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Is English professional football really on the brink of a total collapse?

Is English professional football really on the brink of a total collapse?

That’s the question I want to answer, and I’m going to take a couple of articles to do it.

But before the messianic stuff, I want to start with an enormous thank you.   The thank you lasts five paragraphs, so if you don’t like chit-chat and want to get into the economics bit, just scroll down a bit.

The Gracious Word of Thanks

Two years ago, (in January 2008 to be exact) I started this blog and by the end of that first month found 2000 people had read my ramblings, which made me feel rather chuffed.

By last January, we had 60,000 readers in that one month, and I felt utterly thrilled.

January 2010 reveals that we now have 170,000 readers in just one month.  That is 170,000 individual readers – not the same person coming back time and again (I know you imagine I sit at home just reading my own scribble, endlessly hitting the refresh button) but even I only get counted once.

What’s more anyone who just clicks on the site once and goes away (perhaps having thought that Untold Arsenal contained details of munitions dumps in Iraq) is not counted.  You have to come here twice to be counted at all.

I’ve no idea how many readers other sites get – they tend not to say – but these figures (supplied by OneandOne who host this service) knock me to the ground.  I would like to thank you very much for reading.  I am utterly overwhelmed.

And now, today’s main piece of tittle-tattle.

Traveling to the game on Sunday I listened to David Gill of Manchester IOU talking about the club, its financial position and its future.

He claimed there were no problems, the debt had been wildly talked up by journalists, and that everything was under control.  He couldn’t understand why Man U supporters were making a fuss and threatening demonstrations, when everything was so rosy.  The manager had money to burn, the club was going from strength to strength, and really, supporters should not worry their pretty little heads about matters that don’t concern them.

OK he didn’t actually say the final bit, but he did say everything up to the bit about the manager having any funding he needed to buy more players.

Fortunately I was not driving while listening to this, but when I had time to recover from my hysterics it struck me that this outpouring raised one very important question which is….

Is it possible that somehow Man U, Liverpool and the rest will be able to burrow their way out of their current financial crisis, as clubs have always done before?  Or could it be that this time, we are looking at something different.

I think that we are looking at something different.  And here’s the first part of my reasoning…

100 years ago a significant number of the clubs in the two divisions of the Football League were losing money as a matter of course.   Several, ranging from Woolwich Arsenal (who became Arsenal) to Leeds Ctiy (who became Leeds United) were on the very edge and about to fall over the cliff.   Already a whole series of clubs had gone into administration and come back from the dead.

Indeed Accrington, one of the famed original 12 clubs at the start of the league only lasted five years before going bust.  They were reformed in 1919 as Accrington Stanley, and rejoined the league in 1921.

So everyone was used to clubs falling by the wayside almost from the start of the Football League, and in fact the economics of football in 1910 were pretty much like the economics of football today.

However since John Logie Baird had still totally failed to invent the satellite dish by 1910 – (and he should have done since he was 22 years old by then), the only sources of money for professional clubs were gate receipts, transfer profits and handouts from the clubs’ boards of directors.  It was often not enough, and so clubs would go bust.

100 years on and even with all the extra money, it seems the end result has not changed – and it is not just England that is facing the problem.   According to UEFA’s general secretary Gianni Infantino, half of Europe’s leading clubs are losing money and more than 20 per cent face deficits so huge that there is no obvious way of them ever being paid off.   If you want two examples outside England but fairly close to home try Rangers and Cardiff City, both of whom have financial conditions that appear terminal.

Bungling and bumbling nitwits though they usually are, even UEFA has grasped that finance is not just a problem, it is THE problem.  But still we have to ask, is this a total meltdown?

UEFA says, “Our report has analysed 650 clubs all over Europe and it shows around 50 percent of those clubs are making losses every year – and 20 percent are making huge losses every year.

“It also shows, of these 650 clubs more than one-third are spending 70 per cent or more of their income on salaries only – which is worrying.”

Now we know that from the 2013-14 season clubs must break even or be excluded from the Champions League.   That would cut out Chelsea, Man U, Villa, Man City, Rangers and Liverpool unless they either reform, or do a Tottenham, and have their company owned in the Virgin Islands.  In that case annual accounts are submitted, but no one has any way of checking if they have any relationship with the truth, because there is no right of inspection of accounts lodged there.

To turn to another perspective, if we look at the last ten years we can see that the following clubs have gone into administration while in the league…   (For those clubs that have done it twice I’ve included their earlier demise as well, just for the record.)

I must add at this point that I am greatly indebted to “When Saturday Comes” for providing much of this evidence on their web site and for making it freely available on their web site.  Here’s the list

  • Exeter City 1994, 2003
    AFC Bournemouth 1997, 2008
    Darlington 1997, 2009
    Chester City 1998, 2009, on the edge of extinction
    Portsmouth 1999, 2010???
    Crystal Palace 1999, 2010
    Swindon Town 2000, 2002
    Scarborough 2000
    Hull 2001, 2010???
    QPR 2001
    Chesterfield 2001
    Leicester City 2002
    Barnsley 2002
    Carlisle United 2002
    Notts County 2002, 2010???
    Bury 2002
    Bradford 2002
    Port Vale 2002
    Lincoln City 2002
    York City 2002
    Halifax Town 2002, 2008
    Derby County 2003
    Ipswich Town 2003
    Huddersfield Town 2003
    Oldham Athletic 2003
    MK Dons/Wimbledon 2003
    Wrexham 2004
    Cambridge Utd2005
    Rotherham 2006, 2008
    Leeds United 2007
    Boston United 2007
    Southampton 2008
    Luton Town 2008
    Stockport County 2009

In the last decade around a third of the football league (ie the top four divisions) have gone into administration, along with two football based television companies (ITV Digital and Setanta). Both TV stations owed football clubs money.    That is extraordinary, even for football.

John Beech at Coventry University says that since 1986 there have been 68 cases of clubs in English leagues becoming insolvent.

As I say, there were similar conditions 100 years ago – and indeed if you look at the clubs Arsenal played 100 years ago in the league, you will find very few unknown names.  The old teams are still there – they just went into administration when times were hard, in the style of Leeds United, just to get rid of some of those pesky debtors who keep knocking on the door.

But the question is still, is 2010 business as usual for a wholly unstable and unreliable industry, or are we watching the first signs of something an awful lot bigger?

Putting a company into administration is certainly not unique to football. In fact it is an important part of business, because the availability of administration encourages entrepreneurs to take risks, and without that there is no capitalism.  (I am not trying to argue that capitalism is good or bad, rather that, that is the system we have, and so within it you need things like limited companies and administration if you want to get people to be entrepreneurial).

Totally honest and decent companies can find themselves in trouble through no fault of their own.  Indeed it could be argued that without administration the whole economy would have vanished in the wake of the banks’ exploits last year.

So, if the system works as it has for 100 years, what is the reason for thinking it is different today from what people saw in 1910?

What I want to do in my next piece is outline exactly why I think we really are approaching judgment day as far as professional football is concerned.

(c) Tony Attwood 2010

Did you notice, I didn’t mention my book once.

Oh…

23 comments to Is English professional football really on the brink of a total collapse?

  • critic

    how does spending 70% of their income on player salaries is bad for clubs????dsn’t that mean club are living within their means???and i think chelsea dn’t have debt now as abrhamovich has lifted that that debt or is it some thing different???

  • Critic: if you spend 70% of your income on salaries, then you have very little left for running the stadium, repair bills, electricity, transport, transfer fees etc. What’s more if the club suffers a downturn then you are stuck with those salaries and can adjust to a lower level of income – you have to keep paying them. Any business that spends that much in salaries is not only making a loss, but also can do nothing to adjust the loss because you can’t cut salaries quickly. You can sell, but if no one wants to buy or the player doesn’t want to go (because it would mean a cut in salary) you are stuck.

    Chelsea’s problem is that although the historic debt is now shares, they are still losing money each month. The artificial approach of clearing the debt each month by issuing new shares has been noted by UEFA and they are excluding that as a way out.

  • Geezer

    Just a congratulations on the success of the site Tony, its the site i recommend all the other Gooners, and the first stop i make. Informative, reasoned and funny, and it seems all the other readers are true Gooners as well. Love it, Keep it up!

  • krishthegunner

    I have lot of respect to you personally and your blog and writings…But what do you say about our latest defeat to that manures…I too love wenger and his decisions..but it is too long to bear a fruit in this money splashing world…..hope u have a answer for this….

  • Widdas

    Good stuff Tony and as you admit a big thanks to When Saturday Comes. Football is a great analogy of the country/politics and it’s no surprise like the country it is in the shit. One thing that saddens me is that Arsenal (I despair at the collective noun introduced in the greed driven eighties) has continued to embrace it’s military relationship with the Armories funding initiative but this only echoes the country’s position of financial problems trapped in the manufacture of arms and it’s inevitable consequences. Football can only follow, it has never led any social example. My local youths still struggle to find decent playing conditions and visits to tournaments in Holland etc still cause a blush of embarrasment as we hang on to the game we invented. Yes, I think you’re right, there is a crisis. But, as with everything the big boys will march on. Clubs will be owned by super rich as they always were but these will be multinational like the players, and new rules will be bent for them by clever lawyers. The big problem is we don’t talk enough football, skills etc anymore. It’s all money.
    It’s also a bit rich that you’re talking about this when Man U have played Arsenal off the pitch. OK they bought Rooney etc for a lot of money, but a stadium in North London is named after an irrelevent airline or country. And soon Arsenal will be owned by an American or a Russian and not by you with your passion and care and the thousands of other fans. This is the problem.

  • Tony, there’s a reason why they say you should watch football, not invest in it.

    I suspect that any of the teams facing the brink will fold to keep the wolves away from the door, and they’ll be then reconstituted with the same name.

    All that will happen is that they’ll start on a lower rung of the food chain.

    With Portsmouth for example, it’s getting to the stage where they can’t pay their web management company, let alone the payroll.

  • Phil Gregory

    Regarding UEFA’s debt & champions league entrace regulations: I have very, very little faith it’ll come to much. All Sheikh Mansour has to do is sponsor the club every season to the tune of say £200-£250million and put whatever he likes on the front of the shirt. Obviously, this isn’t a “proper” sponsorship deal, but how can it be prevented?

    My philosophy with anything is regulation very, very rarely works as the be-all and end-all. If clubs want to get into the CL while being laden with debt, they will find a way around the regulation. A better solution would be tighter regulation of the actual ownership of Clubs. Why could Thanksin Shinawatra take over at City with Human Rights violations to his name? Or the nonsense at Notts County?

    If you have better regulation of owners you solve some of the issues before they’ve even begun. It doesn’t solve issues such as Abramovich’s financial doping, but more reputable owners should lead to less clubs treated as billionaires’ playthings.

  • walter

    Will Uefa have the will and the power to really apply the financial ruling ? That will be the main question to answer over the coming years. I really wonder and I’m affraid they wont.

    The list you mention is a really to big and sad list. Rules should be made and applied by all countries in the same way. But I think I am dreaming right now.

  • Krish – I wrote my comments at some length on Sunday night after returning from the game – they are in the comments section to Sunday’s article by Walter about Wayne Rooney.

  • Hartwick89

    I think what is relevant here is ethics and without good moral ethics I think any business venture will ultimately fail. No amount of rules or regulations will have the impact they should if organizations fail to deal with that issue. The question is where do moral ethics come from?

  • walter

    We could have a lengthy debate about that Hartwick89.

    When I was reading the article from Tony the first thing that entered my mind was : if all people would be honest and true and do the right things, we wouldn’t be in that mess.
    Helas, we know that not all people behave like they should behave in an ideal (dream) world. And for those who didn’t know already: sorry to wake you up.

    So it is because of the “bad” human nature that we have to make rules and believe me I am not a big fan to make more rules and regulations.

    You could also ask the question why are people prepared to go over the lines and risk clubs to go bankrupt just for the sake of winning a trophy ?
    And this questions is related to the society we know right now: the society of “the winner takes it all”. A society that only sees things in black and white and where the color grey has no place anymore.
    Look at football journalism: the team that wins are the best and the losers are the worst. Now everyone with one braincell knows that this is not always the case. I have known games where a team wins with 1 shot on goal and for the rest not even coming close but when they win they are paying tribute as the best and the losers are laughed about.
    As no one wants to be a loser or laughed about you can understand why people would do silly things just to win.

    And by people I mean from players on the pitch by cheating your way to win and also managers and directors by doing things who are maybe not forbidden by law but who are so risky for the club that the club may have to pay for it sooner or later.

    Well I’m going to stop now as this is almost turning in to an article itself…

  • walter

    About the numbers Tony, it must have been your great article in our magazine that has brought all those extra readers to your site. 😉

  • AGS

    Hi Tony
    Great article and I’m looking forward to your thoughts in part 2. My immediate thoughts after reading were that the best way to solve many of the problems would be to regulate tightly & stipulate exactly what % of income clubs could spend on wages. However, I don’t think this would work for the good of the game – mainly because turnover varies too drastically between different clubs. If this rule was implemented I fear it would just polarize the talent to the big clubs, and this would not be good for the competitiveness of the league. Closer competition is what we all want, and it is much more exiting than the same clubs winning year after year (The premier league is still too much like this today and its a shame). then I thought that salary caps would be a good solution to this problem. It has certainly worked in Rugby League and does have its merits, but I also fear that there would be too many loopholes to exploit in this scenario – like win bonuses and signing on fees etc that could be manipulated more to give agents and players more dosh to top up their capped wages. So I don’t envy the powers that be (UEFA, FIFA, FA etc) trying to come up with something that works. It will be an absolute minefield. However, I would still start somewhere, and I suggest that the first place the authorities should go to is to find a way of banning Agents from the game completely. They do nothing but suck money completely out of the game – money that we pay through tickets and satellite TV subscriptions etc. £73million was taken by them in the last year alone from EPL clubs. that is just staggering to me. The worst thing is that it is money that could be put back into football at all levels, from reduced prices to investment in grass roots, but instead is sitting nicely in Agents bank accounts funding their nice lifestyles for doing nothing. If players want representatives then that is their choice but there should be no way that clubs have to pay for this as they do now.

  • Phil Gregory

    AGS: the alternative is deterrence. Like you say, tight regulation is either ineffective or unfair (guaranteeing the status quo, or gifts advantage to nations less tightly regulated)

    The Premier League need to have greater powers of intervention. Regarding Portsmouth, they seem to have been very active, freezing transfers until debts are paid etc. If they sense a problem, they should know far, far earlier (a look at Portsmouth’s accounts two years ago would’ve said it all – why was no action taken then?)

    Unfortunately, transfer fees are nothing compared to their wage bill. Such a wage bill could only be taken on by an incompetent management team (directors, CEOs etc) and here, football seems to throw common sense out of the window time and time again.

  • Rafael

    Great article Sir Tony! I was just wondering though, how you think the Champions League would be without teams like ManU, Chelsea, or Liverpool and about how their TV ratings would most certainly dwindle without the presence of such teams? I doubt UEFA will grow a pair of COJONES and actually enforce the rules.

    @Walter
    Walter, did you just comment on another blog? telling some members of the D&G to go back to their manager games and buy all the kakas, ronaldos, and messis of the world? – it was hilarious.
    but then, I’m sure Untold Arsenal is the only blog you care enough to comment on.

  • Getty

    Tony, every since I discovered your blog a few months back, it is the first one I check out.

    As to the state of the financial problems of clubs, could it be passion and winning at any cost that trumps financial realities? What happenes if those D & G fans take over clubs and run them? Run they do, down to the ground, don’t you think? If you are emosionally attached, you won’t rationalize. Or it is more like addiction to gambling. You always gamble thinking you will win until you lose everything you got. There is a very good reason why a lot of seasoned businessmen are not buying clubs to make money. Unless you buy a club and sell quickly for profit, there is no money to be made. I really thought that’s how the Glazers cought out in this arrangement. That Arab billioner they hoped for did not come knocking. I guess they realized the other Mancherster team was cheaper.

    I believe salary cap is what they should start with, but the Premier League & UEFA has too many powerful clubs to make this happen. How reasonable can you make the salary cap? As some of you mentioned, there are lawyers working overtime to find the loopholes and capitalize. It’s like banning performace enhancing drug, as soon as you include one, there will be a new and improved one available that won’t be detected with the test in place. Doing nothing is not an option at this point.

  • Rafael – we have had seasons without Milan or Barca in the Champs League, so I don’t think that of itself causes a problem. And remember TV is the ultimate medium of hype – so they could hype up whoever comes in, in their place.

    But remember, 15 years ago Italy was the top league, and AC Milan were a club of utter brilliance (it may not be exactly 15 years but you know what I mean – the age of Van Basten etc.

    The thought was Italy would always be there at the top – now it is at best third, and possibly the fourth league in the world. Spain is waiting for overtake England, the moment we start to crumble.

  • Finsbury

    Fascinating. Can’t wait for Part Two.

    This guardian article is a useful and amusing:

    Football is the only “business” where you can be a crook, everyone knows you’re a crook, and you can carry on working. – Greg Dyke, Chairman of Brentford FC.

    It’s easy to understand how the press seperate the ‘men from the boys’ then.

    http://www.guardian.co.uk/football/2010/jan/31/premier-league-debts-panel

  • Finsbury

    And I’d have thought that Greg Dyke has met one or two crooks in his time!
    Not least the gangster that had him sacked from his previous job.

  • walter

    Rafael I confess. It was stronger than myself. 😉

  • Dino Gunners

    AGS made some good points on why a salary cap and salary as a % of turnover would not work. Two different ideas.

    1. Have a max player wage that rises with inflation

    The highest you can pay a player would be, say, 80K a week. This would cut the excessive and out-of-control spending on individual superstars

    2. Limit the number of players a team can have at the max player wage

    This is designed to promote partity as superstars generally want to be paid as much as possible. If, for example, a team can have 5 80k players and then the next highest wage is 60k, there would surely be some players who need the extra money and reputation the higher wage provides.

  • t00farg0ne

    @Dino Gunners

    I don’t think that idea would work either.

    All that would happen with a wage cap would be that the rich teams can afford biiger squads and pay everyone but 5 players £79,000 (or less if they could)

    They only way I can see to do anything would be to have a salary cap that individual players can get and have a maximum squad size of players above a certain age, say 21. Clubs can have an unlimited number of under 21s but say only 22 players older than 20. This would make the leagues tighter as there are only so many spaces available for the quality players. The best youth players would get games as clubs in multiple competitions try to expertly manage their resources.

    It would surely mean that quality players that are stuck on the bench at some clubs would have to move on, making the smaller clubs stronger.

    Obviously this would never happen as the big clubs wouldn’t like the risk of losing players to injury and not having replacements to cope with the greater number of games they have to play and so would deem the ruling unfair, even though they will have a good number of youth players to cope with it.

    The interesting thing would be how hard the older players would have to work to keep their place, knowing that in the next transfer window they could lose it. SOmething would need to be done about contracts, giving clubs the ability to chop and change squads although clubs would probably choose to have a smaller squad than 22 to allow freedom to hold on to players and transfer in new ones as and when they need.

    Not reallly thought this idea through fully but it’s the only way I can see a salary cap being fair as players will be less concerned with how much they can get per week (as with a whole team salary cap or the current system) and may be more concerned about playing often and being in a team going for trophies.

  • JediKnut

    Sir Tony my good man! A little late, but better than never eh? Congratulations on the two years! It’s great reading Untold – may it long prosper!

    A quick line to Walter – You’ve been a great addition to Sir Tony! Might I nominate him for an OBE?