Town And Out

By on May 9, 2008 in Finance | 2 comments

Sunrise, sunset. The Independent this morning reported on the successful start made by AFC Liverpool, at least off the pitch – commercial activities including a sponsorship deal have, it was reported, earned them between £50,000-£100,000, while the appointment of Derek Goulding (who took Burscough to an FA Cup First Round in November 2005) as manager seems to be an indicator that they intend to be taken seriously when they kick off in the North West Counties League next season. Meanwhile, other supporter run clubs, FC United of Manchester and AFC Wimbledon both got promoted at the end of this season. Victory at Wembley for Exeter City in the BSP play-off final against Burton Albion could make it a hat-trick.

At the other end of the spectrum, it looks like the end of the road for former Football League club Halifax Town. Halifax, with debts of £2m, seem to be heading for liquidation. Docked ten points earlier in the season, they escaped relegation from the Conference on the last day of the season, but the extent of their financial woes has been unravelling in front of the public over the last week or so. The club’s final hope for survival was a CVA put to creditors to repay two and a half pence in the pound against their debts, but this appears to have been quashed by Her Majesty’s Revenues and Customs. It had been believed that the club owed £500,000 to HMRC, and that this left them scope to negotiate a deal, but it has become apparent today that the actual debt is £814,000. After five hours of talks this afternoon, the club’s administrator, Rob Sadler, was gloomy about the prognosis. “Halifax Town will probably perish”, he said today. With creditors holding out for 10p in the pound, and the Conference meeting on June 9th, agreement has to be reached by then, or the club will be expelled from the league. In their current state, it is unlikely that they will find a home in any league for next season.

Whilst I have every sympathy for the supporters of Halifax Town FC, the question begs to be asked – why should creditors accept two and a half per cent of what they’re owed in order to keep what appears to be a failing football club alive? Take builder Roy Barnett, for example. He is owed £200,000 by Halifax Town for building work carried out at The Shay. Why (apart from the obvious answer of “because if they go into liquidation, he’ll get nothing”) should he accept £5,000? It’s an insultingly small amount of money, considering what he owes. Too often, football gets wound up in its own little world and fails to take into account the lives that it affects. Yet again, the tax man is amongst the biggest creditors and, while it’s easy to demonise him (Ken Bates did it enough at Leeds last summer), ultimately, that money is ours. Yours and mine. It’s difficult to have much sympathy for a company that is so incompetently managed that it can’t even afford to pay its tax bill.

The simple answer, so far as I can see, is that football, as ever, has its priorities in the wrong order. I would have little doubt that, throughout this period that Halifax Town were not paying their tax bill or paying the man that was helping to build their stadium (and plenty more besides, I’ll bet), they spent plenty of money on players’ wages. Also, whilst there is a sound logic behind the FA’s insistence that football creditors have to be paid in full, this rule has stiffened the resolve of HMRC, who now vote against any CVA that doesn’t pay them in full (even though government legislation doesn’t allow them “preferred creditor” status any more). The success of FC United, AFC Wimbledon and Exeter City is proof of another way that works, but the reality is that the majority of football supporters probably don’t want to be involved in that way. As such, the majority of football supporters are, therefore, are hostages to fortune.

Over the last few years, the Conference has continued to haemorrhage money from several of its clubs – Canvey Island, Scarborough and Boston United have fell down (whether voluntarily or not), while Crawley Town, Rushden & Diamonds, Cambridge United and Weymouth have all teetered on the abyss. The mathematics are fairly simple – clubs in the Championship earn a fraction of the money that clubs in the Premier League do. Clubs in League One & Two earn a fraction of the money that clubs in the Championship do. clubs in the Conference earn a fraction that those in the Football League do. Players’ wages do not, however, work in the same way. A decent Conference player costs not much less than a decent League Two player. Some clubs over-extend on the pitch. Some over-extend on ground development. The results, however, are always the same. The supporters owned clubs aren’t a universal remedy to the game’s financial woes (and don’t even get me started on how, in an era of such wealth at the top of the game, so many clubs still contrive to end up practically insolvent), but they are leading more people to see past the game’s false tragedies of relegation and losing cup finals, and focus on a change of priorities – one in which the definition of success is having a team to go and watch in the first place.

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  1. Clubs overextending themselves occurs at all levels of the game, from the Premiership right down through the pyramid of the national game. You are right that supporter owned clubs of themselves are not an immediate fix to the problem – clubs will always want to spend as much as possible striving for success. However, the supporters of these reformed clubs are certainly much more aware of the financial ins and outs of the clubs they support – and are acutely aware of what happens when following the “spend more than we have coming in but don’t worry we’ll get a sugar daddy coming along in a couple of years to bail us out” model of football club management. Fans have a duty to ask questions of those who run their clubs – be they American billionaires or elected fans. Being an ostrich is no longer an option for football fans – start asking questions before it is too late!

    The game as a whole – led by the FA – needs to look at ways of helping clubs manage their finances, as they are patently unable to do so by themselves. Deducting points for entering insolvency proceedings is very much a case of closing the stable door after the horse has bolted. The root cause of clubs overspending needs to be looked at, with a sensible discussion between the FA, leagues & clubs regarding what controls/processes should be introduced to prevent clubs from running up such large debts. Whether this results in salary caps based on turnover, or rules that prevent clubs starting a season unless their tax bill is paid – who knows. But someone, somewhere should take the lead and start the ball rolling.

    Simon Cope
    Chair, Scarborough Athletic FC

    Simon

    May 10, 2008

  2. So – three clubs that have significantly more money than their respective opponents are winning their leagues, and that’s a Good Thing. Huh? Just because the initial money came from thousands instead of tens?

    Meanwhile the mess that is Ebbsfleet United is in the FA Trophy final…and gosh darn it – won it. MyFootballClub is still not running smoothly, their internet message board is as childish and random as any other unmoderated internet message board, the finances still aren’t public, and some of the most passionate initial signups have left in understandable disappointment.
    But thousands of members from as far as Sydney AUS went to Wembley today, almost 20,000 from Kent joined them, and nobody died. (I’m still here in the USA in part because I saw two games at Stonebridge Road last month and the dollar/pound exchange rate hurts.) With any luck, some of the Kent folks who hadn’t been at the ground in years/decades might consider coming back.

    When it all ends, MyFC won’t be what was advertised last year, but since I still haven’t seen any efforts from Supporters Direct-run clubs to attract foreigners who would have to learn to be real supporters, and since the Stonebridge Road folks were genial hosts in spite of my being a yahoo (as in Gulliver’s Travels, not Silicon Valley) in Kent football terms, I’ve gotten plenty for my 35 pounds.

    And those of you worrying about club finances, American minor league baseball franchises are doing well. (Minor league American football and basketball is still dominated by the university system.) The snarkier might suggest that they survive entirely on players on loan…but it’s something you might consider asking about.

    alexgloc

    May 11, 2008

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