Middlesbrough’s Close Encounter With Bankruptcy Revisited

By on Sep 6, 2011 in English League Football, History, Latest | 1 comment

The Insolvency Act of 1986 was enacted on the twenty-fifth of July of that year, and its ramifications would come to change the face of English football, through the introduction of Company Voluntary Arrangements. Prior to the introduction of this law – which was introduced by the government in a bid to entice more entrepreneurial activity in companies with the aim of allowing insolvent companies to trade their way out of insolvency – an insolvent company’s only routes out from serious financial difficulties were liquidation or a winding-up order, and the last club to fall foul of this state of affairs was Middlesbrough, whose financial travails overshadowed the start of the 1986/87 season. It was a series events which threatened the existence of the club, and it ended, at Ayresome Park, with home match in Division Three against Bury, twenty-five years ago today.

The club’s difficulties can be traced to two matters – one quite specific, and one more general. On the one hand, relegation from the First Division at the end of the 1981/82 season hit the club hard. On the other, the more general malaise that English football suffered during the early 1980s had an effect on attendances and, without the sort of sponsorship and television deals that sustain clubs these days, therefore revenues. The appointment of Malcolm Allison as manager in 1982 hardly helped matters. Allison was barely able to steady the ship on the pitch, and his comment that it was “better for the club to die than to linger slowly on its deathbed” was a precursor to his dismissal from the job in March of 1984. With a fire-sale of the club’s best players already complete and crowds continuing to fall, though, Middlesbrough was making massive losses by the levels of the time and at the of the 1985/86 season the club was relegated into the Third Division of the Football League.

On the twenty-first of May 1986 the club appointed a provisional liquidator - a licensed insolvency practitioner appointed to safeguard a company’s assets after presentation of a winding-up petition but before a winding-up order is made. The club’s debt by this time was £2m, including £115,000 owed to the Inland Revenue, who issued a winding up petition against it in the middle of the summer. The petition was granted, and manager Bruce Rioch, along with twenty-nine other non-playing staff, were sacked. In the midst of all of this came an image that came to act as a symbol for the disastrous state of English football during the mid-1980s: the club was evicted from its Ayresome Park ground and the gates were locked.

This was a state of affairs that would not be tolerated today, but the club managed to limp through to the start of the following season. Steve Gibson had been on the board of directors of the club for two years already, but wasn’t in a position at that time to be able to do this alone, so a consortium including ICI, the local council and The Scottish & Newcastle Brewery came together to keep the club alive. At that time, Football League clubs could use liquidation in much the same way that they now use CVAs to rid themselves of their debts and keep going, but after high profile close shaves – on the second of July 1986 the official receiver was called in at Wolverhampton Wanderers, though they were saved at the last minute, whilst Bristol City had liquidated and reformed in 1982 – the Football League were tightening their rules.

It went to the wire. The council, having initially promised £200,000 towards saving the club, was unable to meet its promise and then, three days before the 1986/87 season was due to start, the Football League adjudged that had to have £350,000 in working capital and show it could pay all creditors in full in order to start compete in Division Three. The day before the start of the season, ICI agreed to a bond which meant that they would underwrite the majority of any subsequent debts incurred by the club, whilst Gibson met racehorse owner Henry Moszkowicz at an airport to collect a suitcase containing £300,000. With the money in place – just about – and ten minutes before the deadline was due to expire (and local television company Tyne Tees Television having already reported the club as dead), Middlesbrough Football & Athletic Company (1986) Ltd was given permission to start the new season.

Even with the money in place, though, Ayresome Park was not ready for the start of the new season and the consortium which had taken ownership of the club must have had cause to worry when, the following day, just 3,690 people made the short journey to Hartlepool United’s Victoria Park, Middlesbrough’s temporary home for their first league match of the season against Port Vale, a match which ended in a 2-2 draw. Ironically, Middlesbrough’s next match that season was also at Victoria Park, but this time they were the away team for a 1-1 draw against Hartlepool United for a 1-1 draw. After a draw at Wigan Athletic in the league, they returned to Ayresome Park for their fourth match of the season to a more encouraging crowd of 6,499, which saw a 3-1 win against Bury, a match which took place twenty-five years ago this evening.

Crowds increased steadily as the season progressed, and this was hardly surprising considering that, under Rioch (who had stayed on at the club after his sacking), the team was pushing up the Division Three table towards promotion. His team won eight of its last nine matches that season, securing promotion with ease and with a season-high crowd of 18,523 saw their penultimate match of the season against Wigan Athletic, and the club was promoted again at the end of the following season, bringing top flight football back to Middlesbrough for the first time since 1982. Gibson, who was just twenty-seven years of age at the time of the club’s lowest ebb, bought The Scottish & Newcastle Brewery’s shareholding in the club in 1993, and became its chairman a year later. In 1995, Boro left Ayresome Park for The Riverside Stadium.

Perhaps Middlesbrough was a turning point, of sorts. It took football clubs a long time to catch up with the fundamental change to insolvency law that came with the Insolvency Act of 1986, and a further change would come in 2002, which made it possible for a director and, crucially, the holder of a floating charge over the company’s whole property to apply for appointment of an administrator out of court, whereas they had to go to court to do so prior to this. For Middlesbrough Football Club, the nightmare summer of 1986 is now a fading memory, but it is at least one that seems unlikely to be repeated in the future, thanks in no small part to Steve Gibson’s stewardship of their club. As most football supporters will already be aware, though, insolvency law is still a major part of football in England, and this doesn’t look like changing any time soon.

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    1 Comment

  1. Good piece – nothing new for Boro fans there, particularly, and it’s worth pointing out that the new club had to undertake to pay off the debts of the old and had to have every transfer in approved by a Football League panel to ensure that we weren’t living beyond our means. The feeling in the area is still that the FL wanted to make an example of us.

    sw2boro

    September 12, 2011

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