Saturday, 22 May 2010

How Many More Fans Must Suffer At The Hands Of Financial Mismanagement?

The financial problems currently existing in the Premier League have been well documented this season. At Old Trafford the protests have become more a part of the routine than a demonstration with their green and yellow scarves. At Anfield there are protests every time Hicks, Gillet or both turn up and for good reason. In perhaps the biggest financial meltdown story since Leeds United a few years back, Portsmouth fans have been subjected to the sort of heartache that simply shouldn’t happen in football.

Every time I read an article about the financial plight of these clubs I see comments along the lines of “it’s the FA’s fault” or “the FA should do something to stop it”. Another popular phrase also seems to be “so much for the fit and proper persons’ check”. However, the fit and proper persons check is not a check on how the potential owners will manage the business, more checking where the money is coming from; the Premier League, rightly so, does not want to be attached to dirty money.

So why doesn’t the FA toughen up on this test? Why aren’t income streams checked? Why are prospective owners not audited to check that they have the funds to manage the ownership of a top-flight club in England? Well, quite simply, their arms are tied behind their backs on this one. In each country throughout the world there are governmental laws that deem who is eligible to own and run a business. The FA must be careful not to contradict these laws or they would risk landing themselves in hot water.

So what exactly can the FA do to help the situation? Wage caps seem to pop up in conversation quite often but, realistically, would probably kill off the English game. If players can’t get £100k per week in the Premier League then they will simply move to Spain or Italy or wherever else is prepared to pay those kinds of sums. If the wage cap was not introduced around the world at the same time then the Premier League would simply crumble. And what would happen to the clubs that had players on wages above that that couldn’t be sold? Would these clubs be penalised? After all, they would be in breach of the rules.

I was thinking recently about the plight of the English game and potential ways in which these problems could be addressed. There are currently points penalties in place for teams that enter administration but many believe that this is not a severe enough punishment to act as a real deterrent to clubs. After all, Portsmouth were reported to be paying up to 109% of their turnover on wages at one point last season. They were gambling on the future much as Leeds had done seasons earlier. Despite the virtual destruction of a great club, the lessons were not learned.

Of course, the points penalties could be made worse for entering administration but I believe that to penalise at this point is too late. Things have already become so bad by this point that the teams are virtually relegated anyway and all it does is add to the woes that the club has. In many cases the points penalties are deferred until the next season meaning that they have no hope of recovering sufficiently and, in some cases, are doomed to successive relegations without even kicking a ball.

I would like to see the FA act constantly to try and deal with the problems before they go so far that it is simply too late. There are many clubs in the league who run themselves as diligently as possible and what is the reward? They finish in a lower position than they should do and lose out on prize money to teams finishing above them who have done it by overspending. Why not introduce penalties based on finances before clubs enter administration?

There is no deterrent in place at the moment to foreign investors buying football clubs on finance. Two prime examples are, of course, Manchester United and Liverpool. Liverpool recently announced losses of £54.9m for the last year, despite pretty much breaking even in the transfer market. Manchester United were reported as reducing their debt by £30m over the past 12 months but how different would that have looked if Ronaldo wasn’t sold?

It would be interesting to see what would happen if the Premier League introduced a system whereby clubs were docked a point for every million they lost in a 12 month period. Clubs like Liverpool and Manchester United would be severely hindered and would face the prospect of immediate relegation given the number of millions that could potentially be lost in a season. Of course, there are many very large drawbacks to this idea.

Similar to the wage cap, the system would have to be implemented worldwide for there to be any chance of it working in the way that it should rather than simply hindering English football clubs. In reality, this will never happen. Whatever is to be done, or not done given past experience, there are going to be many more heartbroken fans in the coming years and, much like Portsmouth, it will be for completely the wrong reasons.


  1. It is a problem that will no doubt occur again somewhere soon as well.

    Look at Cardiff, the next few weeks might well be telling as to the real seriousness of their plight. You can only hope they have not been running the club on the basis that they would be promoted this year.

    With regard to the wage cap, it would be difficult to implement it, and as you rightly said it would also need to be a worldwide rule.

    Another problem with reforming the game in this way is the conflicts of interest within the game. Too many people with club interest have too much power within the FA and Premier League and there is probably no real willing to do anything to change the situation.

    Not sure if he is still at the FA anymore, but could you really see David Gill of Manchester United pushing for a points deduction for clubs losing money?

    In the past would he have been advising the FA to go for Alex Ferguson as England manager? I somehow doubt it. Just one example of the many conflicts of interest that exsists in football.

    While the big bucks are still coming in from Sky, who is going to try and water down the Premier League with wage caps and points deductions for bad management? The status quo will just continue.

    There would appear to be no ideal or easy solution to the problem, and thats why nothing will be done and it will sadly happen again.

  2. You speak a lot of sense Dean and I am inclined to agree with the majority of what you have stated there. I do feel that even if a really big club goes the FA and Premier League will still adopt the "it's all their fault" stance once more. This, of course, is correct but it doesn't make it right.

  3. I was reading a while back a little piece about Alan Sugar. It was saying that, when the formation of the EPL was being mooted in the early 90s, he fellt strongly about the Premier League putting away some of its TV money into a trust for emergencies and to help the grass roots etc. He warned that if the Premier League gave all its money to clubs they would just waste it on players' wages. He was pretty much bang on.

    There must be some way to regulate what clubs do with their money. Afterall they do it in France an Germany.

    Matt, I saw on your Bio you live in Heppenheim. My girlfriend lives there, small world!

  4. I guess Alan Sugar is not as daft as I had thought then! You're right, he got it pretty much exactly right. I really do feel things are getting out of hand now though - lessons were not learnt from what happened in Italy back in the 90s and it looks to me like something similar might well be happening in England now. It is just a shame that the fans will have to suffer.

    What is your girlfriend's name? I might know her.

  5. Some great points made guys, but I reckon I disagree with the general conclusion that the status quo will prevail.

    It will all come crashing down at some point, although it may take a so-called big club (a la Manchester United) to fail before the FA/FIFA take note.

    Interesting you mention Germany - the Bundesliga were ridiculed for regulating their game - taking a different financial model completely to the EPL.

    And yet, Bayern Munchen got further in the Champions League this year than English clubs. Certainly food for thought.

  6. What do you think the FA/FIFA would do if some of the biggest were to fall?

  7. My girlfriend is a half German/Iranian girl. She studies Architecture in Darmstadt (where I have lived for 3 years). Wouldn't like to put her name in the public domain mind!

    Interesting point about Bayern. They are able to generate huge profit from merchandising and marketing etc, more so than other German clubs. The German regulations have certainlly prevented the Bundesliga from becoming a closed shop as in England and most clubs (barring Hannover) remain in favour of leaving it like this.

  8. Interesting article. What is most concerning are those clubs in the Football League who either attempt to get into the Premiership and fail, or get relegated from the Premiership and incur big losses as a result (despite the massive parachute payments). Clubs that this has happened to include Southampton, Crystal Palace etc.

    It is refreshing to see that Blackpool appear to be taking the view that gambling on staying up would be foolish and so are prepared to save the money they earn from promotion (£90 million) and invest in the future (eg making sure their ground has four stands etc). The only problem is many fans (especially lots of those who are short sighted/glory chasers and only started supporting them since they got to the Playoff Final) will demand the club spend. It really puts the board etc in a very difficult position.

  9. I think Southampton's woes actually came from building St Mary's. Once they were relegated from the Premier League they never made it back up. However, your point is extremely valid. The trend throughout English football is very worrying right now.

    For me, the Premier League has to bear some kind of responsibility for the problems that are occurring lower down in the football league. All of these ridiculous wages being offered at the top level effectively force the lower clubs to give higher wages in order to attract players of sufficient calibre. It is this that is killing the game from the inside.

  10. @ The Manager, I think you are probably right, a big club collapsing is probably what it will take to get something done about it.

    The Satus Quo for me, is running the Prem League in a manner which leaves clubs open to this happening.

    They will not change the system because of poor little Portsmouth, they've made that very clear already with Scudamore blaming bad admin.

    Even if Hull are to enter admin they will not be too bothered either, as they are now in the Championship.

    Look at Leeds, Leicester, Coventry, Norwich, Southampton, I'm sure there are plenty more. The Prem League don't seem bothered about all the clubs that have gone tits up after relegation.

    They will probably just say that they get the parrachute payments, so get on with it.

    It must have been a bit humiliating for Scudamore though with Pompey.

    Another way of looking at it though is, that clubs generally go wrong after been relegated to the Championship, while thats happening the Prem League can wash their hands off it.

    With Pompey they have had a wake up call, I would say they never imagined a Prem League team would do that with all the TV money they get.

    It would seem though that Scudamore and Co are treating it as a one off, he can't say he hasn't been warned if it happens again now.

    Not too sure of the facts about Germany, but I'm sure I have heard that they have to have a solid business plan to prove that they will be finacially viable for the upcoming year before the start of the season.

    I wouldn't think Portsmouth could have proved that last year.

  11. Some good points raised there, Dean. Pompey would most certainly not have been able to prove that. In fact, I am sure I read somewhere that their wage bill at one point was actually higher than their turnover - how a business can be allowed to get to that point is just ludicrous!

    I think the FA/Premier League would have known a year or two ago when Portsmouth were doing all of their crazy deals with crazy wages that this was likely to happen but they have chosen to ignore the situation completely and, like you say, apportion the blame to the club.

    The most worrying thing about it is that the FA and Premier League still do not seem even slightly bothered about the situation and are seemingly quite happy for it to happen again.

  12. Agree Matt, think that your last point sums it up, you do get the feeling they believe no one will be stupid enough to do it again!!