Arsenal News » Is English professional football really on the brink of a total collapse?

Is English professional football really on the brink of a total collapse?

That’s the question I want to answer, and I’m going to take a couple of articles to do it.

But before the messianic stuff, I want to start with an enormous thank you.   The thank you lasts five paragraphs, so if you don’t like chit-chat and want to get into the economics bit, just scroll down a bit.

The Gracious Word of Thanks

Two years ago, (in January 2008 to be exact) I started this blog and by the end of that first month found 2000 people had read my ramblings, which made me feel rather chuffed.

By last January, we had 60,000 readers in that one month, and I felt utterly thrilled.

January 2010 reveals that we now have 170,000 readers in just one month.  That is 170,000 individual readers – not the same person coming back time and again (I know you imagine I sit at home just reading my own scribble, endlessly hitting the refresh button) but even I only get counted once.

What’s more anyone who just clicks on the site once and goes away (perhaps having thought that Untold Arsenal contained details of munitions dumps in Iraq) is not counted.  You have to come here twice to be counted at all.

I’ve no idea how many readers other sites get – they tend not to say – but these figures (supplied by OneandOne who host this service) knock me to the ground.  I would like to thank you very much for reading.  I am utterly overwhelmed.

And now, today’s main piece of tittle-tattle.

Traveling to the game on Sunday I listened to David Gill of Manchester IOU talking about the club, its financial position and its future.

He claimed there were no problems, the debt had been wildly talked up by journalists, and that everything was under control.  He couldn’t understand why Man U supporters were making a fuss and threatening demonstrations, when everything was so rosy.  The manager had money to burn, the club was going from strength to strength, and really, supporters should not worry their pretty little heads about matters that don’t concern them.

OK he didn’t actually say the final bit, but he did say everything up to the bit about the manager having any funding he needed to buy more players.

Fortunately I was not driving while listening to this, but when I had time to recover from my hysterics it struck me that this outpouring raised one very important question which is….

Is it possible that somehow Man U, Liverpool and the rest will be able to burrow their way out of their current financial crisis, as clubs have always done before?  Or could it be that this time, we are looking at something different.

I think that we are looking at something different.  And here’s the first part of my reasoning…

100 years ago a significant number of the clubs in the two divisions of the Football League were losing money as a matter of course.   Several, ranging from Woolwich Arsenal (who became Arsenal) to Leeds Ctiy (who became Leeds United) were on the very edge and about to fall over the cliff.   Already a whole series of clubs had gone into administration and come back from the dead.

Indeed Accrington, one of the famed original 12 clubs at the start of the league only lasted five years before going bust.  They were reformed in 1919 as Accrington Stanley, and rejoined the league in 1921.

So everyone was used to clubs falling by the wayside almost from the start of the Football League, and in fact the economics of football in 1910 were pretty much like the economics of football today.

However since John Logie Baird had still totally failed to invent the satellite dish by 1910 – (and he should have done since he was 22 years old by then), the only sources of money for professional clubs were gate receipts, transfer profits and handouts from the clubs’ boards of directors.  It was often not enough, and so clubs would go bust.

100 years on and even with all the extra money, it seems the end result has not changed – and it is not just England that is facing the problem.   According to UEFA’s general secretary Gianni Infantino, half of Europe’s leading clubs are losing money and more than 20 per cent face deficits so huge that there is no obvious way of them ever being paid off.   If you want two examples outside England but fairly close to home try Rangers and Cardiff City, both of whom have financial conditions that appear terminal.

Bungling and bumbling nitwits though they usually are, even UEFA has grasped that finance is not just a problem, it is THE problem.  But still we have to ask, is this a total meltdown?

UEFA says, “Our report has analysed 650 clubs all over Europe and it shows around 50 percent of those clubs are making losses every year – and 20 percent are making huge losses every year.

“It also shows, of these 650 clubs more than one-third are spending 70 per cent or more of their income on salaries only – which is worrying.”

Now we know that from the 2013-14 season clubs must break even or be excluded from the Champions League.   That would cut out Chelsea, Man U, Villa, Man City, Rangers and Liverpool unless they either reform, or do a Tottenham, and have their company owned in the Virgin Islands.  In that case annual accounts are submitted, but no one has any way of checking if they have any relationship with the truth, because there is no right of inspection of accounts lodged there.

To turn to another perspective, if we look at the last ten years we can see that the following clubs have gone into administration while in the league…   (For those clubs that have done it twice I’ve included their earlier demise as well, just for the record.)

I must add at this point that I am greatly indebted to “When Saturday Comes” for providing much of this evidence on their web site and for making it freely available on their web site.  Here’s the list

• Exeter City 1994, 2003 AFC Bournemouth 1997, 2008 Darlington 1997, 2009 Chester City 1998, 2009, on the edge of extinction Portsmouth 1999, 2010??? Crystal Palace 1999, 2010 Swindon Town 2000, 2002 Scarborough 2000 Hull 2001, 2010??? QPR 2001 Chesterfield 2001 Leicester City 2002 Barnsley 2002 Carlisle United 2002 Notts County 2002, 2010??? Bury 2002 Bradford 2002 Port Vale 2002 Lincoln City 2002 York City 2002 Halifax Town 2002, 2008 Derby County 2003 Ipswich Town 2003 Huddersfield Town 2003 Oldham Athletic 2003 MK Dons/Wimbledon 2003 Wrexham 2004 Cambridge Utd2005 Rotherham 2006, 2008 Leeds United 2007 Boston United 2007 Southampton 2008 Luton Town 2008

  Stockport County 2009

In the last decade around a third of the football league (ie the top four divisions) have gone into administration, along with two football based television companies (ITV Digital and Setanta). Both TV stations owed football clubs money.    That is extraordinary, even for football.

John Beech at Coventry University says that since 1986 there have been 68 cases of clubs in English leagues becoming insolvent.

As I say, there were similar conditions 100 years ago – and indeed if you look at the clubs Arsenal played 100 years ago in the league, you will find very few unknown names.  The old teams are still there – they just went into administration when times were hard, in the style of Leeds United, just to get rid of some of those pesky debtors who keep knocking on the door.

But the question is still, is 2010 business as usual for a wholly unstable and unreliable industry, or are we watching the first signs of something an awful lot bigger?

Putting a company into administration is certainly not unique to football. In fact it is an important part of business, because the availability of administration encourages entrepreneurs to take risks, and without that there is no capitalism.  (I am not trying to argue that capitalism is good or bad, rather that, that is the system we have, and so within it you need things like limited companies and administration if you want to get people to be entrepreneurial).

Totally honest and decent companies can find themselves in trouble through no fault of their own.  Indeed it could be argued that without administration the whole economy would have vanished in the wake of the banks’ exploits last year.

So, if the system works as it has for 100 years, what is the reason for thinking it is different today from what people saw in 1910?

What I want to do in my next piece is outline exactly why I think we really are approaching judgment day as far as professional football is concerned.

(c) Tony Attwood 2010

Did you notice, I didn’t mention my book once.

Oh…