Monday, December 11, 2017

The Farce Of English Football’s Finances

August 13, 2010 by  
Filed under Featured, International

By Kieran Lovelock

The English general public has long enjoyed a seemingly unbreakable affinity with the domestic game of football. However, now it appears that the game upon which so many communities have been built is acquiring huge cracks and could be on the verge of financial meltdown.

England’s reputation as a football haven was largely built on the greatness of the 1966 World Cup winning team, which included two of the best players the game has ever seen in Bobby Moore and Sir Bobby Charlton who were in turn managed impeccably by Sir Alf Ramsey. But the values of communal honesty, clarity of vision and common sense that were installed into English football by these knights of the realm 44 years ago, have now been well and truly lost.

The past sixteen months have seen three strongly established clubs (Southampton, Crystal Palace and Portsmouth), who have recently played Premiership football and produced England internationals, stand on the verge extinction. Unable to pay their debts, their taxes and even their players they all entered the process of administration and the future of Portsmouth is still extremely unclear. This problem doesn’t just lie in the overinflated world of the Premiership either. Back in February, Chester City, who played in the fifth tier of English football, attracted crowds of 3000 every week (sometimes much bigger) and had been in existence since 1885, ceased trading mid way through the season. And to move back to the Premiership elite the five times European champions Liverpool recently reported and annual loss of an estimated £54.9million.

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(Photo: Jerome Boateng-Man City)

How has it got like this? How has an industry that is so deeply ingrained into the psyche of a nation that has been a huge part of the global economy for centuries, fallen so far that it can’t even pay its workers on time?

Well, the recession didn’t help matters but the truth is that this has been coming for a while. In June 2003 the face of football changed forever when Russian multi billionaire Roman Abramovich bought Chelsea FC. As part of a plan to achieve world dominance Abramovich started paying whatever money was needed to lure players to Stamford Bridge and made it so players sitting on the bench were earning £100k a week.

Why did he do this? Because he could.

Clubs of all sizes soon realised that if they were to keep pace with the industry and keep their fans happy, then they would have to somehow replicate the way in which Abramovich had made Chelsea so attractive to players. Sure enough chairmen and chief executives everywhere started spending obscene amounts of money on average footballers and before you knew it, clubs that had been run soundly for decades were in trouble.

Nothing demonstrates this more than the way the 2008 FA Cup winners Portsmouth have recently gone about their business in an effort to reach “the next level”. The numbers don’t lie and in each of the past three years Portsmouth’s wage bill has exceeded their total revenue, leaving them in debt by a staggering £138 million. In 2007 total revenue (brought in by retail, sponsorship, FA Cup money, Premiership money, prize money, TV money and matchday receipts) stood at £40.7 million and their wage bill was £49.7 million (including bonuses). In 2008 the revenue generated was £70.4 million yet the wage bill stood at £76.4 million, and in 2009 Portsmouth created revenue of £59.9 million and but had a wage bill that added up to £67.1 million.

Now I’m no economist, but I’m sure that even the chancellor of Greece could work out that this wasn’t a sensible business model and that under this financial structure administration was a mathematical certainty. But the sad thing is, is that many other clubs have followed suit and will soon endure the same fate.

What could be seen as even more ludicrous is the sequence of events through which Crystal Palace went into administration. Ten years ago lifelong Palace fan Simon Jordan bought the South London club for £10million and didn’t bother buying the stadium which, for a medium sized club like Palace, provides up to 80% of the revenue and is the club’s only real capital asset. Like many club owners Jordan was blinded by the lure of the Premiership and told the fans that reaching the elite was the sole aim of his transactions. This resulted in managers coming and going, players being put on extortionate salaries and the club’s wage bill rising to nearly £12 million on gate receipts of little more £2million. The result? Jordan was left with no option but to make a deal with the loan sharks and is now personally bankrupt. Jordan was three hours from go down as the lifelong fan who put his club out of business for good but Palace were luckily bailed out at the eleventh hour after a deal was done with Lloyds Bank to let the new owners have the stadium.

But despite the individual errors made by people like Simon Jordan the governing bodies must take some of the blame. The FA have long overlooked the need to monitor the way in which English football clubs are run in their pursuit for short term gain. If a club signs a star striker, for instance, it is great news for the FA because this brings in more crowds and more exposure. However, they seem to ignore  the fact that the clubs finances may not be able support the transfer fee, or the players wages, and forget that eventually all that money has to be paid back otherwise the tax man will close the club down.

To fully assess the FA’s incompetence in managing such a critical area of the game all you have to do is take a look at their record on what they call the “Fit and Proper Person Test”- used to determine who is qualified to run an English football club and who is not. On June 21 2007 former Thai Prime Minister Thaskin Sinawatra, who is currently wanted in his homeland for human rights abuse and was forced into exile by way of a military coup in 2006, successfully purchased Manchester City FC. Most people might judge this person somewhat questionable, but not the FA. The same could also be said of former QPR chairman Flavio Briatore. The Italian was kicked out of Formula One racing for asking a driver to crash deliberately, but as far as the FA were concerned it’s no problem for him to run a football club. Just on these two examples alone you would not want to bet your house on the FA being able to get footballs finances under control.

So what should be done if we are to avoid a total meltdown?

There are many things that can be implemented, such a rule which states that no club’s revenue stream can ever be separated from its stadium along with a complete revamp of the “Fit and Proper Person Test”. But most importantly of all, the FA simply have to come to an agreement with FIFA and the European Union allowing them to introduce a policy which states that only a certain percentage of revenue can be spent on the playing staff in terms of wages and transfer fees. If this rule is breached the club in question should then have transfer embargos, heavy point deductions or even relegation enforced upon them. Otherwise where will this stop? What percentage of its revenue will a club use on wages next time? 150%? 200%?

Football is often said to be game where the simpler you make it the better you will play. Well, in order to end on this note all we should do is look to former British Premier Maggie Thatcher. She once summed it up the best by telling parliament- “You cannot spend what you do not earn.” Now just how simple is that?

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