Against the backdrop of a succession of football clubs entering administration both north and south of the border, a new study by corporate recovery specialists Begbies Traynor reveals a picture of poor financial health that is affecting a significant proportion of Scottish football clubs and threatens to extend far beyond the current situation at Rangers.
The Red Flag Alert survey, which monitors business distress levels, has found that of the 32 clubs currently playing in the Scottish Premier League (SPL) and first and second divisions of the Scottish Football League (SFL), four – including troubled Rangers - are recorded as displaying signs of corporate distress that indicate poor financial health.
The data shows that one in eight (12.5 per cent) of the clubs are showing signs of distress compared to an average of less than one per cent of all businesses across the UK.
Business distress signals, as measured in the survey, comprise a range of significant financial problems that include clubs with serious court actions against them, including winding up petitions and high court writs; clubs that have been issued with striking off notices for late filing of accounts; those with county court judgments against them; and those with serious negative balances on their balance sheet.
Commenting on the survey’s findings, Ken Pattullo, group managing partner in Scotland for Begbies Traynor, said: “The alarmingly high level of financial distress levels among professional clubs could be a sign of more casualties to follow Rangers.
“Football clubs, like any other company, are in the midst of deep economic downturn that is affecting their finances, but these figures show just how difficult their position is when contrasted with other sectors of the economy. Attendances at matches are at a low ebb with many cash-strapped fans choosing to follow their teams by watching games on television rather than forking out up to £30 for a seat at a match, and we are in danger of seeing a wave of failures in a sector that is not only a huge employer, but a part of the social fabric of the country.”
He added: “With so many clubs already displaying symptoms of distress, there is the potential for a domino effect in Scottish football if the situation deteriorates further. In England, the football creditors’ rule means that football debts, which include wages and transfer fees to other clubs, provide a safety net for football clubs owed money by a club that goes into administration.
“The rule is being challenged by HMRC in a case in the High Court, but in Scotland there is no such safety net for any of the clubs owed money by Rangers, or other clubs affected by any future football club administrations.”
“Regardless of intervention and support by the sport’s governing bodies, or the financial management of clubs in the past, the real issue to tackle going forward is revenues from attendances, and the key to survival for many clubs will be their ability to attract fans back to their grounds to help balance the books.”
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