As Bad As Things Got: Leicester City, 21st October 2002
Their title defence, of course, began catastrophically and ended with the team not far from the relegation places and title-winning manager Claudio Ranieri losing his job. Since then, though, Leicester have consolidated themselves as a top half Premier League club. They finished in fifth place last season, and it says much for the stability that Brendan Rodgers has brought to the club that few are particularly shocked by them being in third place in the table and in the quarter-finals of the FA Cup, this time around. It’s the most successful period in the history of the club, and it isn’t showing any signs of slowing, yet.
If you’d told somebody all of this at the start of this century, though, they might not have been that surprised. Leicester’s 1990s had been… variable. They only narrowly avoided relegation to the third tier at the end of the 1991/92 season, but were promoted into the Premier League via the play-offs two years later and settled after promotion again in 1996.
Even prior to 2016, Leicester City had a peculiarly unique place in the English football landscape. They hold, jointly, the record for having been the champions of the second tier – currently the Championship – the most times, on seven, with Manchester City. They also hold the record for having lost the most FA Cup finals without having won it, with four, the last of which came in 1969, when they lost to Manchester City.
But Leicester City started the new millenium with reason to be optimistic. Under Martin O’Neill, by the end of the 1999/2000 season, they’d finished the previous four seasons in the top half of the Premier League and had played in three of the previous four League Cup finals, winning twice. O’Neill left Filbert Street in June 2000 for Celtic, and was replaced by Peter Taylor.
The club had been looking to leave Filbert Street for several years. Converting to being all-seater earlier in the 1990s had reduced the capacity of Filbert Street to 21,500, but this wasn’t too much of a problem for the club as it bounced between the Premier League and the First Division in the mid-1990s. When the club came to settle in the Premier League, however, crowds grew and that capacity started to look a little meagre, while by modern standards it also looked somewhat antiquated.
In early 1998, plans were announced for a 40,000 all-seater stadium to be built at Bede Island South, but these were abandoned two years later. Revised plans for a 32,000 capacity stadium were unveiled in November 2000, with optimism around the club still high. Peter Taylor had started brightly, and Leicester even led the Premier League in the autumn of 2000, not long before the new stadium announcement. The stadium would end up costing £37m, an affordable amount, on the Premier League revenues of the time.
Leicester City were relegated from the Premier League at the end of the 2001/02 season.
The team’s decline can be traced back to the time of the announcement of the new stadium. Leicester were still in contention for a European place until into the spring, but a run of nine defeats from their last ten matches of the season saw them fall to 13th place in the table, while they were knocked out of the FA Cup at home in the quarter-finals by Wycombe Wanderers.
The dismal form continued over into the next season. Leicester lost their first two matches of the 2001/02 season, 4-0 to Bolton Wanderers and 5-0 to Arsenal. When, after a brief revival, form plummeted again, Taylor was fired, but things didn’t improve under his successor, Dave Bassett. Leiecster City were relegated from the Premier League with room to spare, finishing twelve points adrift of safety, with just five league wins all season.
More than 31,000 people saw Leicester City’s first match at the Walkers Stadium in August 2002. Micky Adams had been appointed manager of the club just as relegation was being certified at the end of the previous season, and he’d already proved himself with a short unbeaten run, and this form continued into the new season. For many observers, however, Leicester’s good start to the First Division season dwarfed by concerns over their financial position.
The club had been hit by a perfect storm of relegation from the Premier League and the construction of a new stadium. And on top of that, on the 27th of March 2002, ITV Digital was put into administration. ITV Digital had paid a vast amount of money for Football League highlights, and clubs were spending that money accordingly. However, sales were far lower than expected and piracy of the ITV Digital platform was widespread. Viewing figures were terrible, and ITV Digital started to fall in on itself.
The company sought to renegotiate its contract with the Football League, offering £50m for the remainder of the contract that they’d held, but the Football League turned it down. On the 1st May 2002, all ITV Digital channels stopped broadcasting except for ITV Digital Sport, which kept going for a further ten days. By the time the dust had settled, over 1,000 jobs had been lost. By the time the company was formally liquidated in October, they owed £1.25bn.
Under the new deal signed with Sky – to which First Division (now Championship) clubs had reacted furiously, many believing it to have been signed in haste – their annual television money fell by two-thirds, from £2m a year to £700,000 a year. Professional football is its own economy and it doesn’t necessarily peak and trough in line with the rest of the world’s economies and the effect of the ITV Digital collapse was to completely stagnate football’s internal economy.
Leicester City’s collapse in form on the pitch couldn’t have come at a worse time. The club was £28m in debt to an American pensions company who’d lent the club the money to help pay for the Walkers Stadium, while relegation from the Premier League had cost them £22 million in revenue, with a £1.5 million tax bill looming. In addition to this, the club had spent heavily on players’ contracts in a bid to continue their status established under Martin O’Neill. By 2002, their weekly wage bill of £346,000, and when the summer of 2002 came around they needed both the liquidity that transfer fees could bring and to reduce their wage bill. Matt Piper, Gary Rowett and Robbie Savage were amongst those hastily sold to try and balance the books.
The club was over £30 million in debt, with a huge wage bill, and an attempt to balance to books led to transfer fee receipts lower the than the clubs had anticipated. By the second week in October, trading in shares in the club was suspended, with the price having fallen to 7p a share from £1.10. The club’s value fell from £42 million to just £2.8 million. The players rejected a 20% pay cut, but agreed to defer part of their pay until promotion back into the Premier League. In order to try to facilitate promotion straight back, the deal was included as part of an agreement that the club’s remaining senior players would not be sold as they pushed for promotion. The players were, reportedly, extremely unhappy at the way they’d been depicted in the press after rejecting the 20% pay cut.
This, however, was too little, too late. On the 18th October came the final nail in the coffin. Midfielder Dennis Wise, who had been sacked by the club after an fight on a pre-season tour that left Callum Davidson with a fractured cheekbone, was taking the club to the High Court to sue for wrongful termination of his contract, claiming £2.36 million. The prospect of the former England international winning the case that prompted some potential investors to abandon their interest in a new share issue that could have staved off the creditors, and when court proceedings were issued the club had little choice but to fall into administration.
There were two bids to try and save the club, one fronted by Gary Lineker, and the other by former director Gilbert Kinch. As the administrators started to wade through the wreckage, the cuts began. There were redundancies, while the players had to accept a deferral of 33% of their wages, agreed through the PFA. The club’s supporters quickly organised themselves into a Supporters Trust, following a meeting attended by more than 700 people. The media, meanwhile, got stuck into the lazy trope of “greedy players”, with radio host Adrian Durham calling for the supporters to boycott the club.
In the new year, the full extent of the club’s predicament became apparent. Leicester were £74 million in debt when they fell into administration. The biggest debt was £28 million for the new stadium, while £4.5 million was owed to the Inland Revenue, £2.7 million in VAT, £75,000 to Chelsea and £500,000 to Tottenham Hotspur. There was also £19 million outstanding for players’ wages, which would still be owed, even if all existing contracts were terminated. There was also a £20 million debt owed to the club’s parent company, Leicester City PLC. Leicester, like many others, had chased the El Dorado promised by stock market flotation in the late 1990s.
And at the end of January, a spanner was almost thrown in the works when Birse Construction claimed to still be owed £7.5 million, and that they had not been paid for their final three months of work on the new stadium. By this time, though, the momentum was with the prospective new owners, who’d assumed the name of New Fox PLC. It was a close thing, to get the £5m that they needed to get the deal over the line, but with the Foxes Trust membership having swollen to more than 3,200 members there was just enough in donations and investment to get the club safe. There was even talk of reverting the club to its pre-1919 name of Leicester Fosse. At half-time during a match against Wimbledon in February, supporters were asked to hold up one of two cards, one with a large ‘F’ for Fosse and one with a large ‘C’ for City. An estimated 90 per cent voted to retain the club’s name.
Leicester City’s administration, however, did cause considerable consternation amongst other clubs. They went on a fifteen match unbeaten run from the end of January, and while this was regarded by the club’s supporters as fighting against insurmountable looking odds, the perception of other clubs was that Leicester were at best gaming the system and at worst cheating by clearing their debts in this way. Leicester were promoted back to the Premier League as runners-up behind Portsmouth, but in October 2003 it was confirmed by the Football League that clubs entering into administration would henceforth be deducted ten points for doing so. Three months later the Premier League agreed to follow suit with a nine point deduction for any club caught in the same predicament.
There would be further ups and downs for Leicester City before the miracle of 2016. Their 2003 promotion into the Premier League only lasted for one season, and in 2008 they were relegated into League One, the first and only time that the club has played in the third tier. Their stay, however, was brief. Promoted back as champions with 102 points at the first attempt, they were promoted back into the Premier League in 2014. On this occasion, it is fair to say that the rest is history.
It is possible to see both sides of the Leicester City administration of 2002/03. On the one hand, it is completely understandable that other clubs – and, perhaps unsurprisingly, Neil Warnock of Sheffield United (who finished third in the table that season and lost in the play-off final to Wolves) led this particular charge – should have been frustrated by a club so heavily in debt charging towards the top of the table. On the other hand, though, Leicester didn’t break any rules as they stood at the time, and some might well argue that the manager of the team who were at the sharp end of The Battle of Bramall Lane probably shouldn’t be lecturing anybody on gaming the system.
Of all the administrations that followed the collapse of ITV Digital, though, Leicester’s would turn out to have the most far-reaching consequences. The introduction of points deductions for clubs entering into administration has been controversial at times, but it turned out to be necessary. There have been 28 such events since Leicester’s, but the game seems to have learned few of the lessons of that troubled period on the game’s history. At least it seems unlikely that Leicester City will be headed in that direction again, for the foreseeable future.