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

Debt, the APPFG Report and the beleaugured Premier League

Posted by John Beech on April 23, 2009

Owners of Premier League clubs must be beginning to wonder who is going to have a pop at them next. First UEFA President Michel Platini complained about the lack of homegrown players in the PL (1); then he slammed their proposal for a 39th game played abroad (2). Next the attack came from nearer home – it was by Lord Triesman of the FA, calling on them to cascade their riches down the pyramid (3).

Now they have been accused by the All-Party Parliamentary Football Group of ‘financial doping’ (4). Of particular concern to the Group are ‘ “ludicrous levels of borrowing” and the use of profits to service large debts.’

A review of the most recent set of financial data covering ten years for the clubs who currently constitute the Premier League (which does not cover the takeovers of Liverpool and Manchester United it should be pointed out) would suggest that they should not all be tarred with the same brush.

Certainly there has been a significant increase in the number who have switched from prudent business models to models which depend on ‘soft debt’ from their benefactor to be sustainable, a switch to a strategy with far higher risks associated.

As there are clubs who have consistently ‘built their stadia on sandy ground’ – examples are Bolton, Middlesbrough and Portsmouth – so there are clubs who have been consistently prudent by comparison. Examples of this second type are Tottenham and West Bromwich. Those who have moved in recent years from the second to the first include, most dramatically, Chelsea under Abramovich.

So far we have seen more statements of how an ideal top tier should be run financially by its individual clubs rather than any realistic discussion of how a transition to this ideal might actually take place.

I am reminded of the old chestnut of the motorist being told be a helpful rustic who he asked for directions, “Well, if I was going there, I wouldn’t start from here”. Too many PL clubs would be starting from the wrong ‘here’, and these include Bolton Wanderers, home of Phil Gartside, who is currently proposing a restructuring and expansion of the Premier League (see A Bubble Bursting?).

There are three possible transition routes:

  • An immediate ban on future debt

Direct and effective though this might be, it would lock in the inequalities that soft debts (and, to my mind, advantages every bit as unfair as those which clubs going into Administration have supposedly gained) have generated to date, and ensure that the playing field remained distinctly uneven.

  • An immediate ban on past and future debt

This approach is simply unrealistic given the phenomenally high level indebtedness already ambient – too many clubs would be caught in the ban.

  • A phased transition to low or no debt

The only viable option, but one fraught with difficulty in the detail however. Over what time scale? Would clubs with bigger debts have longer to clear their debt? Some debt should be allowed – businesses need access to loans to expand – but the devil needed in the detail is to allow only debt which is manageable from revenues rather than through the owner’s indulgence.

All in all, a can of worms, but a can that desperately needs to be opened.

Unless some form of regulation is introduced we will continue to see clubs competing on the basis of ‘our benefactor’s wallet is bigger than yours’ – hardly a healthy state for what is, let us not forget, a sport, albeit a post-commercialised one.

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