By Tony Attwood
In the article that follows I am deeply indebted to The Swiss Ramble (@SwissRamble) for data that appears on his Twitter account – always most certainly worth a read. The conclusions drawn from the data are entirely mine.
This is particularly interesting because between 2011 and 2014 debt levels generally declined. So while it is true that debt levels among clubs have risen because of the pandemic, they were rising long before then, and have been rising at a dramatic and I would say unsustainable rate.
And I say unsustainable, even taking into account the assets of clubs and the wealth of the owners. Although perhaps not true for Newcastle, Manchester City or Chelsea, the debt levels surely are unsustainable for the rest of the Premier League. The owners are of course very rich, but the thought that their debt might not be recoverable even through a sale of the club, can’t be very comforting.
Of course, all owners say they are in the long haul, but such statements were made before the Newcastle deal came on the scene. Everton owe their owners £350m, Brighton £304m, Leicester £128m, Bournemouth £126m. That is rather a lot of money.
So what does this mean for now and the future?
The money (as Swiss Ramble confirms), has of late gone on transfers, with clubs owing each other vast sums. And the worrying factor is that the clubs owe far, far more than they are owed – and that is worrying because they are all in debt.
In 2012 the PL clubs owed £364m for transfer fees and were owed £181m. A negative of £183m. By 2020 this had risen to £2250m owing and £666m owed by Premier League clubs – a shortfall of £1584m. And the question is, where is that money going to come from?
Higher entry costs to matches? Unlikely. Making staff redundant? Arsenal have done this and the difference has not been enormous. Utilising more youth team players (obviously an Arsenal ploy, and this stops some purchasing and brings in some money as with Joe Willock, but beyond that… it doesn’t do much).
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Worse, since the pandemic started, player sales in terms of value of gone down quite considerably.
Of course, for the clubs where debt is not an issue because a) the owners can afford it and b) Uefa and the Premier League won’t take much action in relation to Financial Fair Play, not much is happening. They have the money and they can spend it.
But for clubs where the owners are getting to the point that they don’t want to spend much more on players, there is a problem.
If the market crashes, then clubs will find they have paid £bn for players who are no longer worth anything like that price, and so the money spent can’t be retrieved. The money has gone, the players get older and then…
Billionaires of course don’t go bust – they have far too many accountants handling their wealth for that to happen. But they can and do stop funding financially dead enterprises.
Which raises the question, apart from Newcastle and Manchester City and probably Chelsea, which clubs are safe from the ultimate ravages of a collapsing transfer market?
Curiously Norwich City is one because they have evolved an interesting model which puts financial stability first. They spend little on transfers and are content to seesaw between the Premier League and the Championship, knowing that they will pick up Premier League income for a year and then three years of solidarity payments, by which time they have come back to the Premier League again for another round of funding.
In the financial year ending 31 July 2020 they made a £21m profit, while everyone else was making a loss, which is rather clever.
But aside from that, it needs just one major club to go bust for the whole edifice to fall because when one goes down, money that it owes elsewhere obviously doesn’t get paid, which brings down the next club and the next.
I mean, imagine what would happen if there was a coup in Saudi Arabia or Abu Dhabi.
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