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Tranmere Rovers & Cheltenham Town Stare Into The Abyss
A curious question, but one that is worth answering. This week has seen reports that the financial damp rot that seems to have infected football is now spreading up the chain. Non-league clubs are the most at prone to financial ruin for the simple reason that not many people are that interested in what happens to them on a day-to-day basis, but higher up the ladder there are signs that clubs are starting to feel the pinch this may be reaching as high now as the Championship, with stories now being reported about the possibility of difficult times at two clubs that should surely be able to hold their own financially: Crystal Palace and Watford.
At Crystal Palace, the players haven’t been paid and this story is being glossed over as some sort of minor issue of cashflow. Palace, however, have had brushes with financial difficulty before. In 2000, Simon Jordan arrived at the club with last minute buyout to rescue the club from having to enter into administration. Since then they have, some would argue, under-performed, only having managed one season in the Premier League in the last decade, and there have been difficulties off the pitch too. It seemed possible until last summer that they could be forced to leave Selhurst Park before a new lease was finally signed and the club have a good start to the season in the Championship, but paying the wages would seem to signify a major problem at the club.
No matter what other bills aren’t paid and no matter what lengths have to be gone to in order for this to happen, the players will always be paid. There is a good reason for this. Unless they sign a deferral agreement, players theoretically become free agents if they are paid just fourteen days late, although more commonly two months would be the accepted time span for players to up sticks and go elsewhere. The fourteen day period would explain why Neil Warnock was so keen to point out that the players will be paid no more than ten days late. Palace have had a decent enough season so far. They are, at the time of writing, in eleventh place in the table but are just two points off a play-off spot. It would be nothing less than a calamity for the club if the squad started to break up for financial reasons.
With the January transfer window just a few weeks away, the temptation might be to offload some players, but this would be not much more than sticking their finger in the dam of their debts and hoping for the best. With other clubs fully aware of their financial predicament, the value of their players would be likely to drop and they would end up disrupting a squad that has half a chance of making the Premier League. Simon Jordan has had Crystal Palace up for sale for some time, but so far there have been no takers. David Sullivan’s name has been linked with them, but is the asking price too high, or is this simply the wrong time to be trying to sell a loss-making football club? Ultimately, it feels as if Crystal Palace have become over-reliant on Simon Jordan, and if his money has run out with no buyer in sight, then they may end up with long term problems as well as the short term ones that they are currently experiencing.
The team that they beat 3-0 last weekend, Watford, find themselves in a similarly intractible situation. Manager Malky McKay was widely expected to face an uphill struggle to keep his side in the Championship this season, but they currently sit in ninth place in the table. Off the pitch, however, the club seems to be sliding into trouble with the amounts of money being mentioned being utterly unsustainable for a club of their current status. They were loaned £1m by chairman Jimmy Russo last Friday, but the club has already announced that unless they get another large injection of cash by the 22nd of December, their holding company, Watford Leisure, may have to consider suspending trading on the Alternative Investment Market unless they can find a further £5.5m.
The club has made noises about seeking “outside investment”, but who is going to invest millions of pounds in Watford Football Club, with the likelihood of making anything like a return being next to zero? It is the figure of £5.5m that is the most troubling aspect of the Watford situation. Is this brinkmanship on the part Russo (and his brother), or is the situation there as desperate as it seems on the surface. Ultimately, suspension of trading in Watford Leisure would be highy likely to force the club into administration, and this would obviously cause the club major difficulties (they own Vicarage Road, for example) both on and off the pitch.
Set against the difficulties at Crystal Palace and Watford, the £70m spent on players agents by Premier League clubs over the last twelve months or so is thrown into pretty sharp focus. This is such an astronomical amount of money to spend on, well, whatever it is that agents do that could conceivably be judged as having any benefit to anyone other than the players concerned or the agents themselves, that it requires a degree of scale to put it into perspective. Kings Lynn Football Club’s HMRC debt (although it is worth pointing out that they have more debts than just this) is £65,000, and it might send them to the wall. At a higher end of the spending scale, Dartford Football Club’s state of the art Princes Park stadium cost £7m to build, and includes an all-weather training pitch, bars and a banquet suite. That’s one-tenth of what Premier League football clubs spent on agents… last year.
It shouldn’t even need to be said that football clubs of the size of Crystal Palace or Watford don’t have to be financially unviable. What we learn from the current predicaments of both clubs is that there is no one size fits all cause for the difficulties of clubs of this size, and there isn’t really a one-size fits all solution for it, either. Having said that, however, living within ones means is a good start – it just so happens that, in the case of these two particular clubs, the specifics relating to their situations a mixture of years of slight neglect and something approaching mismanagement by osmosis. And meanwhile, the Premier League carries on frittering money away on agents. Sometimes it feels as if we living in the last days of Rome.
Ian began writing Twohundredpercent in May 2006. He lives in Brighton. He has also written for, amongst others, Pitch Invasion, FC Business Magazine, The Score, When Saturday Comes, Stand Against Modern Football and The Football Supporter. Ian was the first winner of the Socrates Award For Not Being Dead Yet at the 2010 NOPA awards for football bloggers.
Crystal Palace have had at least two transfer embargoes placed on them this season. Not sure what the first was, but the second was failing to pay an instalment of the Alan Lee transfer fee to Ipswich in September.
The first one was for failing o pay an instalment of the Nick Carle transfer fee to Bristol in august.
Palace have NO assets at all. Everything from player contracts to future ticket sales have been mortgaged to the hilt with a company specialising in “distressed companies” in the British Virgin Isles who charge an interest rate to match their “special” help.
They are doomed but it will be a long and painful process.
Funny how Kings Lynn can go to the wall owing 65K to HMRC whilst Leeds were allowed to continue owing then 7M. They were then allowed to write most of that off and give them 1p in the £1 I think and resume trading under the same name on the same site.
Why are business rules different from football clubs? I thought they were supposed to be businesses now as well. Why couldn’t Woolworths just write all their debts off and start again on the same sites?
Leeds ended up paying something in the region of 28p in the pound.
“Why are business rules different from football clubs?”
They’re not. Administration is a legal process than any business can use and/or be forced into by it’s creditors.
“Why couldn’t Woolworths just write all their debts off and start again on the same sites?”
Because in the case of football clubs (and a lot of non-football based businesses), people were interested in continuing to run the company, and were prepared to come to a deal with the majority of the existing creditors.
In Woolworth’s case, this didn’t happen. So everything was sold off (including the name) to pay the creditors.
Leeds’, sorry Bates’, biggest crime was engineering massive fake foreign creditors to out-vote HMRC when it came to agreeing a CVA.
That has been noticed and copied by other club owners like Vaughan.
Not sure I understand the “last days of Rome” reference. Is somebody confusing the events of the mid-fifth century with the courts of Nero or Caligula?
Hi Ian Palace fan here – we met at the SD conference. On Palace we have an embargo back in place again for the third time (due to non-payment of contractual money to players who have left). On Selhurst Park the positon is not as rosy as set out. Not only is the rent cripplingly high £1.2m pa it hasn’t been paid for at least three quarters – so something over £900k is owed on that. However in general your article is spot on but the inflation is not just agents fees it is everything – one quarter of Ronaldo would see us financially sound; one weeks wages for Ashley Cole would rescue Kings Lynn.
Oh and there isn’t just the chance of players being sold in January – it is a certainty if we get any offers. getting offers is by no means certain because, as you say, other clubs know what is happening and may sit on their hands unless a bidding war starts – it is the best we can hope for.
[…] related to the media’s ominous chatter. The two clubs, whose potential plight is covered in a decent post on general football blog twohundredpercent, have a bit of breathing space after commendable starts […]