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EPL owes more money than rest of Euro football combined

18 English clubs owe 56% of the debt of the 732 European clubs licensed by UEFA

Manchester U and Liverpool liable to be excluded from Europe under new regulations

There is a secret UEFA report called “The European Club Footballing Landscape,” which reviews the finances of football.  The latest available edition is that which trawls through 2007/8.

It looks at the 732 clubs licensed by UEFA to play in its international competitions.

Why it is secret, no one is saying.  After all what could be more important in football today than to reveal the extent of the financial crisis which threatens the very existence of the game in its current form?   But that’s UEFA for you – keep it under your hat as long as possible – especially when it turns out that your richest league has 56% of all the debt in European football.

Anyway, the secrecy failed because the Guardian has got a copy.  They say that the report shows the combined debts of 18 EPL clubs at around €4bn.  They exclude Portsmouth and West Porno (or West Iceland as they were then) because they were not licenced, because they were both on other planets at the time.

So the EPL debt is four times the debt of La Liga, the second most indebted league, and La Liga is considered by some to be a basket case in its own right, with Real Mad spending money in a way that is unrelated to any known system of economics, and paying for Da do Ron Ron on the basis of shirt sales.

Simultaneously the EPL made loads more money from TV etc than anyone else.  The average club took away €122m in rights and royalty fees compared with €79m in Germany.

Anyway UEFA are now going to publish this report in full, and come out with a new set of Financial Fair Play rules, which it says are agreed in principle by the big clubs and their leagues.

These require clubs to break even financially from 2012-13. There are suggestions that the loophole of putting money into shares so it doesn’t show as debt is being closed in the new regs.

What’s more the report specifically (and yes it is specific on this) identifies Manchester IOU and Liverpool Insolvency as catastrophic in its own right, and there is implied criticism of the way the EPL and the FA have simply closed their eyes and said and done nothing about the disaster.

According to the Guardian the report says, “Just over half of [the Premier League’s] commercial debt has been placed into the [relevant] clubs [or at a holding company level] recently as a result of leveraged buyouts, so far acting principally as a burden rather than to support investment or spending”.

Amazingly (and this is really taking us into fairy land), the EPL has responded to the news of the report by defending the EPL club debt saying that as they earn more they can borrow more.  In other words the EPL is resisting the reforms (tiny though they are) at UEFA.

According to the report 47% of the licensed clubs made a loss in 2008.  Now let us compare that with the EPL, where as far as I can see only about 15% made a profit, and some of that is dubious as the accounts are hidden in the Virgin Islands.

So the EPL and FA have now cobbled together a new plan, which is to accept UEFAs new rules but to seek an amendment so that “benefactors” can put in money without being accounted for in the new rules.   This would allow not only the KGB in Fulham and Manchester Arab to continue as before, but also to allow Aston Hold Your Head Villa, Bolton, Everton and others to continue using their system in which the owner lends more and more money to the club each year.

This is not to suggest that the head holders, for example, spend all the owner’s money on wages – they have built new training facilities and new facilities for supporters – which is what UEFA wants.  But as the UEFA model stands that would make no difference unless there were to be a fixed repayment plan (as in a conventional mortgage), and I am not sure that is in place.

AV could find a way out of this if they could fill their ground for each game and get into Europe, without spending any more money (and then avoiding the idea of deliberately getting kicked out of Europe by fielding a weakened team), especially if they schedule the debt repayment over a very long period of time, but that depends on getting an amendment to the rules – which UEFA seem unwilling to give, not least because of the intransigence of the EPL and FA overall.

Arsenal will continue to be safe because the debt on the stadium is being paid off on monthly repayments of the mortgage, and the club is far more profitable as a result of the development of the ground than it was at Highbury.   Tottenham will be safe because their accounts are in part hidden off-shore.

Quite what Manchester U and Liverpool can do is unclear.   Chelsea and Man City can hope for a rule fudge to allow them to hide the money from the owner, but the condition of Man U and Liverpool is so awful, and they are so flagrantly bust, there is, under the present rules, no way in which they can get a licence to compete in Europe.

Tony Attwood.

———————————-

UNTOLD RUMOURS of a financial nature

Peter Ridsdale: “We haven’t borrowed a penny from the bank since I came here: we’ve been self-sufficient and we don’t have a bank overdraft.”

Untold Rumours hear that there is no bank overdraft because Barclays is so frightened of the state of Cardiff and its impending implosion that they won’t loan the club a penny more.

This is because when Cardiff sell a player the money goes to two directors of the company that owns the club’s stadium.  The club have even borrowed from Barclays the money equal to what the club hope to get at the end of the season for ending in the top six.   They also have another debt of which £10m has to be repaid in December.

Mr Ridsdale is rumoured to earn £1m a year.

Notts County’s latest creditor arrangements look like they might be a way of getting around the point deduction arrangements.  If so the FA and League will spring into action.   “If they have debts equal to those of a smaller nation then we wouldn’t blink.  If they were trading with North Korea we’d love it.  If we had no idea who owned them, well who cares.  So no administration, no problem.”

Portsmouth could fare worse. If they go into administration they could lose 9 points this season, and then 20 more next season for failing to reach an agreement with all their creditors.  To avoid this second hit they have to pay all the football creditors in full, paying Revenue and Customs (that’s you and me) in full, and then pay a few farthings to the rest.   It’s tough, isn’t it?

AS FOR THE REST OF HUMANITY

Should the top clubs from smaller countries move into Euro Leagues?

Vote now for the biggest prat in English football.  The polls are still open.

Arsenal win the league: the start of the new golden era.

The England captain we signed from Kettering Town.

Why did Arsenal move to Highbury, and not somewhere else?

Arsenal in 1910 – the first edition of this book has almost sold out.  We will be publishing a second edition shortly, but if you want one of the First Edition copies, you should order now.  It is Arsenal in 1910, the complete story as a novel.

30 comments to EPL owes more money than rest of Euro football combined

  • tim

    Thanks Tony. The EPL and FA make me sick.

    Kudos to The Guardian for digging this up. This is what journalists should do.

  • walter

    So despite everything the FA and the EPL holds on to the “spend more – make more debt” phylosophy from the past years ?????
    Now I don’t know who is “the FA” or “the EPL” but I bet that they are filled with people who came from clubs with a lot of debt ? So they will try anything to protect their former clubs.

    I don’t know what to do on this ? Cry or laugh ?

    I really hope the rules that Uefa is planning to enforce will be installed in the near future. But then comes the most difficult thing: apply the rules !

  • walter

    What a great article once again Tony.
    Just like to add : is the Fa and the EPL going totally mad on this ?

  • AGS

    Great article and agree with Tim that the Guardian deserve some praise for digging this up and doing a bit of proper journalism (all to rare nowadays). My personal thoughts are that EPL clubs need to get smart now but just like with everything else, I expect they will drag their feet and be more concerned with lobbying UEFA for loopholes in the rules to enable the status quo. The only country that seems to be getting things right at the moment is Germany and it wouldn’t surprise me to see the Bundesliga as Europes best league over the next 5-10 years. They are getting massive crowds at most clubs (easily the highest attended league in Europe), have great stadiums, they already have rules in place which sensibly govern the way clubs are run and managed. Their clubs have good scouting networks and are already unearthing potential gems that allow clubs to generate their own transfer funds (the likes of Dzeko at Wolfsburg cost them nothing but will get them at least £20m when he moves on). Their clubs are also starting to have more impact in European competition, such as Hamburg last season, Bayern doing well again, Werder Bremen also there too. They have Leverkusen to come next season and the re-emergence of Dortmund (who get 70,000+ at home games). And most importantly, they seem to put their fans first with good prices and facilities.

  • lordgunner

    the EPL will burst very soon.No company in the world can continue over spending without punishment at the end.
    The EPL should look at what s happened to the Italian,German and few Spanish club who where spending without control in the 90s/early 2000 and now most of them are in big financial problem.Lot of this big club of the period who were “living the dream” (parma,Dortmund,lazio,Valencia,PSG,Roma,Deportivo and the list is long)are now in the limit to go burst.

  • Rhys Jaggar

    Tony

    I’m no supporter of some of the ridiculous debt in English football, but I do think it’s extremely important to look carefully at how clubs in Europe fund their stadium. I think you’ll find that many are built by the local council and I wonder whether that is the European way of being a ‘sugar daddy’?

    So either we must split out all stadium-related debt and compare it to rents paid to local council stadium owners, or we must assign the amount stadiums cost to build to the debt figures of European clubs.

    I don’t know what UEFA do, but Platini has it in for English football, so his report must be looked at critically.

    I hope Real Madrid’s debt includes the £250m used to buy players last summer. And Bayern the cost of building the new stadium in Muenchen in 2006. Etc etc etc.

    Really critical to examine this report to see the assumptions made about what debt is and what it isn’t.

    Rumour of the day:
    Capello will pick Michael Owen for the World Cup after returning from Rustenburg. Commenting on his decision, Capello said: ‘Owen is just like our new training facilities in South Africa. Not ready on time for inspection, but he’s assured me he’ll be ready come June 1st.’

  • Gooneraside

    New Untold (and unverified) rumour.
    TERRY TO JOIN ARSENAL
    After his recent problems as highlighted by the press (before being succeeded by his faithful left-back), John Terry has today hinted that he will be entering hospital in an attempt to cure his addictive problems. Directly afterwards, he will be signing for The Arsenal and will make his debut against Doncaster Rovers Belles. His old club will continue to use his old club.

  • I agree about the comments re stadia – there are all sorts of bits of support that turn up in other countries.

    In England Manchester City play in a stadium that was built with public money, and they only have to pay anything towards the cost when they get over a certain size crowd.

    But the fact is that in England most of the clubs don’t spend their wealth on the ground. I mentioned Villa having built a training ground, as Arsenal did, and Chelsea have done this too. But most clubs have spent their money on buying players and on wages – and that is the trouble.

    Man U have extended their ground, but it is hardly ground improvement, and most other clubs have done very little to the grounds – so the problem remains. Make a loss because of spending on players and their salaries.

  • tim

    Rhys, you make a good point. The stadium issue is just one example of how hard it will be for UEFA to implement its “financial fair play” rules. And it’s important not to forget the agenda of Platini…

    The optimist in me thinks this will work (and cement our club as the dominant force in Europe, thanks to the foresight of AW).

    The pessimist in me, however, thinks this is one more step towards a Euro super-league (composed mainly of financial dopers like Real, Man U and City, Chelsea…)

  • Phil Gregory has just sent me this link to an article on finances by a Man U fan. I thoroughly recommend it.

    http://andersred.blogspot.com/2010/02/tale-of-two-rulebooks.html

  • ibbs

    Superb article as always,i’ve stopped reading the(we knw more than Wenger)websites.
    Your articles SHOULD be given out to moaning arsenal fans on match days,hopefully should make them see WHY Arsene’s doesn’t spend like DODGY SPURS.With Harry there it won’t be long b4 they go the pompey route,lol!
    Superb work guys.

  • Ole Gunner

    Interesting paragraph from the Guardian article:

    “The Premier League today defended the amount of debt carried by its clubs, arguing that as they make the most money of any in Europe, they can be expected to borrow more too. A spokesman pointed to the rules introduced by the league last summer, including a “going concern” test by which accountants will inspect clubs’ books and financial projections, as evidence that the league is concerned about the issue. “The critical point is not the absolute size of any debt,” he said, “but how sustainable it is.”

    The Premier League won’t accept reform. Essentially there’s a spokesman saying that they would reactively test clubs every season with a going concern test. The test was in place this season, and it does not seem to have predicted the troubles Pompey is facing.

    There is no evidence that the Premier League even has a plan of action for when clubs fail talk less of when a club fails their going concer test.

    David Conn was exactly right. The problem at the heart of financial trouble in all football is wage inflation. If wages continue to rise at current levels, football would simply collapse at some point. Most of the other sources of overspending are also linked to this one point. Everything from fantastical transfer fees, to high ticket prices is linked to this problem.

    The solution is a wage bill cap. Allow clubs to pay what they want to any 1 individual, but limit what percentage of turnover they can pay as wages. Be very clear what constitutes wages, and rendder illegal any kind of payment to players outside that definition.

    The other thing needed is transparency in the process of buying clubs. Make sure that prospective buyers say upfront how much they will invest over a 5 year period. Make this sum public and ask propsective owners of clubs to issue a bond for the pledged amount which should not be regulated.

  • Steve Lewis

    I’m a Man United fan and this UEFA proposal could be good news for us if it forces the Glazers to sell up. I think it could be good news for Arsenal as well because although you have your debt under control the motives of Usmanov and Kroenke are unclear. Were they thinking of a leveraged buyout? If they were then they will have to think again.
    Quite frankly I’m sick to the back teeth with football at the moment and especially with my club which is more interested in becoming a brand rather than what it is; a football club.

  • FunGunner

    Finance is not my strong point, but I agree about wage inflation being the source of the problem and a wage BILL cap (not a wage cap) being part of the answer. However it occurs to me – would you also have to define turnover or legitimate sources of income (gate, TV, transfers out etc) so that the club’s turnover couldn’t be artificially inflated by an owner paying ludicrous amounts for a box of shirts, or some other good or service? I think the answer would have to include the enforcement of far stricter accounting standards which uniformly applied across Europe – no Tottenscum-style hiding in the Virgin Island, basically!
    And if a club’s home has been “donated” – perhaps their turnover should have notional “rent” payments deducted from it to make a wage bill cap calculation fairer.

  • FunGunner

    Actually the “rent payments” would affect profit, not turnover, wouldn’t it? Scratch that part!

  • Steve Lewis

    @fungunner
    It’s a good point you make about “artificially” boosting turnover/income. At least, though, it could stop the likes of Mansour and the Russian Crook from going on a fast-track spending spree of forking out £250m in transfer fees and ludicrous wages (160k per week for Teve$) in a short period of time.

  • Ole Gunner

    I’m not sure I’m necessarily against rich owners overpaying for a box, or any such scheme to put money into clubs.

    Revenue is revenue. If Abramovich is willing to pay £40M a year for his box, or even £60M, it is no problem to me, so long as revenue is tied to spending in the same period and is relatively predictable.

    Unpredictability is what leads to inflation. If Chelsea spend £300M to buy a team to replace their current ancients, it is very inflationary if people believe they have unlimited funds. Other clubs would feel that to compete with Chelsea they have to spend at similar levels. If on the other hand, you realise its a one-off, their inflationary antics are less likely to make you spend more.

    In any case, the constraints on their wages would curb excessive spending from them.

    I personally have no philosophical problems with sugar daddies. My problem with them is the risk that a club suffers when Abramovich decides it might be more fun to buy Tonga and all the lovely if large-sized maidens therein, than owning a bunch of muscular apes with no restraints to their sleazy natures. The other problem is inflation. It is bad enough that KGB Fulham can buy 2 Premier League titles, it is a disaster that clubs have to risk bankruptcy to compete with them, much bigger clubs with more merit to boot.

    I detest the fact that they could build success by going after Arsenal and Man United targets and paying twice or thrice the asking price. So they denude their competitors and strengthen simultaneously….by any definition that’s doping.

  • Steve Lewis

    I have no problem with sugar daddies as such as long as they genuinely have the interests of the club at heart (e.g. Dietmar Hopp at Hoffenheim) but where the situation becomes blurred is at places like Chelsea and Man City where it be becomes a plaything, a chance to play Football Manager in the real world with owners having an opportunity to play God with a football team. Fundamentally Arsenal and United are football teams that represent local traditions and communities. It’s fine that they have become global concerns but at the same time it’s important they adhere to their original roots. No doubt I’m about be slaughtered for my anachrostic and my naive views but I don’t give a flying f*ck.

  • Finsbury

    What Rhys Jaggers said was interesting, relating to the Arsenal Stadium Story.

    AFC’s new stadium was built using the same process’ that any large scale commercial development project in London would require or use.
    But stadiums (I can’t give any specific examples) can be funded as public infrastructure projects. e.g. In New York, home of Wall Street, the subway system was built using a Bond Issue, I think, & vaguely speaking, the Jubilee Line extension successfully applied a smorgasbord of techniques.

    I believe there was an attempt to convince Islington Council & London Transport to attempt to ‘invest’ in the new stadium project, and carry the cost of regenerating some of the infrastructure around the stadium. Nothing really came of it beyond a conversation, so it seems as with the recent decorative cladding over the raw shell of the stadium, improvements to tube stations and transport links will be made incrementally over time when affordable.

    It’s a fair compromise, I think the stadium is a fantastic achievement for the club and all individuals involved. Although, the way things turned out with Islington Council and London Transport, it has left the project open to criticism for not having built/incorporated a brand new tube station (or access to Arsenal tube) from right under the stadium, built to the quality of the Moscow Subway. The Chav$ would’ve been even more jealous, AFC’s very own bank vault & subway station hidden deep below the new stadium: Neo Mɑskaʊ.

    Some wannabe Chav$ even use that as an excuse to leave the games early.

  • shotta-gunna

    This piece and the link to that by the ManU fan on club finances at http://andersred.blogspot.com/2010/02/tale-of-two-rulebooks.html should be required reading for every fan of football and the English game in particular. The root of the problem is the ideology that we can leverage and financialize every asset stimulating a virtuous cycle of endless profits for all players in the market. Harken back to the the dotcom bubble in the early noughties or the recent housing fiasco. There is an elite of corporate raiders, big investment banks and hedge funds who have profitted from this leverage game leaving entire countries and now football clubs in an unholy mess. Until the public turns against those in the clubs and the FA who continue to trumpet these policies there will be further ruin great clubs in England such as Manchester United and Liverpool. Portsmouth is already a basket case. Yet the FA’s Peter Scudamore and various owners are doing everything to undermine minimal reforms proposed by UEFA. Yet the public in general stands mute. At least there has been a sea change in fan opinion of the Glazers at Manchester United which bodes well for the future. But when, for example, will Aston Villans shed the scales from their eyes and turn against the the type of leverage being pursued by Randy Lerner who has lashed increasing debts on the club, in this case from his own related entities, while collecting very generous interest?

  • Zack

    I honestly don’t see why on earth the FA and Premier League assert that because they earn more, then can borrow even more… Using logic (which is sorely lacking in the English FA), if you can earn more than others, there’s a lesser need to borrow with your greater income. Sure, by earning more, you can also afford the debt, but that’s surely covering the obvious-beyond-obvious fact that English Clubs are horribly overspending. The FA’s case for defence is just pathetic. Trying to save Liverpool and Man Utd?

    Of course, there’s also the other side of the coin. The Sugar Daddies. I’m definitely behind the UEFA on this Financial Fair Play ruling. Chelsea disgusted me the moment Abramovich bought their titles, and now Man City too. This might have came a little too late, but better late than never right?

  • Phil Gregory

    Zack, high earnings = can afford more debt, as you have a greater capacity to pay interest. The figures are horribly distorted due to an array of things. For example, most people don’t know but the EPL earns

    And THEN you factor in stuff like English clubs self-fund stadiums (French sides’ councils pay for them) or the fact that in Spain players pay 23% top band income tax compared to 40% in this country (soon to be 50%) so wage costs are vastly higher…

    Until the financial systems in Europe are comparable, the debt figures aren’t worth much as a means of comparison in my eyes.

  • Phil Gregory

    Whoops, after “earns” at the end of the fist paragraph, its supposed to read “around 60% more than the average La Liga side (the next biggest earning league)”

  • FunGunner

    Well, I DO have a major problem with sugar daddies – the club is not operating as a proper business, otherwise. You can’t call the way money is pumped in by an owner “doping” AND not have a problem with it, surely? It’s not unpredictability that causes wages inflation – it’s an increase in available money that causes wage inflation, just like in the world outside football. And also other players/agents knowing what the top-paying clubs are paying. Any new rules would have to deal with sugar daddies as well as the self-funded versus council-provided grounds issue and variations in tax rates, but it would be all to the good because it would level the playing field. And making it more difficult to be a sugar daddy would make clubs less attractive as prospective rich man’s plaything.

  • Finsbury

    In case anyone didn’t understand why I thought of the Moscow subway as Chav$ki’s ideal example of what an expanded station/vault underneath their Coal Shed might look like:

    http://www.pjlighthouse.com/wp-content/uploads/2007/04/moscow-subway-art-dota-seo-01.jpg

  • walter

    Phil and Tony, thanks for the very intresting link you gave.
    It seems that there are other “untold” sites on the world…

  • Phil Gregory

    Walter, its a very decent blog, definitely worth keeping an eye on.

  • A few years back, I thought UEFA and FA were going to propose to limit a club total wage bill to not more than 50% turnover.
    What happen?

    As long as the global market keeps expanding – America still untap, relatively “virgin territory” and North-East Asia a most lucrative growing market – there is no way that UEFA can rein in Premier League as they continue to develop global markets and expand out of Europe.

    If Prem League earns a new global TV rights of £1-billion per annum, where each team gets £50m per season, it si POSITIVE cash-flow as far as they are concern and will keep spending to retain prem league status.

    Factor in merchandise sales, sponsorships and commercial rights, average turnover for each prem team may hit as high as £100m, or total prem league £2-billion for 2010/11 season.

    What UEFA report must do is to compare the annual prem league turnover to other European league turnover. Then we can get a better idea of the debt problem.

    What prem league practices is the time-honored tradition of laissez faire capitalism, none better epitomised by this saying attributed to the late Jimmy Goldsmith:
    “Use other people’s money to make money”.

    I am afraid that as long as the global market is growing, with new markets being developed all the time, growing global TV rights and commercial rights, and plenty fo sponsorships and sugar daddies, there is now ay UEFA can do anything about it.

    The greatest danger to UEFA and FA is the growing threat of a Pan-European league where all these 20 elite teams believe they should keep all these billions to themselves rather than sharing with other “not so globally attractive European leagues”.

    Prem league and Pan European league will go the way of the global F1 circus show to keep the billions to themselves.

    if a “Bernie Eccelestone” suddenly appear to kick-start a Pan-EUropean League……..with G-14, G-18, G-20…..

  • Thanks for the kind words about my blog. We (supporters) are all in this weird football mess together, something too easily forgotten sometimes.

    Merlin96 – quick point but the international rights are for three years so it isn’t £50m pa but c. £17m pa. That’s around £7m more pa per club than the current deal.

    Football is an almost perfect example of the impact of increasing the money supply in an economic system with fixed supply. Give 20 teams an extra £7m each and it will feed straight through into wages and transfer fees. More money in football doesn’t create more footballers (we’d all be Premier League footballers at wages half what they are now if we could!), so the prices rise.

    Add the fact that every extra pound for the PL vs.the Championship makes relegation an even worse fate and the imperative to spend to survive will become worse.

    At some point, football needs to stop and realise that money revenue is no longer improving the “product” or “fan experience” but just making things worse. Then we can put Scudamore to use doing something more socially useful (like selling arms to impoverished African nations perhaps, or ghost writing books for Katie Price).

    LUHG

  • Nice one! If I could write like this I would be well happpy. The more I see articles of such quality as this (which is rare), the more I think there might be a future for the Net. Keep it up, as it were.