Deloitte 2011 Report on Football Now Released

MIRROR
Report: English clubs are £3.5bn in debt
Published 23:01 08/06/11 By Martin Lipton

English football is in debt to the staggering tune of 3.5 BILLION pounds.

But despite dire warning of a financial crisis set to flood the game in the wake of the recession, clubs are still gambling on getting it right in the market and hoping not to suffer the consequences of getting it wrong.

The annual review of the game’s finances, by Deloitte, found that clubs in all four divisions are continuing to rack up huge losses.

Only four of the top flight clubs made money in the 2009-10 season, running up collective losses of £2.6bn. In the Championship, only Reading, Swansea and West Brom did not go into the red in that campaign.

Top flight wages continue to rise, up another £64million to a record £1.389bn 12 months ago, with an all-time high of 68 per cent of income going straight out of the door and into player’s bank accounts.

Deloitte’s figures did not take into account Chelsea’s £71m January spending spree on David Luiz and Fernando Torres, or the extra £3m in wages Manchester United agreed to pay to keep Wayne Rooney at Old Trafford.

And while the Premier League has secured its place as the biggest money-raiser in world football - earning £700m more per year than its nearest rival, Germany’s Bundesliga - the debts are stacking up.

The report's editor, Dan Jones, said: “What stands out is the resistance of English football to the recession. The 2009-10 season was in the teeth of the recession but the clubs still managed to grow their revenues and that’s great.

“But we have to think of the effects of UEFA and Financial Fair Play and whether that is going to bring about the sort of cost controls that have been talked about.

“The clubs have time to prepare themselves. They know the rules and also English clubs are in the best possible position because they get more revenue than clubs in other leagues. If you have to try to break even, it’s better to have to do it when you have more revenue.

“You have to mismanage on an epic scale to go into administration in the Premier League. Portsmouth did it but that was under special, dismal management.

“But if you are running on thin margins in the Premier League and then get relegated and can’t get control back then that is a problem.

"If you haven’t got plans to control the situation if you get relegated, or you run too hot in a bid to get promoted and don’t manage it, that’s when it can be a serious issue.”

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Why chasing the dream of football glory is still turning sane businessmen into dreaming Del Boys and gamblers
By Martin Lipton in
Published 23:00 08/06/11
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We have heard the warning for years, a call for realism amid the summer spending frenzies.

As the Premier League clubs keep on splashing the cash, they have actively dismissed the idea that, one day, the bubble will burst.

For some it will not. But for others it most definitely will.

Report: English clubs are a staggering £3.5billion in debt

Yes, the Premier League is stronger than ever. That is unlikely to change any time soon. Yet for all the talk of a new financial reality, too many clubs still insist on chasing the dream.

It is easy to understand why.

When Swansea (above) won promotion last week they transformed their finances, unleashing an income stream that will guarantee £90million going into the coffers over the next five years, even if nobody walks through the turnstiles.

It is a prize so tantalising it continues to turn sane ­businessmen into gamblers.

And while no club has gone to the wall mid-season since Maidstone in 1992, near-misses at Portsmouth, Leeds, Southampton and Plymouth – among others – in recent years appear to have had no impact at all.

It seems that, like Del Boy in Only Fools And Horses, too many chairman look at what might be and insist: “This time next year, Rodney, we’ll be billionaires.”

That has led to Premier League clubs spending £2.6bn more than their income in 2009-10.

Wages keep rising as they try to keep star assets, while the fact Liverpool and Manchester United were yesterday prepared to value two young English players, with just one senior cap between them, at £31m merely ­underlined the situation.

And all because no one believes it could ever happen to them.

The likes of United, ­Liverpool, Manchester City, Chelsea, Arsenal and, to a lesser extent, Spurs are safe from the downside of such expenditure levels.

But Dan Jones, editor of Deloitte’s latest Annual Review of Football Finance points out the dangers when the majority of mid-ranking clubs in the top flight “are caught in a cycle of excessive wage cost inflation as they compete against each other”.

Jones said: “Blackpool and Burnley both entertained, and came remarkably close to surviving in the Premier League, while setting their clubs up financially for years to come.

“Then you have the likes of Wolves and West Brom following a strategy of prudent investment - who don’t go crazy in case they go down, following realistic strategies rather than ‘living the dream’.

“The biggest cause of concern is what I’d call the clubs in the squeezed middle of the Premier League.

“The clubs are ­resilient and adaptable ­businesses. But any business, if it is run badly enough, will have financial problems.

“People want to compete and so they will push it as hard as they can. Sometimes hearts rule heads and you can end up in ­financial ­difficulties.”

Jones speaks of the “resilience” of the Premier League despite the world financial meltdown, and the strengthening of the competition as the unchallenged global football product.

He cites Tottenham, who made operating profits of £105m over four years in which they have increased transfer spending and had a £30m boost from the Champions League, as an example of what to do.

“We’ve always been impressed with Spurs and the way they run their ­business,” he added. “They have always been in the top 20 world clubs in our money league, and that was despite not being in the Champions League, as they were this season.

“You have to spend to achieve success and that’s what makes it difficult.

“Tottenham’s track record speaks for itself on the ­business side. But we know Daniel Levy does not believe in putting the club in ­financial peril.”


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