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! Football Finance

Gillingham’s Scally hits out

Posted by John Beech on April 6, 2009

Paul Scally, owner of Gillingham, never afraid of controversy, has attacked what he calls the ‘mockery’ of points deduction for clubs going into Administration (1). He would prefer to see clubs punished thus: “Rather than having points knocked off they should be relegated and only allowed to return three seasons later once they have proved to the league they have their finances in order.”

I would certainly agree with him that points deduction for clubs going into Administration is dysfunctional. However, I would take issue with some of the points he makes to support his case. Indeed, I would argue that points deduction is not only dysfunctional but is simply a form of second punishment.

His argument is based on the notion that “it may be they have spent money on players they shouldn’t have and that gives them an advantage they should not have.” How is going into Administration an unfair advantage? Agreed, they may have ‘spent money they shouldn’t have’. But how different is this from spending money lent to a club in the form of ‘soft loans’?

Scally bought Gillingham in 1995, then playing in League 3 (the old Tier 4) ,from Receivership at a reported price of £1. The club was ‘£2m in debt and in an eight-year spiral of unremitting failure’ (Independent, 27 March 1995). At the time he was happy enough to ‘do a deal’ with the club’s 212 creditors (Guardian, 4 September 1995) and made no call for his new club to relegated for three years. The system of points deduction was not, of course, in use at that time.

Within a season, the Gills had been promoted and soon were vying for further promotion. This, of course, would not have been possible if the sanction of compulsory relegation for three seasons that he now calls for had been in place. If it had been in place, would he have rescued the club? Would they in fact have survived?

By 2005, under Scally’s leadership, debts had grown to £9.5m (2) but negotiation with the club’s bankers meant Administration was avoided. In 2006 the club faced a transfer embargo after borrowing £200,000 from the PFA. By June 2006, the level of debt had grown to £10.3m (3). The following month the electricity supply to the club was cut off because of an unpaid bill of £100,000 (4). The stadium has been sold to and leased back from Prestfield Developments Ltd, another Scally company. By May 2007 the club’s overdraft had risen to £12.6m (5).

Relegation in 2005 and 2008 has not helped. Nor perhaps has the club’s location in Kent – Charlton Athletic offers a viable alternative of higher level football, and capitalised on this by offering free coach travel from Gillingham.

Today Scally is based in Dubai. He explains thus: “It gives me time to work on strategy over there and a bit of peace and quiet from the day-to-day stuff” (6).

Clearly the whole issue of clubs falling into Administration needs to be addressed, but a solution must be found that allows clubs to survive, and survive with sustainable business models.


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