Date Published: 21st December 2021
Financial distress is now affecting a total of 34 clubs in England and Wales, double the number before football grounds around the UK were closed in March 2020. Since the onset of Covid, two EFL clubs, Wigan Athletic and Derby County, have entered administration, triggered in part by the pandemic.
Despite the return of fans to grounds in August, there has been little immediate change in the fortunes of the national game below the Premier League, with the temporary financial boost generated by the package of Covid relief measures now ended for most clubs.
“...there has been little immediate change in the fortunes of the national game below the Premier League...”
In a direct comparison of data between the period immediately before Covid restrictions were imposed on clubs in March 2020, when only 17 clubs were flagged as having financial problems, and the end of September 2021, the survey reveals a 100% rise in the number of clubs showing early signs of financial distress.
Since the end of March 2021, the number of English clubs displaying signs of credit trouble has remained relatively steady, climbing from 33 in England and Wales to 34 in the most recent period to 30 September 2021, while Derby County was placed in administration in September.
“The rates relief, Premier League payments and furlough measures did prevent a slew of clubs going to the wall in 2020, and with the exception of Derby County there hasn’t been significant change in the credit worthiness of the clubs in the last six months, but that means the return of fans hasn’t been a magic bullet either,” said Gerald Krasner of Begbies Traynor.
“That we now have twice as many clubs in peril, in addition to the failures of Wigan and Derby County, should be concerning to fans and governing bodies alike. These have been exceptional times and perhaps there is an argument to be made that they may require exceptional remedies or exemptions in future if the game isn’t to see a whole raft of ‘zombie clubs’ staggering through to avoid deductions and financially-driven relegations.
“We are even seeing small indicators of falling credit worthiness in the Premier League, and it’s a long time since that was a factor to even mention.”
Krasner, who was one of the team of three administrators that successfully sold Wigan Athletic FC out of administration in March this year, was previously chairman of Leeds United and is one of the UK’s leading football restructuring experts.
He said: “Scotland’s clubs have seen less negative impact, and whether that’s due to lower wage bills, or a generally prudent approach to financial housekeeping, or a combination of both those factors, the Scottish League faces far fewer financial threats than clubs do south of the border.”
Gerald qualified in 1971 as an ACA with Peat Marwick Mitchell and subsequently joined Bartfields Chartered Accountants where he began to specialise in Insolvency. He was one of the first licence holders in 1986 when he specialised in CVAs before they became more popular. Gerald has worked on numerous successful cases including Krasner v Dennison, for which he won in the Court Of Appeal and as a consequence changed the treatment of a bankrupts' pensions.
In 2004 he became chairman and part owner of Leeds United AFC which had debts of circa £103 million. These were reduced to £24 million before the club was sold the following year. In 2007 he sold the insolvency division of Bartfields to Begbies Traynor and became a partner at the firm.
Gerald has lectured both nationally and internationally to fellow insolvency practitioners and other professionals, and has also been involved in committees for both R3 and Insol.