At all levels of football, the crisis is here, and it won’t go away

 by Tony Attwood

“The most important week in the history of the Football League – act now, or risk carnage”.  So said Mark Palios, the former FA Chief Executive.

It doesn’t really matter when he said it, because it is always the most important week.  But this week is a special week in the history of “the most important week” because this week it has emerged some Championship clubs are accused of trying to poach other clubs’ players – at this moment when the game is teetering on the edge – and when clubs are negotiating pay deferrals.  “Join us,” they say, “and we won’t cut your salary.”

Rick Parry, chair of the EFL took a headmasterly tone telling clubs in League One and League Two clubs that “such behaviour must stop”.  But like a headmaster totally out of touch with the reality of the classroom, such lectures will make no difference.

The problem is that clubs have to pay player salaries at the end of this month, as they do each month, and because they are running at a loss, and now they have no income at all, they don’t have the cash.  Furloughing (the act of asking the state to pay 80% of the salaries) has been going on but some clubs are holding off, seeing it as a bargaining chip in attracting disaffected players from other clubs.

And here’s the problem.   In many Championship clubs, the wage bill alone exceeds the total income of the club.

Last month, the League released some of the TV money it gathers and gave it to clubs that were in desperation.  Then the Premier League advanced its solidarity and parachute payments that it hands over to the other leagues, doing so earlier than required.

But Rick Parry, chair of the English Football League that controls the Championship, League One and League Two, said the EFL won’t pass this on to the clubs until clubs have given assurances on financial matters.  Thus speaks the headmaster, “You’ve been very naughty boys and you can’t go out to play until this stops.”

Which raises the question about club chairmen, if you constantly run a business in which you pay your staff more money than you earn as a company, is running a company the job you should actually have?

Mind you Chairman Parry is also the man who suggested playing 341 matches in 56 days to finish off the league programme before next season starts.  And he made that idea public without asking the managers of the clubs, which is a little bit silly.

Of course, this can only go on while there are more and more rich people willing to buy a football club.  But even then one club a year can do it and maybe get away with it if as a result, it gets promotion.  But that’s about it.

Deloitte’s analysis found that in 2017/18 Championship clubs lost £307,000,000 between them, which in any analysis looks a bit careless.  Spending on wages in the league was 11% MORE than income.  Early figures for 2018/19 suggest the situation got worse with over half the clubs now spending more on salaries alone than they receive in income.

Only one club has died this season – Bury – but many more are on the brink.  The Wigan chairman said that at one stage his family were putting £1m a month into the club just to keep it going.

What makes the matter even more insane is that many of the clubs that go up to the Premier League then spend a fortune on players, as Aston Villa have done this year, so the craziness never stops.

Thus most Championship clubs make a loss.  In 2017/18 (the last season for which figures are available) Wolverhampton were the prizewinners losing £57m.  After that came Fulham (£45m), Cardiff (£39m) and QPR (£38m).

Only five clubs made a profit (Burton, Sheffield Wed, Preston, Norwich and Hull).

Now the rules introduced in 2016/17 allow clubs to make £39m loss across three seasons, but the clubs are simply ignoring this, hoping to get into the Premier League and thus avoiding the Championship rules, and so getting no fines.   Last season only Birmingham were penalised for breaking the rules – despite the wholesale breaches of regulations elsewhere.

Now the argument can be made that the number of clubs that go bust is tiny, so there are always more people willing to buy a club.

And that is true – until a moment like this comes along.  Now we have the situation in which the money that the clubs relied on to reduce their losses is simply not there any more.  But the thing that loses all that money (salaries) is most certainly still there.

And as we know, through the leak of Wolverhampton figures, in the Premier League they (as one example) and continuing the insanity, having now already spent NEXT SEASON’S first TV payment – borrowing the money against that payment, to help them get through this season and have funds available for transfers.

In the Championship, clubs don’t care about fines and points deductions – because these only apply if the club fails to get promotion.  If the club goes up, then all is forgiven, as with the curious case of Leicester City’s money and its marketing company, that we have covered in the past.  Nothing has been done about it, because odd behaviour in the Championship is not investigated when a club is in the Premier League.

To get around the problems Aston Villa and Derby County have used the device of selling their grounds to their owners.  Sheffield Wednesday are the latest to try the trick.  Questions are still be asked over these transfers, but even if they get away with it, clubs can only do that once – although Wednesday are now suing the EFL – I think for defamation.

So it’s all bad news in the Championship – and it is getting worse because wages rose more than income last season.  No one is learning any lesson.   Wages were up by 11% from the previous year and until the virus hit, figures suggest the situation was getting worse.

Such a situation can’t go on forever of course, and all that the virus has done is brought reality closer.  TV companies are not going to pay for games that have not been played, and without TV money clubs will collapse.   Even if championship clubs get through this lockdown, the chances are they will go on spending far more than they earn in the desperate hope of promotion.

It is not just clubs in the Premier League who are in trouble.  For the championship, it is not just a case of if it will implode, but simply when.

4 Replies to “At all levels of football, the crisis is here, and it won’t go away”

  1. Next season will bring normalcy to all clubs, no more huge transfers. All clubs especially those funded by bottomless owners will be wary after the punishment meted out to M C. I foresee the importance of youths. Clubs will rely on their youth squads a lot. All transfer speculations will come to nought although one or two may come to fruition at much reduced fees.

  2. There have been a couple of articles I’ve seen, which talk about how tyhe value for players has dropped. The latest article, used data from TransferMarkt, seems to show a median drop of 20% drop in value. But this is a hypothetical value, as transfer windows are not yet open. I would imagine buying clubs (are there any?) will at _most_ offer a further 20% discount (0.8*0.8=0.64; or a 36% discount in total). And the silly medja experts continue with pie in the sky player valuations which will not happen.

  3. Normally., a player’s value is determ9ined by whether there is a buyer’s market or a seller’s market. Today, it appears that this is a buyer’s market but in reality, who has the $$$ to be able to offer the inflated prices formerly expected. My guess is that most clubs will hold off on spending anything and that the few that actually do, ie: those with ultra-rich owners who have deep pockets and don’t mind spending during this crisis, will bargain basement shop but the rest will wait until their financial situation has stabilized (money starts coming back in)

  4. It all depends on the big ‘when’ at present there is nothing to say it is happening any time soon and as each week goes the clubs are losing more and more money.

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