Date Published: 30th March 2016
The trickle-down effect of football TV money and good housekeeping forced by the Football League and HMRC has all but eliminated business distress in English football.
Of the 72 teams in the top four divisions of the English football league, only two lower division clubs now show any signs of distress, representing just 3% of clubs.
This is a dramatic 85% reduction from a total of 18% of all clubs that were in financial distress in March 2012, when the data was first analysed by corporate recovery experts Begbies Traynor.
“To say that we have seen the end of football clubs going under is a step too far, as relegation impacts clubs harder than ever before, but it’s certainly less likely now,” said football finance expert Gerald Krasner, a partner at Begbies Traynor.
“The football industry has never been fitter, and while many might think that it is down to the influx of big money foreign club owners, it is as much to do with the Football Fair Play rules and the HMRC stance on arrears, which have forced good housekeeping,” added Mr Krasner, who is also a former director of Leeds United Football Club.
In March 2012 a total of 13 English clubs faced significant financial distress, and several, including Portsmouth, Port Vale and Coventry City, have since entered administration as out of control wage costs, poor management and falling attendances took their toll.
The average gates at English clubs have remained largely static, with just a 1% rise in the last five years, but attendances north of the border have grown by 9% in the same time period, largely attributed to the growth of Rangers’ average gates.
Since the introduction of UEFA’s Financial Fair Play rules in England and Wales in 2012, clubs have increasingly been forced to live within their means, and limit losses that had swollen with billionaire owners supporting huge player wage bills and gambling on promotion to the super lucrative Premier League.
In the last 18 months HMRC, typically the single largest trade creditor in football club failures, has tightened its approach to late payments ensuring that arrears of millions of pounds that were accrued by clubs such as Glasgow Rangers and Portsmouth are no longer able to build up and threaten clubs’ long-term stability.
The ownership of clubs, once characterised by benefactor and fan owners such as Blackburn Rovers’ former chairman Jack Walker, has shifted dramatically to overseas individuals and investment groups as the English Leagues have gained profile globally in the last decade.
“The amount of TV money has grown, along with the popularity of our leagues overseas, but that brings its own downside. The fiscal cliff that faces newly relegated clubs is huge and growing, even with the so-called ‘parachute money’, and this is probably the biggest challenge to football club finances now,” said Mr Krasner.
“It is however sad that as football distress has been reduced to a trickle, the UK ownership of our clubs has dwindled to just a handful as more and more famous clubs were snapped up by overseas investors during the toughest times,” he added.
More information and the full report can be found at Begbies Traynor Football Distress Survey (England) March 2016.
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.