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Football finance collapses; Liverpool face disaster

That most disgraceful of clubs, Liverpool, are en route to join Manchester Money as the laughing stock of football, as the long-predicted changes in the way football is financed, finally appear on the horizon.

I’ll try and cover the changes to football finance in a moment.  First, Liverpool.  Al Kharafi, the Arab, has offered to buy the club.  Liverpool have no choice but to accept, given that RBS and Wachovia Banks have said their £350m loan only lasts until the summer, won’t be extended, and must not be used for transfers.  No other bank will touch the club with a barge pole.

What makes this a disaster for Liverpool is that two events are now happening which will change football as much as the end of the maximum wage and the Bosman ruling.

First, in the European courts, the word is that the legal challenge which would allow pubs to show live football without paying Sky and Satanta, is going to succeed.   This will change the whole way of selling football will change.   At the moment Sky get back most of the money they pay the EPL for football, just on their pubs deal.   The income they get from households is the profit.

The case has been moved from the UK high courtto the European Court of Justice for advice – and that is the key issue because EU law says that although it is illegal to use a pirated card (of course) if the card was bought legally in another country within the EU, it must be legal in the UK.  This is a fundamental of EU law.

If as we expect the European Court says that free trade is sacrosanct then the rights to EPL matches would be worth far, far less than at present.  £900 million a year (the current rate) would collapse to a tenth of that level.

As if that were not enough, Uefa has started to discuss controlling the amount of money to be spent on transfers and wages.  The proposal is that no more than half of the income (excluding owners’ injection of money, as per Absent Abramovich and the Arabs) can be spent on players.   The EU has let it be known that if UEFA does not act soon, it will.

It looks as if people like Absent Abramovich and the Arabs will be able to build the stadiua and training grounds, but no more.   That of course still makes life difficult – the owner builds you a stadium, and then like Absent Abramovich, decides he wants his money back a bit later.   The club mortgages the ground, and is in total debt once again.

UEFAs rules will only affect clubs playing in their competitions, but no EPL club is going to take the risk of taking Arab money only to find they can’t play in Europe.

So, pulling it together, Liverpool are selling out once again because otherwise they will cease to trade.   But they will then find that their income from TV is cut, and then their ability to use Arab money is curtailed.  The club becomes a joke like Manchester Money, and the Arab realises this is not much fun.

KGB Fulham will find it tough, so will Manchester Money.  Aston (if you go down hold your head) Villa will also be troubled with their Yankee dollars.   Arsenal of course will be fine – they are the only team living within their means.

Sources: Reuters, The Guardian

4 comments to Football finance collapses; Liverpool face disaster

  • don't believe the hype

    Do you really think this scenario will happen? There are so many vested interests here, I’m sure there will be some kind of fudge. Although it would be great if the authorities actually started regulating football to stop the financial doping that is going on.

  • jbh

    Many good points. I’m thinking that Liverpool’s current owners are in an incredibly weak position. Potential buyers are in a strong position as effectively they have to sell within 6 mths or go under – so offers will be low. Without wanting to take a big hit Hicks and Gillett are up a creek without a paddle.
    Being self sufficient and having a strong youth policy will be key moving forward if UEFA get their changes in. Only know of 1 club in this position.

  • Consolsbob

    Thing is, even if your projested scenario actually plays out like you think, then new buyers equals new money and the whole sorry show rolls on until the owners become disillusioned, move on, new buyers, etc.

    Don’t get me wrong, I hate the way so many clubs live on their tomorrows that will never come. Not sure I don’t hate the idea of EU legislation more. It’s screwed up agriculture, fishing, competition and so many of Europe’s traditions that survived centuries of upheaval. Who is to say that it will not screw up football?

    This all precludes that a certain fat Russian does not make us into one of the clubs that we love to hate. Less likely now for sure but possible.

  • Valentin

    Already UEFA is under pressure to better regulate financial doping. Until now the Italian and the Spaniard were against it, but now with the Russian oligarch money and the Middle East Petrodollar threatening out of the champion’s league, they have changed their tune. Even Berlusconi is now in favour of regulation !
    UEFA would issue license to play in its competition only for team that can show that
    1) they will be able to live until the end of the competition,
    2) their budget is in surplus or at least not vastly negative. On going operational loss will not be accepted.
    3) their debt and wage ratio to their turn over stays within some criteria. What is often proposed is Wage