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

Liverpool and Manchester United

Posted by John Beech on October 14, 2010

I’ve been abroad for work and then taken a couple of days leave – the net result is a week of only occasional internet contact.  A week is a long time in football it would seem.

All my standard searches to keep up with football management affairs have resulted in a total overkill on the Liverpool sale soap.  Certainly it’s a fast-moving and ever-changing saga – I was interviewed on BBC News 24 this morning, and already there has been a development, oh, and a non-development.

It strikes me that the focus on Liverpool, understandable though it is, has meant that some very interesting football management stories have been largely ignored.  For example, there are stadium stories at Bristol City and Worcester City, not to mention the 2012 stadium confrontation, and the Portsmouth CVA and Sheffield Wednesday’s plight should definitely not be ignored.  I hope to blog on at least some of these shortly.

The oddest of largely ignored stories is, to me, the reporting of Manchester United’s financial results (1).

The club has certainly done stunningly well in terms of growing revenues and turning a profit.  Turnover is more than twice that of cross-city rivals Manchester City.  Wages have risen, but the wages/revenues ratio remains just a vague aspiration for most clubs.

All very commendable, but there is the other side to the coin – an £83.6million loss and overall debts of £521.7million.  For all the success with growing revenues, debt management has been rather less successful. Given all the legitimate concerns of United fans regarding the Glazers, there is still room for a glance at Liverpool and the thought that things could be distinctly worse.  The difference between the club’s financial positions is nevertheless not so great, even if the relatively small difference leads to quite different outcomes.  Highly leveraged debt leaves a club worryingly exposed.

In the way that we are running out of ‘benefactors’ with deep enough pockets, we are also running out of ‘investors’ with sufficient finds of their own to invest.  Clubs seem to be convinced that the scenario at Portsmouth could never possibly happen to them.  First Portsmouth, now Liverpool.  Just how many Premier League clubs to teeter on the brink will it take before Chairmen get a grip on club finances, before they take Mr McCawber’s advice.  Unless spending is reined in to the extent that the business model becomes sustainable, we live in danger ultimately of only having a weekly exhibition match between Mansouri City and Abramovich Globetrotters to tune in and watch.

Meanwhile back at Liverpool, or rather at court rooms around the world…


5 Responses to “Liverpool and Manchester United”

  1. Question: What possible “legal reasons” would a bank refuse to accept full payment of outstanding loans?

    • John Beech said

      Possible answer: Their lawyers advise that they are already in a legally binding situation to accept alternative payment.

      • From an organisation that at the point the legally binding situation is agreed don’t actually own the club and therefore have no legal status with regard to the debt…
        Don’t misunderstand me, have no real time for Hicks etc but do find the behaviour by all parties a bit strange of which refusing to accept full repayment of a loan from those who took the loan out the most bizarre of all.
        If sometime in the future it is reported the club is been used as colateral by Henry and his company one can only guess at the extent of the anger…

  2. Can you see clubs getting to the position where only hendge funds can afford to buy them? Surely that woudl result in a mass takeout of club revenues to pay the shareholders / investors?

    • John Beech said

      At the level of the Premier League we seem to have run out of wealthy enough ‘benefactors’, and the revenues attract hedge funds. It might lead to the scenario you suggest if there were no step taken to regulate the market, although the recent cases of Liverpool and Manchester United would surely make any hedge fund think twice about investing football. Financial Fair Play (FFP) should rein in the ludicrous excesses and bring some stability, but it’s unclear how far this ‘new order’ will cascade down the Pyramid. I suspect that financial doping will survive alive and kicking in the lower leagues. I doubt that FFP will rein in the likes of Crawley Town, Fleetwood or Eastwood Town, but then neither can I see hedge funds queuing up to try and buy them.
      What I see as significant is the lack of initiative from governing bodies other than UEFA. Richard Scudamore says that Liverpool were never in danger, but, debatable though the level of danger might have been, to argue that there was no danger is unrealistic, and unhelpful.

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