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Why a crash could be good for football

by oldcorinthian (U9056734) 07 October 2008
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When a bubble pops it is always a shock and the people that currently say it can’t crash are the most surprised of all .

Everywhere around us at present are examples of financial crisis that were thought impossible, such as bank nationalisations and bank failures and such disasters could visit the Premiership.

Will the bank holding Manchester United’s massive debt suddenly want to restructure them?

Will Arsenal suddenly discover a black hole in its accounts because it can’t sell the flats on the old Highbury site?

Will high profile foreign owners suddenly call in their loans because they have an unforeseen problem?

If a bank can crash so can a football club. If fat cat traders can be sacked then Premiership footballer’s contracts can be cancelled.

The difference is that the government won’t nationalise a football club, it will be left to go to the wall. Clubs that go into administration will get points deducted, which could mean relegation. Clubs that don’t complete their fixtures could be automatically relegated.

I don’t think a football club would ever cease to exist because ultimately the hard core of fans wouldn’t allow it, even if it meant starting over like Wimbledon did.

In my Footbubble book I suggest that the top teams faced with a financial crisis might decide that it is time to break away from England and launch a European Super League.

It is a reasonably logical progression. If all the clubs are owned and funded from overseas and the majority of players are foreign why cant the games be played elsewhere?

This could be good for the remaining clubs playing in a truly competitive league with no “Big Four” who win everything because they have the most money. Even if all the clubs stick with the Premier League and the FA then all the advantages been discussed of the September 2008 financial crash could also be good things for English football. Even the “Big Four” may have to cut their cloth more in keeping with the present climate.

Substitute the excesses of the traders for the spoilt footballers who earn £150,000 per week. Would it be terrible if the market decided to pay players dramatically less? If players are unhappy, and they can find a League in the world still willing to pay them, they can go.

It may mean more overseas players returning home, which would mean Premiership teams turning to their academies, and British born players in the Championship, which could only improve the performance of the national team.

A full-scale recession would mean that ticket prices and merchandise would be reduced making it easier for the real fans to return to watch their teams.

Crowds would flock back to the game because any team could win the League.

If football is less attractive to digital bidders then live football may return to BBC and ITV and become the sport of the people once more.

A result of the crash in football, just like in the banking world, will be an increase in regulation. We might finally get a thorough test for deciding who can buy a football club.

We might even get a worldwide rule governing the amount of debt a football club can have and also a wages to turnover ratio to limit things getting out of hand again.

If one of the current Premiership teams gets into difficulties it will be of its own making. They allowed in the new owner and they agreed the players contracts .I think that should a club go into administration it will be the club that brought it on itself and the advantages above are a price worth paying for one self inflicted casualty.

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comment by TC (U8369606)

posted Apr 20, 2009

'Most debts are manageable'

You are living in a dreamworld pal. Man Utd and Liverpool are sustained by highly securitized debts that have to be regularly serviced. They are living on borrowed time and the end of TV money will see the start of the crash next year.

Football clubs have always been a very poor investment and if you seriously think big business and the banks who hold the debts give a fig about how 'big' a football club is you are seriously deluded. RBS (with Govt backing) would shut Liverpool down next week if necessary and sell Anfield off to property developers. They are tiny enough for them not to care about but their debts are big enough for them want to cut their losses at some point. That point is fast approaching for the 'big' clubs.

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comment by colmkav (U8715425)

posted Apr 20, 2009

The rules need to be changed so that clubs can only spend money they generated themselves.

I am not so much concerned about the debt but the fact that clubs like Chelsea and Man C make a mockery of the game.

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posted Apr 20, 2009

Re the OP - agree with most, except the last paragraph. Ultimately, pretty much all clubs are set up (as far as I'm aware) as limited companies. So if a gajillionaire wants to buy the club, and the existing shareholders are willing to sell, I don't think it's fair to say that the club "allowed" it to happen. In my view it's up to the authorities to filter the prospective owners, and so far they've been completely ineffective at doing so.

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posted Apr 20, 2009

Is this the same MP's who constantly have their noses in the public trough, and their heads up the backsides when looking at their expenses. People in glass houses etc... Notwithstanding that, I do feel something has to be done about the huge amounts of debts being piled upon businesses of all types. Not just football clubs.

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comment by Joe G (U4314969)

posted Apr 20, 2009

Why exactly is it FOREIGN owners who are more likely to run away according to Wheelan.

Is he putting his hand on his heart and saying if his finances encounter problems he'd put the ongoing survival of Wigan ahead of keeping a house in the Carribbean or having a car and driver. Money is as attractive to all, regardless of nationality and if the bubble bursts you're just as likely to see Bill Kenwright or the Levvy's asset strip their clubs to keep their lifestyles afloat as Abramovich or the Glaziers.

Football clubs are more financially able to survive bad financial climates because they're run less like businesses than banks or such like. People bemoan the fact that owners run clubs like business's and lose touch with the sporting element but NO-ONE buys a club for the sole aim of making money. Even the most inept of financial advisor would tell any billionaire eyeing up a Premiership club that there are 1,001 easier ways to make money than with a sporting franchise.

You CAN make huge sums of money with massive profits but the profits are dependant on results on the pitch which can be beyond your financial control and remarkably hard to predict as well as the fact you're far more exposed to criticism and censure from the media and fans than any investment bank chairman (unless you're a certain former RBS 'employee').

Sure people like the Glaziers and Hicks/Gillet bought in to football partially because of the potential to make money but unlike putting your money in Gold or property football offers your glamour, celebrity and a more physical sense of achievement. A major motivator is ego and vanity, the football club is a plaything like a superyacht or mansion in the bahamas. Accordingly these owners are willing to pump in more money and suffer more pronlongued losses or below par returns because there are other rewards. If you invest in shares or Gold you either make a profit or you don't and anything less than profit is a failure.

It's hard to see how even when you hear about the Man United's current finacial fears the Glaziers consider their time at United to date to have been anything other than successful yet if they'd put their money into Lehman Borthers I somehow think they'd be less pleased.

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posted Apr 20, 2009

With regard to the top four buying success, I would exclude Arsenal who bring in unknowns at low cost and make them good footballers. An interesting article recently showed the net sum the top four had spent on players over the past 5 years. Chelsea too high to figure out; Man Utd and Liverpool about 100 million each and Arsenal 3.4 million. Spurs for example have spent much more than Arsenal and are not in the top four.
The Champions league is of significant importance and I think that's why you saw weakened teams playing for Man U. and Arsenal in the FA cup.
I agree that something must be done on the massive overspend but then when Mervyn King of the B of E. said he didn't care about savers, i.e. the prudent and wise, then what hope of the FA doing anything about their top favourites which keep them in a privileged position at FA HQ. , even if they owe near a billion. Man U, Liverpool and Chelsea need to be very careful. Arsenal are much healthier on the debt side and have a well structured low interest repayment package. That club have not a major worry or are they reliant on the Highbury sales as that debt in under another company than the football club.
Liverpool should forget about their new stadium for a while as having defaulted on the payment of 350 million, it would be near impossible to borrow adn wouldn't make financial sense.
Still life goes on and thankfully all this is not my problem!!!

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comment by VOR1 (U8355578)

posted Apr 20, 2009

Everything you need to know about the all parliamentary football group you can read here:

http://www.dailymail.co.uk/sport/article-1171920/MARTIN-SAMUEL-English-clubs-envy-Europe-listen-MPs.html

It's worth reading

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comment by Joe G (U4314969)

posted Apr 21, 2009

A Daily Mail article and the words 'worth reading' in the same sentence? Naaaah

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posted Apr 21, 2009

Joe_Green

A Daily Mail article and the words 'worth reading' in the same sentence? Naaaah
--------------------------------------------------------
Ordinarily I'd agree, however (and I've not read the article) Martin Samuel does write some very good articles.

However, and it is a big however, a bit of Samuels' credibility in my eyes has been taken away by his move from The Times to the Daily Mail.

Firstly, despite it's Murdoch associations, The Times is a much more respected paper both nationally and internationally. Secondly, Samuel is now much less able to comment on the loyalty and motives of players when they move given the detail of his move to The Mail.

http://www.guardian.co.uk/media/2008/sep/17/dailymail.thetimes

As for the financing of football clubs, where shall I start my essay..... The long and the short of it is that football is on the one hand to be treated like a normal business, but, given the nature of 'success' is anything but a normal business. Most people really don't think through and don;t know how to think through the actual issues and the constant references to 'debt' as if debt is the only figure on a businesses balance sheet is disingenuous to say the least!

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comment by VOR1 (U8355578)

posted Apr 22, 2009

comment by Joe_Green (U4314969)

posted Yesterday

A Daily Mail article and the words 'worth reading' in the same sentence? Naaaah

---------------------------

How about reading it first & then critiquing the content second?

<doh>

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