The Finance And The Fury: A Lesson From Australia

By on Mar 3, 2011 in Finance, Latest | 2 comments

With non-league finances in a troubled state, is it time the FA looked at how things are run Down Under?

Earlier this week BBC Five Live ran a programme about non-league finances. Ok I know some of us have been banging on about the topic for ages but still, the figures from Dr John Beech’s study of two decades of data are pretty startling. But what is even more startling than Dr Beech’s statistic that 68 non-league clubs have suffered some sort of ‘insolvency event’ in the past 20 years is the reaction from the FA. David Newton, the Head of Integrity thinks it’s an over-reaction.

“It’s not necessarily demonstrative of a major issue,” he told the BBC.

Wow.

Let’s consider for a moment the Blue Square North last season. This competitive league, the second step of non-league had no relegations last season, no club relegated into the league or out of the league due to various clubs either folding (Farsley Celtic), being kicked out for financial reasons (Northwich) or dropping out of the league above (Grays, Chester, Salisbury.) How can a league function in a competitive manner when you have that many teams facing uncertain futures? For a team in the bottom half of the table why bother trying if you aren’t going to get relegated? It’s not even a matter of waiting for the AGM cup anymore.

Not a week goes by at the moment without news of one club or another having a wobble, in recent weeks we’ve had Windsor & Eton, Kidderminster, Redditch, Mansfield, Wrexham, Weymouth to name but a few. Whether it is problems with debt, tax, ground ownership, club ownership, whatever, these clubs have been allowed to let their problems spiral and grow out of control. There is a growing sense of anger and frustration from the loyal fans, the ones who have been putting money through the turnstiles week-in-week out to see it seemingly washed down the drain.

So what is the answer? Well, down on the other side of the world, where the A-League is just six years old, they are putting some measures in place to make sure that they don’t have to face financial meltdowns in the future. Earlier this week the North Queensland Fury became the second team to be axed from the A-League (the first being the New Zealand Knights whose place the Fury took when they joined the league in 2009.)  The Football Federation of Australian said it could not afford to prop up the club financially, especially in the wake of a failed World Cup bid, a drop in attendances and a lack of funding (sounds familiar?).

The sport’s governing body said it was too much of a financial risk to let the Fury play so they have axed the entire club – it’s a fairly big move and not one they have taken lightly, but faced with an alternative scenario where they are forced to bail out a club with a substantial cash injection the FFA have acted. Now the A-League has a very different, and fairly complicated, set up – for one thing it’s a stand-alone league – no promotions or relegations to worry about and it is a very new league but it is already facing the all-too-familiar ‘clubs in crisis’ situation.

Yes, the move is extreme and axing a club in the build-up to the finale of the season, the Grand Final, could have been timed and handled a lot better by the FFA (there has been a predictably big backlash about the way the whole thing was announced) but it sends out a strong message that the A-League is being founded with an element of financial sensibility. The now fairly unpopular FFA boss Ben Buckley put the projected loss for the Fury for next year at almost £1million. He said:

“Whilst the Club and the advisory board had attracted some very encouraging sponsorship commitments, the projected loss to run the Club next season is still in our assessment in excess of $2million.

FA had been looking for capital from the campaign to set the foundations for a move to local ownership and a long term future for the Club.

However with the capital-raising falling well short of the target, FFA has had to make the hard decision that it cannot continue to own and finance the Club in these circumstances.

Looking back at the short, turbulent history of the club there is an alarming similarity with some of the problems facing English (and Welsh) non-league clubs at the moment. When they were founded the original group running the Fury forecasted crowds of 8,000, they got around 1,500 less than that – this was the first spark of the financial problem which would hound the club and ultimately lead to the FFA wrestling the franchise for the club back into their own hands and imposing a series of sanctions on players and salaries – leading to most of their players, including one Robbie Fowler, leaving at the end of the 2009/10 season. Australian papers estimated the first season loss at between A$4million and A$5million – so up to around £3million, in a single season.

Just last week, Blue Square North side Workington said they would be forced to dip into their ‘new stand fund’ to boost the coffers by around £30,000 because crowds are down significantly this season – their break-even crowd is 600, they’ve been getting an average of 200 less than that. When I was up at Stafford Rangers earlier this season, one of their fans told me they were around 100, if not more,  shy of their break-even figure each game, Gloucester City’s is 400, the crowd dipped under 200 at one point last month and the playing budget has now been cut. Now, I’m not suggesting the FA takes to axing clubs willy nilly or that the FFA model is faultless but there is an argument for the FA to start to take the finances and the related risks to the integrity of the English game into consideration a bit more.

Points deductions after administration are all very well but it’s not much punishment when you are already going tits up and being relegated. The Conference docking points from Histon’s five point deduction earlier this season is a step in the right direction – they admitted ‘providing misleading financial information.’ The Financial Reporting Initiative is beginning to shed a glimmer of light on some of the monetary goings on, although much of the business goings-on at certain clubs remain in the dark. The leagues can only do so much – the sport’s governing body could and should be taking a harder look at things.

The FFA judged the Fury to be a ‘financial risk’ – the same could easily be said of a number of non-league sides. Ben Buckley said that part of the reason behind the axing of the Fury was to ensure the integrity of the A-League competition itself.

“We need to concentrate our resources on the growth, promotion and stability of the entire Hyundai A-League competition and this level of investment would prevent us from undertaking programs to achieve the above,” he said.

So back in Blighty what about the integrity of our non-league structure? David Newton might not think there is a major issue when it comes to financial problems but clearly a situation where which league a club plays in is decided by the financial position of another club suggests a degree of instability? For example, Forest Green Rovers finished last season thinking they were back in the Blue Square South but there was a hint that they might get a reprieve, so manager David Hockaday had to plan for two squads – FGR got a reprieve after Salisbury were dumped down two leagues to the Southern Premier League and Hockaday had to cobble together a team using his two lists, not an ideal way to spend pre-season when your budgets are allocated according to league and you don’t know which one you are in. Hockaday has said he probably lost players who would have stayed had their league position been made clearer earlier on.

What does it say about the state of non-league when a club lying in the bottom half of the table can breathe easily because three clubs have gone bust so they won’t go down? Or a promotion chasing team suddenly losing 6 hard won points because another team’s results have been expunged? There is already a ‘fit and proper person’ test and a degree of financial scrutiny but clubs which are clearly a financial risk are still being allowed to blunder into a season only to go pop when the taxman/ owner/ chairman/ council pulls the plug. It is time the FA took a long hard look at how they can manage the risk of the boom-and-bust clubs and maintain the integrity of the game before that figure of 68 ‘insolvency events’ spirals still higher.

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    2 Comments

  1. Part of the problem IMO is that the FA simply don’t have the level of control over the clubs that FFA have. Because the A League is run on the basis of licences being granted by FFA, they remain able to withdraw that licence. In the case of North Queensland, what they effectively have said is that their business plan for the franchise didn’t add up, and as the organisation that grants that franchise they have the right to demand such detail. The line about “a move to local ownership” implies that this was a case of trying to plant a team in a promising location – not an uncommon thing in sports that want to expand their market, Rugby League seems to do something similar over here with the likes of Gateshead Thunder, Harlequins, Crusaders and Catalan Dragons over the years – the idea being that they will benefit longer term by making their product available more widely. While there may be more chance of success where there is some history of interest in the sport, access to a large population centre might be considered the key factor.

    The FA meanwhile have to deal with clubs, sometimes (often) long established, that are limited companies in their own right, and a league system that (subject to ground gradings) is based on meritocracy.

    It may not be impossible and arguably it is desirable to enforce tighter restrictions on the financial affairs of clubs, but will the FA be prepared to do so? What would the fallout be? There seems to be little desire from the FA, who are letting the leagues themselves make the decisions on that front.

    I don’t think the FA have the stomach for it, and I think it would be a complete minefield to try and implement anything beyond the sort of regulations that the Conference have enacted. They are already proving not to be fully effective in keeping clubs out of trouble, but short of insisting clubs post a bond equivalent to the year’s projected costs prior to the start of the season, what else is possible?

    Albert Ross

    March 3, 2011

  2. Good article with one minor error, NQ Fury didn’t take the NZ Knights place in the A-League, the Wellington Pheonix did. The Fury were one of two expansion teams who joined the league in 2009, the other being Gold Coast United.

    There is an interesting comparison between these new teams as Gold Coast’s crowds have been even worse than the Fury’s, they average only 3,000 fans in a 27,000 seater stadium! Yet Gold Coast have survived as they are underwritten by a billionaire mining magnate with deep pockets.

    Just like the EPL it seems that rich sugar daddies are what you need for success.

    Micky F

    March 5, 2011

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