September 2008 will be remembered as the month that the credit crunch started to bite. The world’s financial systems have been exposed as being built on house of cards. Bad debts have been thrown from pillar to post, losing value every time they are passed on. Banks, hedge funds and investors have acted irresponsibly to the point of recklessness, and now the party is over. For the last decade, a seemingly endless array of cheap credit has been thrown around, much of it specifically aimed at people that simply couldn’t afford to borrow it in the first place, and now there’s nothing left in the pot. It is one of the natural cycles of capitalism – boom followed by bust. The over-riding feeling in the world of finance, however, had been that this time they’d cracked it – this time, the “bust” element of boom and bust had been swerved and profits were set to continue forever in an upwards spiral. If all of this feels somewhat familiar, then there’s a good reason for that. It’s because English football has been living the exact same dream for the last fifteen years or so, and the harsh reality of the matter is that if the bubble can burst for the investment banks, the building societies and the hedge funds, there is no reason whatsoever why the same can’t happen for a game that has utterly embroiled itself in the world of finance.

We are, in terms of being able to see the practical effects of it all, at the very beginning of whatever economic downturn is to happen. It will take months for the reality of what has happened on Wall Street and in the City of London to filter through to the rest of us. Already, however, some of the signs are already there and, for football, shirt sponsorship is a very visual reminder of how things are going. Manchester United’s shirt sponsors, AIG, had to be bailed out with a loan from the American government to the value of $85bn. Newcastle United are sponsored by Northern Rock, a British bank that had to be nationalised in January of this year after falling victim to the first “run” on a British bank since Victorian times. West Ham United have been wearing blank shirts since their sponsors, XL Holidays, collapsed into administration last month. League Two club Bradford City are sponsored by Bradford & Bingley, whose share price collapsed last month, leaving the government having to bail them out through nationalisation. West Bromwich Albion may have rejoined the Premier League last summer, but have been wearing sponsor-free shirts this season because they have been unable to secure shirt sponsorship. These are, in many respects, merely cosmetic problems for clubs. Shirt sponsorship deals are highly visible, but (at least for Premier League clubs) they are far from the biggest source of income. The examples given above do, however, tell a story that reflects badly upon the global financial situation. However, they only scratch at the surface of possible troubles ahead.

Let’s quickly take the opportunity to review some figures. At the end of the 2006/07 season, Premier League clubs had £2.5bn worth of debt between them, up from £674m in 2005. Manchester United owe £660m. Arsenal owe over £300m. They both have fixed-rate interest payments at the moment, but those will end eventually, and you can be pretty certain that they will increase when the fixed-rate term ends. You may well think that these two clubs are well positioned to cushion this sort of blow, but there is no waiting list for season tickets at Old Trafford any more. Arsenal’s cheapest season ticket is £925, and their support comes from North London and the Home Counties, both areas that are highly likely to be affected by job losses as the financial sector contracts. At the other end of the scale, Portsmouth owe £60m, but are trapped at Fratton Park, with its capacity of 20,000. They are expected to lose a further £25m this year – for how much longer can they continue to sustain this level of loss? Remember also that all of this is centred upon the Premier League – the golden honeypot of English (if not world) football. If the Premier League is exposed in this respect, then what is the prognosis for clubs without the buffer of that £1bn television contract?

The bare fact of the matter is that football is giving every impression of being an industry that has hitched a piggy-back on the very ride that we are seeing implode before our eyes. Liverpool have until January of next year to complete a £350m finance package to pay for their new stadium. It is perfectly plausible to suggest that they would have had difficulty finding this level of funding under any circumstances but, considering the events of the last two weeks, it is all but impossible to see where this finance is going to come from now. The latest rumours from Merseyside seem to indicate that work on the new stadium won’t start for another year at the very least and, while the club are putting a brave face on things (claiming that, at worst, building work will be delayed by twelve months), the ultimate question to ask is whether this scheme is actually worth it. Interest rates based on the current global financial situation would be punitive, to say the least. It’s difficult to see how, in the current environment, the benefits of a new stadium could possibly outweigh the potential risk.

As people tighten their belts and, ultimately, unemployment starts to rise, further effects will be seen at ground level. Crowds have already dropped across the board, and the likelihood is that clubs will start to feel this pinch severely over the next twelve months. Dare they lower prices, in the hope of bringing in more people? Or will they continue to raise prices to ensure that the most loyal cover the cost of the slump? The biggest squeeze is likely to come on wages. If clubs have roster of players on two, three or four year contracts based on current incomes and incomes drop over the next year then, yet again, they have a problem. Even taking into consideration football’s unique employment situation, in which the wage bill is inflated by the fact that (from a commercial sense) the football is both the product and the staff, wage demands that are already bordering unsustainable could be pushed over the edge.

No matter what happens over the next few weeks, months or years, football will survive. There are plenty of clubs that are well run and will not have anything major to worry about. There’s a good chance that there will be casualties, but the harsh truth of the matter is that these will largely be clubs that have been hoist entirely by their own petard – clubs that have had as much money thrown at them as any sport will ever have thrown at it and have chosen to throw it into a bottomless pit. The cash bonanza will probably not end completely, but it is likely that budgets will have to to be slimmed down to something more manageable. It might turn out to be the best thing to happen to English football in a generation.