurprising giving that from 2007 when Leeds United went into Administration, insolvency events have happened to three League 2 clubs, three League 1 clubs and three Championship clubs.

Radio 5 Live's Paul Greer interviewing Colin Farmery and Kevin Ryan

Obviously at the vanguard of the media pack was local radio station BBC Radio Solent, together with BBC Radio 5 Live.  The entry into Administration had however attracted the interest of the mainstream news gatherers – BBC Breakfast, the BBC News, BBC 24 News Channel, Sky News, and even the US news channel Bloomberg (1).  Clearly what we were witnessing was a major news story.  But was it actually the right one?

What seemed to be missing was what the significance, or otherwise, of the imminent event was. Was it just a Pompey story, or was it a Premier League football story?  Or, dare I suggest, an emblematic news event for the whole English football sector?

There seemed to be too little sense that this was a story not of ‘the bubble bursting’, of ‘implosion’, or of ‘financial meltdown’, but rather more of English football heading steadfastly towards the brick wall of unmanageable debt aboard the juggernaut of the unsustainable benefactor model.  The collapse of Portsmouth’s finances was not well presented as part of a broader landscape of financial woes in English football.

Radio Solent did report that Bournemouth, on the Radio Solent patch, had been served that very day with a winding up petition by HMRC for tax debts of £314,000 (2), with only £100,000 available to meet the bill.  But even surrounded as I was at Fratton Park by the cutting edge of the football media pack, I found it hard to find out what had happened at the Football Conference meeting to decide the fate of Chester City.

While these two events are in a direct sense of a lower significance because they are about clubs lower in the pyramid, I find it hard not to see them as all parts of one picture – a picture of a sector at a crossroads with its back to the wall, up Portsea Creek (or any other creek you choose to mention) without a paddle, a sector which is shuffling deckchairs on the Titanic, while finding it hard to organise a piss-up in a brewery.

With such a wide choice of clichés to choose to head this posting with, why then did I choose ‘drinking at the last chance saloon’.  Well, first because it is a cliché popularised by David Mellor, he of the toothless Football Task Force, which was charged with, among a wide-ranging number of items, reconciling “the potential conflict between the legitimate needs of shareholders, players and supporters where clubs are floated on the Stock Exchange” (3).  That final phrase seems lost to history today, but ‘Black Friday’ certainly seemed a day when the legitimate needs of shareholders, players and supporters were particularly in conflict.

Mellor of course used the phrase ‘drinking at the last chance saloon’ not with respect to football and the Task Force, but about the press and the reporting of his personal life (with its entirely false account of his use of football merchandising incidentally).  The reporting of football business is at times not always of the absolutely highest quality (obviously with honorable exceptions).

Take as just one example this headline from the same day on the BBC website: ‘Stoke City free of external debt‘.  The club is externally-free of debt the report began, but by paragraph 4 it emerged that “The club’s owners, the Coates family, have invested £17m interest-free and plan to put in another £24m“.  ‘Invested interest-free’?  Soft or otherwise, this is still a debt.

While the media focus on Friday was understandably on Portsmouth, the whole sector is running headlong towards the brick wall of UEFA’s Financial Fair Play protocol.  The shambles of Portsmouth’s finances are sadly symptomatic of the entire sector, albeit Pompey is one of the worst cases, but our concerns need to be with the sector rather than just with today’s headline head cases.

It’s time to wake up and smell the coffee, take the bull by the horns and sweep the Aegean stable!

Posted in Debts, Governance, HMRC, Insolvency, Ownership, Premier League, UEFA | Tagged: , , , , , , | Leave a Comment »

Is this really ‘financial fair play’ yet?

Posted by John Beech on January 7, 2010

‘Debt-for-equity swap’ seems to be the buzz phrase of the moment.

[Please scroll down to beyond the italics if you are into finance and don't want to rehear some basic stuff.]

What it means in simple terms is that someone who has lent the club money decides to wipe the debt out by accepting shares in the club instead of getting his money back.

For the ‘benefactor’ who lent the money there is little immediate change – instead of an IOU he now has shares.  As the person involved is a ‘benefactor’, he almost certainly isn’t planning to sell the shares immediately to get his hands on cash.

For the club, there is a more obvious benefit.  First of all, the danger of ‘soft debt’ (a debt for which there is little pressure to repay in the shorter term) turning into ‘hard debt’ (“I want my money back and I want it now!”) is removed.  In the club’s accounts, the figure no longer appears under ‘Long-term Liabilities’ (a ‘negative’) on the company’s Balance Sheet; now it will appear as ‘Shareholders’ Funds’ (a ‘positive’), in spite of the fact that no cash has actually changed hands.  This makes sense as the money now belongs to the club and will never have to be repaid.  However, it doesn’t mean there is any new money available.

The overall effect is to make the club seem stronger financially as there is no longer the millstone of debt around its neck.

This has happened recently in a big way at both Manchester City (1) and Chelsea (2).

In one sense, this is very good news.  A Premier League with collective debts of over £3 billion does not suggest that top-flight football in England is in a healthy state financially, as UEFA and specifically Michel Platini, have repeatedly pointed out.  As they also point out, and forgive my paraphrasing, it reduces the beautiful game to a battle of which club has the ‘benefactor’ with the deepest pockets, thus removing the game a long way from any sense of keeping to a sporting ethic.

Now, unnamed financiers (3) have dismissed the swap in the cases of Chelsea and Manachester City as ‘window dressing’ and ‘putting money from your left pocket to your right pocket’.  A little harsh perhaps, but they highlight the point that tax had no bearing since these clubs weren’t paying interest on the loans in any case.  Many others of course are however, and would welcome the removal of hefty interest charges.

Of more concern to me is that Manchester City have broken Chelsea’s 2004/05 record for greatest (financial) losses.

What has happened is that the worst debt culprits have had their ‘benefactors’ swap debt for equity to comply with UEFA’s Fair Financial Play code.  This has only been possible because the clubs that are the most indebted are so because their ‘benefactors’ have the deepest pockets, and are thus in the best position to be able to afford debt-for-equity swaps.  In other words, the worst culprits are the clubs who can best afford to comply.  No such luck for the Portsmouths or the Hull Citys.

For Fair Financial Play to be effective, another of its elements must come into play: the requirement that clubs balance their books over a period of time.  Clearly neither R A Abramovich’s XI nor Sheikh M Z Al Nahyan’s XI show that much sign of winding their spending in to comply with this, the second being particularly active in the current transfer window.

UEFA intends to introduce their ‘Financial Fair Play’ concept for the 2013/14 season; the delay is to allow a ‘soft landing’, or in other words to give clubs time to make the necessary arrangements.  It will be applied to clubs ‘whose turnover is over a certain threshold‘ (4).  The threshold will undoubtedly be set to include clubs in the Premier League and all the major European Leagues.  Because of the latter, many Championship clubs will have to comply too, given the financial scale at which the Championship operates.  To get them to comply, UEFA will have to come with a sanction a tad more relevant than a ban from European competition, as currently envisaged.

One thing is certain, the further defining of the Financial Fair Play concept will have major implications for English clubs, and they need to be thinking about how to achieve a soft landing sooner rather than later.

Posted in Benefactors, Debts, Governance, UEFA | Tagged: , , , | Leave a Comment »

Just how significant today will prove

Posted by John Beech on November 11, 2009

I don’t suppose it will get much press coverage in tomorrow’s papers, but today something happened which will have a major, major impact on the English game – UEFA announced the formation of its Club Financial Control Panel (1).  The Panel is tasked with ensuring that the UEFA club licensing system is applied correctly across all 53 UEFA member associations, that clubs have fulfilled the criteria defined in the UEFA Club Licensing Regulations, and, most significantly, driving through the adoption of UEFA’s Financial Fair Play concept (2).

Let me quote the passage on the Financial Fair Play concept which will send shivers down the spines of many of the Chairman I have blogged about of late:

The major objective of the Financial Fair Play concept is to improve the financial fairness in European competitions, as well as the long-term stability of European club football. In order to achieve this goal, a set of measures will be put in place. These include an obligation for clubs whose turnover is over a certain threshold, over a period of time, to balance their books or break even. Under the concept, clubs cannot repeatedly spend more than their generated revenues. Guidance will be given on salaries and transfer spending, indicators provided on the sustainability of levels of debt, and clubs will be obliged to honour their commitments at all times.

Can this really be the blueprint for dragging Chairman down screaming off Debt Mountain?  Will it really reign in the insanely escalating levels of pay for players?

As UEFA President Michel Platini puts it: “The idea is not to hurt clubs. The idea is to help them. The basic premise is that clubs should not spend more than they earn. Club owners have asked for the introduction of rules, and this will be an adventure for European football and UEFA.” He argues that the measures are essential for the long-term health of the European game.  They certainly are essential for even the mid-term health of the English game.

Key to the success or otherwise of the Panel’s work will be the quality of the people appointed to serve.  They are Jean-Luc Dehaene, Belgium (Chairman); Jacobo Beltrán, Spain; Egon Franck, Germany; Umberto Lago, Italy; Johan Lokhorst, Netherlands; Brian Lomax, England; Petros Mavroidis, Greece; Brian Quinn, Scotland; and Yves Wehrli, France.

The two British members of the panel are a particularly interesting choice.

Perhaps not a name ubiquitously well-known on English terraces, Brain Lomax is nonetheless a major figure in the recent development of English football.  He was a founder member of the first Supporters Trust, at Northampton, back in 1992, and then became first the Managing Director and subsequently the Chairman of Supporters Direct.  This year he was awarded an OBE for services to football in the Queen’s Birthday honours list.

Brian Quinn CBE is much better known North of the border, as Chairman of Celtic.  He joined their board in 1996 and was appointed as Chairman in 2000, holding the post until 2007.  He holds Masters degrees from both Glasgow and Manchester Universities, and a Doctorate in Economics from Cornell University.  Prior to his work with Celtic he had worked for the International Monetary Fund and the Bank of England, rising to be Deputy Governor. (There is more on him and his strategy at Celtic here.)

If the other seven panel members of the same calibre as these two, we can expect a Panel that will be effective and efficient in driving through of Financial Fair Play, and that will have a major impact on the English game, a very positive one.  No doubt there will be tears before bedtime from some Chairmen, but that will be no bad thing.

Posted in Governance, Insolvency, Ownership, UEFA | Tagged: , , , | 2 Comments »

 
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