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Six English football clubs face financial troubles as levels of distress rise dramatically in 2019

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| May 29th 2019

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Six English football clubs face financial troubles as levels of distress rise dramatically in 2019

The seventh annual Football Distress Report by insolvency specialist Begbies Traynor reveals that financial distress in football clubs has seen a six‐fold increase from just one to six clubs (8% of total clubs) across the Championship and two Football League divisions now showing signs of serious financial trouble.

With the season’s high stakes play‐off games settled, the six clubs across the three divisions are already
showing signs of financial hardship, which could have been exacerbated by their relative fortunes on the
pitch

The increase to just over 8% of clubs in financial distress follows a period of improvement for the past five consecutive years, during which time the drop in distress fell from its peak of 11% to a record low of 1% of all league clubs in 2018.

“A sharp rise in the number of struggling clubs is a great concern for the sport in England, and counters the opposite trend in Scotland where prudent management has seen the distress levels fall to nil this year,” said football finance expert Gerald Krasner, a partner at Begbies Traynor and former chairman of Leeds United.

“While the trends have been generally good since the early years of this decade, we’re now seeing signs that over spending on playing staff and poor planning are on the rise again, especially in the lower divisions as the fortunes of the Premier League and the rest of football become more and more polarised. Late payment of players’ wages is again becoming commonplace, and Bolton Wanderers’ financial woes and the recent collapse of the club’s sale is certainly concerning.

“It appears that the effects of gambling on promotion and higher than achieved league positions might be coming home to roost for some clubs, and with stagnant attendance figures that gives clubs a financial problem in subsequent seasons,” he added.

Attendance Chart

Distress ChartAverage gates in the Premier League were static at just over 38,000 and there have been slight falls in attendances in the Championship (down 1.5% from the year before at just over 20,100). Only Division One gates saw an average increase, up by 11.5% to just over 8,600 per match in the season to the end of March 2019.

"With the gulf between the top and bottom clubs growing ever wider, the cost of relegation is becoming increasingly significant. What is encouraging is to see the progression of relatively small clubs into the top flight, and some examples of frugal well‐run clubs such as Huddersfield Town this year, who remain in a strong financial position despite early relegation from the top flight," added Mr Krasner.

Since the start of the Premier League in the 1990s, with an increase of overseas investment, the top two English leagues have gained profile globally and now lead the world’s football viewing audiences. Bigger and bigger TV deals have generated an increasing proportion of English club revenues and sponsorships, rather than ticket sales and the cultivation of talent that was once a mainstay of football club income.

“UEFA’s Financial Fair Play rules, that came into effect in England and Wales in 2012, have encouraged the majority of football clubs to limit the huge losses that were all too often seen when reckless chairmen and directors gambled on promotion to the globally lucrative Premier League. We hope these clubs can turn the ship around and plan more realistically to recover their stability of a year ago, but relegation or missing anticipated promotion could be a financial and business disaster for some clubs this year,” concluded Mr Krasner.

More information and the full report can be downloaded at Begbies Traynor Red Flag Alert Football Distress Report.


About the author

Gerald Krasner

Partner

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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.

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