By Tony Attwood
Until recently I had the feeling that the mass media was going to pretend forever that Barce-loan-us was a well run, well organised football club who have every right to take any players they want from any club they want. They are, after all, God’s team.
Although the news that they could not pay their players salaries got into the Financial Times and the Wall Street Journal, there was a general feeling of “this can’t be a real story because this is Barca” and it was dismissed as tittle-tattle.
It is a bit like the way the Liverpool story has been handled for years. Liverpool are a team made by the Almighty. They don’t go bust. Their supporters don’t cause deaths. They are honour personified.
The BBC even covered the Barca financial story with a comment that it was all probably nothing and the new President was probably just making it all up in order to say, “Look at the mess the last President left us with, but don’t worry I am sorting it out.”
Now however the walls that hold up that disgraceful empire are collapsing. The Guardian has even run a story saying that Barce couldn’t buy Cesc even if he wanted to go (which as Walter showed in the last article, he doesn’t).
The Guardian’s piece centres around a further financial analysis prepared by Professor José María Gay, the head of the University of Barcelona’s economics and business unit. (And notice how I openly quote the newspaper and give it credit for this – even though they nicked my analysis of why and how it is the lack of coaches in English football that stops England progressing. But being magnanimous I shall let such a trivial matter pass. I wouldn’t want you to think I was bitter in any way, or even that I remembered the incident).
Back to the plot: In the document Gay presents Barce’s 2009-10 balance sheet. Wage costs have risen 55% from their 2008 level to €262m (£220m). But (and this is the big point) the club’s stated revenues have risen 33% over the same period, meaning wages now account for almost 64% of income.
The key point is that the club’s short-term debt of €392m (£329m) far exceeds their working capital of €110m (£92m) and “even hints there could be a risk of default during the current close season.”
Shall I do that again?
It “even hints there could be a risk of default during the current close season.”
I don’t want clubs to fail, but I have to say that given the behaviour of Barca over the summer I am as amused by that one as by the auditor’s note on the last Liverpool accounts to the effect that there must be doubt as to the famous IOU club’s ability to continue as a trading company.
As the major financial reporting centres such as the Wall Street Journal, the Financial Times, Blomberg, Reuters and Untold Arsenal reported, Barcelona have been trying to borrow another €150m (£126m) but have failed to announce any success. Wot? No money! Surely not!
Moving across the Adriatic we don’t hear too much about Italian clubs in crisis, nor about their ability to meeting the Financial Doping Regulation requirements – and I would love to find a writer dealing with this (if you are one such, if you could be, or if you know one, please do let me know). From the little I know of the debts of Inter and AC Milan they seem to be Manchester Cities – endlessly supported by rich benefactors. This leaves them with no debt, but no basis on which to meet the new financial regs.
However one club has come clean and gone to the dogs… Roma, who are now up for sale as the owners (the Sensi family) try to pay off UniCredit.
That might seem like a detail of no importance (equivalent to the consideration of Billy The Dog’s review of policing activity at WBA matches, and the Wigan’s chances of survival this season, but here’s two snippets).
But read on, dear and beloved reader, for there is more.
First the family has been trying to sell the club for three years, without success. Second Roma is not a backwater side – Roma finished second in Serie A last season.
Which brings me back to financial doping. I was having a read through the Uefa document “The European Club Footballing Landscape” (as one does while waiting for the Bourne movie to start on ITV2). It sets out much of the background – and it interestingly does confirm that even under the current lax licensing laws a number of clubs who have qualified for Euro competitions have been refused places because they don’t meet the regs. It is an encouraging sign.
So I started to think, which of the top clubs in the EPL will make it past the regs?
Clearly what Uefa expects is that the clubs will clean up their acts to get in through the door – but I wonder if they realised just how hamstrung some of the clubs are. Or indeed just how deep the crisis goes.
Let’s go back to the fact that for Barca are “hints there could be a risk of default during the current close season.”
OK let’s say that is over the top and Barca don’t go pop. They could still keep going, but only with more and more borrowed money. Now with the figures noted above, and with the fact that these figures will get worse because Barca have to borrow more and more, their ability to show they are breaking even will decline.
But there is worse on the table: Barca have reached the top – they have won everything. But for many matches their ground is not full – which makes it hard to raise prices much more. There is no Arsenal-style waiting list. They can’t do any better on the pitch, and they have been so clever at marketing their brand it is hard to see they can go much further. They can’t get better fixtures (Spain is always a two horse race).
So although it would seem that they can actually turn around their own situation and survive, there is a real question, and I mean a really real, big time, very big, as in enormous, question as to whether they can both survive and meet the Financial Doping regs.
Meanwhile in Italy the same must be true about Roma.
In England the same is true of Chelsea, Man City, Man Utd, Liverpool, Tottenham, Villa, Everton, Birmingham… well the list goes on.
So does that mean we are down to Arsenal as the reps in the Champs League?
No, because the clubs can change – it is just not so easy. The one club that looks like it is doing the work properly is Chelsea who are clearly changing their approach to get the wages bill down, and reduce transfer fees. They will probably be ready in time, although it may take longer to get back to the power that they have had when they could buy anyone who moves. As Arsenal have shown, it can take seven or eight years to get a good youth team together.
Man City are just Chelsea about three years behind, and I suspect part of their development plan is to win the league but forgo Europe, and then follow the Chelsea model with the hope that they can cobble together a youth policy.
Man U and Liverpool as we know are hopeless cases and simply won’t be able to qualify under present arrangements
Tottenham’s accounts are so eccentric that since I sent Phil a note saying could we cover the Tinies next in our regular finance review articles he hasn’t been seen. Last I got was a quick note from the Virgin Islands saying he still can’t make sense of what is going on but the weather was quite nice. I can’t believe Uefa would leave a hole as gaping as the one the Totts use at the moment to cover up their losses – if they have done then you can expect every club to move offshore at once.
Villa, Everton, Birmingham and the rest – they all lose money and are backed by financiers. Some give money for nothing, for the love of the club. Some like Villa’s owner make a really good profit on their loans by charging way over the normal lending rate. None of them are anywhere near break even.
So the result? For Barca, I can see survival but not an easy ride to Europe. Arsenal are already there. For Chelsea yes I think they will be there. For Man City, yes but it will take a couple more years. For the rest in England, and I suspect some in Italy and more in Spain (where nearly half the first division are in administration), I really can’t see them making it.
Coming shortly: How Tottenham created one of the biggest financial cons of all time through their company reports.
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