It Doesn’t Grow On Trees
The week before a round of international matches is usually a slow one for the press, but this week both UEFA and the FA have given them serious food for thought. Lord Triesman, the chairman of the Football Association, has been unusually outspoken in his criticism of Premier League clubs’ current levels of indebtedness. The latest figure doing the rounds on the current accumulated debt of Premier League football clubs has been nudged up from the estimated £2.5bn that we quoted on here last week to £3bn, and now UEFA are starting to make threatening noises over the continued involvement of clubs that seem to have an extraordinarily cavalier attitude to paying back their debts.
It is worth getting a little bit of perspective on the size of the amounts of money being thrown about. When, in the wider market place, we are talking about tens of billions of pounds being thrown about to save high street banks, it is worth remembering that all football clubs are much small institutions, in business terms, than they would often like us to think they are or the amount media attention given to them would suggest they are. The current domestic television deal signed by the Premier League was agreed at £1.7bn. Add the £650m agreed for the sale of overseas television rights, and you arrive at a figure of £2.3bn. To put it another way, Premier League football clubs currently owe one-third more than all of the television money than they will receive for the next three years.
The clubs, astonishingly, seem to think that there is no great problem with this. Consider this article from this morning’s Daily Telegraph. Chelsea seem to have raced past Manchester United (who can, after all, depend on a steady stream of revenue from a global fan base) as being the club with the biggest debts, but the comments of their chairman, Bruce Buck, would seem to indicate that Chelsea don’t seem to think that there is any problem whatsoever with owing £730m. Comments such as, “I think it’s even softer than soft debt. Its equivalent to equity for all practical purposes” are little more than management speak gone mad, and his belief that Chelsea’s aim “is to break, or as close to, break-even as we possibly can in order that we don’t have to look to Mr Abramovich to fund us continually” would seem to indicate not only that Chelsea are currently still failing to break even financially, but also that there seems to be no prospect of them doing this in the near future.
Football wishes to be seen as a business, but the harsh reality of matters is that it isn’t very good at being a business. Chelsea have every single financial advantage that a football club could possibly have. On top of the constant stream of money that comes into Stamford Bridge from the Premier League, they also enjoy the yoke from the golden egg that is seemingly perpetual involvement in the latter stages of the Champions League. It is unfair, in some respects, to single Chelsea out for such criticism, when they are all doing it. In this article from the Daily Telegraph, it is stated that “by highlighting the £3 billion figure without pointing out that the League’s revenue is more than £2?billion, they believe Triesman has created a false impression of crisis”, as if owing fifty per cent more than your annual revenue is a healthy state of affairs. No-one seems to be terribly interested in answering the question of what steps are going to be taken to arrest the increase in debt, let alone starting to reduce it.
Regardless of anything else, there is a serious moral question to be asked over whether it is justifiable that this level of debt should have been allowed to build up. Quite asides from this, however, the matter is now becoming a concern at an altogether more practical level. Triesman’s comments have reportedly sparked concerns from the banks over the sustainability of clubs’ business plans. Setting aside for a moment any raised eyebrows over whether clubs actually have any “business plans”, if the banks start to get jittery in the current volatile environment, then football clubs could well end up having the rug pulled from under their feet. Football has never been a “good” investment that is likely to yield much of a return, but banks are hardly likely to tolerate continually growing losses at the moment.
UEFA have stepped into this argument, stating that clubs that continue to act irresponsibly could be barred from European competitions, but it is difficult to envisage them ever seeing this through to fruition. Such talk from them may start talk of break-away leagues but, considering the infrastructural requirements of doing this, it still seems unlikely that the biggest clubs would be in a position to cast themselves away from the rest. It is, however, encouraging to see that all of the people that could conceivably bring power to bear over this issue – the FA, UEFA, the banks and (in the shape of the Culture Secretary, Andy Burnham) – are now issuing clear warnings that this cannot be allowed to continue. It may be a slow week on the pitch, but the public debate that this should spark can only be good for the long term health of English football.