Financial Crisis in football - wonder how we compare with others?

Over the last few days I've read a number of articles about how clubs are already struggling or will do so soon. I think there's a massive financial reset coming. And I've obviously been thinking about what our situation is now and what the implications might be in the future.

A few considerations came to mind:

Interesting article on the BBC website today: https://www.bbc.co.uk/sport/football/52275018 in which Luton's CEO says: "….many Championship clubs are vulnerable due to the severe overstretching of expenditure".
The article further states that an inspection of the accounts of 16 of last years championship clubs reveals that the wage bills of 13 of them exceeded their income. And in their accounts, Reading and Birmingham went so far as to say that there was "material uncertainty" over their ability to exist as a going concern. As is the case for the majority of Championship clubs, they are reliant on funding from their owners.

The piece goes on to say that a closed-doors end to the season (as is being suggested) would cost Luton between 10% and 15% of their income for the entire campaign.

There's also been speculation in recent days that Reading, Derby and Wednesday are in immediate danger and unlikely to be able to pay wages this month.

All of this seems to suggest that the owners refusal to live beyond our means is proving to be beneficial and sensible given the current situation, albeit they couldn't possibly have envisaged it might become crucial so soon.

On the other hand we do appear to have increased costs substantially.

In a piece in the Chron on 6th March Dane Murphy said all the money made from promotion and player sales has been invested back into the club. He said: “We brought in a high volume of players in the summer, then we had to bring in Gerhard who was under contract, then we brought in three more players in January. Those costs add up. Another thing that gets forgotten is that the transfer payments for the three we sold in the summer all come in in tiers so you can’t spend it all straight away.”

On the Chron website yesterday Hecky was quoted as saying: "There has been a lot of money spent this season by Barnsley on transfer fees and wages. The playing budget now is a hell of lot more than when we went up. That’s really good for the club and I am looking at it thinking ‘I would have loved to have had that money to spend." I know he's unlikely to have all the financial information but it suggests that it's common knowledge in football that we have invested substantially - something the owners have said on several occasions.

All this leaves me wondering if we are better off than other clubs at the moment and if so how much? And irrespective of how financially well run we are (if indeed we are) how long it will be before we hit financial problems. How much revenue will we lose if the season is completed behind closed doors? Is it less because the majority are ST holders? And if, as seems to be accepted, reduced finance across football means a financial reset we'll be more competitive in the future? Or if the bottom drops out of the transfer market and fees paid reduce dramatically we'll have less money to re-invest and therefore become less so?

Btw, I appreciate some might not care and understandably feel that there are bigger concerns right now but thought I'd post something football related for us to discuss......​

 

Surely at some point every club will be in difficulties and the fact we hit that point later than others wont necessarily benefit us. As in me and my neighbour both owe in our mortgage. He has no money coming in and house gets repossessed. I have enough money saved for 6 months mortgage bit after that I gave nothibg, do still get repossessed, just 6 months later than my neighbour.

 

It's a question I really want to know the answer to.

I think we've been erring on the side of caution, financially, and so will have it easier than others when it does go tits up. The question for me is, is this going to be what makes that happen (probably), and to what degree (god knows)?

Kudos for a well put, football based question, too, I'd almost forgotten what this site was for!

 

I‘ve been wondering that, given that the owners were considering buying yet another club I think it’s fair to say we are in a lot better shape than others.
Not sure how that sits regarding FFP though, presumably that’s a different thing or being suspended as it would be barmy to let a club go under because of a rule from ‘normal’ times.

 

Not sure I agree with that. Whether it helps us surely depends on how long this goes on for doesn't it? If we are more able to deal with the financial consequences for longer than others and until football recommences isn't that better for us v clubs in the worst position who may not survive

 

Thanks BBBFC. I'm convinced some clubs will fold either before football's restarted or in the period afterwards. The PL payment of £125m to the EFL may help in the short term but will then reduce income in the next period thereby just shifting the problem out for a few months. I think it might be quite a few too. Can see a dent in the 92. Wonder also if we'll see a return to part time and regional north and south leagues instead of L1 and L2 as it was many years ago.

 

The survival of clubs will really depend on 3 factors:

1. How long football is suspended. Presumably games played behind closed doors, whilst generating some extra cost, would result in keeping Sky & other sponsorship monies coming in.

2. How well run / badly run the club in question has been in the last couple of years, affecting the outgoings / cash flow.

3. How deep the pockets are of the owners of the club & their willingness to put in extra capital by way of loans / share issues / gifts.

We are probably well placed vis-a-vis other clubs with regards to 2. I guess larger clubs have more overheads & more to lose in Sky / sponsorship deals too.

We've never really established with regards to point 3 what resources are really available. On paper the owners are mean't to be rich, but in a world that is facing a global recession liquidity may not necessarily be there. It was liquidity that killed us when the ITV Digital deal went down (& to some extent our strange shareholder voting system). You'd hope we'd be in a better place, but it can't be a given.

TBH I'm more bothered about saving my business at the moment, but it is good to discuss something that is BFC related for a bit.

 

That six months does give you longer to find another source of money though. So you could still save your house...

 

Just read a piece in The Independent: https://www.independent.co.uk/sport...pool-tottenham-man-united-angry-a9463371.html
and wonder if there's a fourth bullet:
4. Whether a clubs players will accept a wage cut and if so how much?

PL players willing to consider a deferral but not a reduction, which doesn't help as it just pushes the cost out - linking to my point about some going into administration may be a little later. Isn't that what Leeds players have done? The article relates to the PL but I guess the wage issue is very similar in the Championship.

Sorry to hear about our business. What line of business are you in JP. I was wondering whether some support from BBS'ers could help in any way? For example, there's a FB page for the village I live in and the community are trying to support shops / businesses that have had to close by buying online.....

 

Yes, the players will have a big part at some clubs. I guess wage bills like Rooney's 80k a week or whatever it was will be up at the end of the season.

I run a DJ agency. I had a big vent a few weeks ago, so most folks know of my plight. It's the "how long" question that is the key with me. I honestly can't see weddings & nightclubs being back on in 2020 TBH. Small registry office weddings may take place I think, but no big receptions.

 

Yeh, tough that and sorry to hear it. Are you MH on MixCloud btw? If so, follow you on there and really enjoy your uploads!

 

Yes, cheers.

 

I have been reading the same articles as well and listening to Mark Chapman on 5 live. There seems to be a real fear that some clubs in the Championship might implode without financial assistance, I don't know who from, PL I expect. It mentions that there is little agreement between clubs on a way forward. Also that transfer fees will be lower in the summer which could have a negative impact on clubs that relyon that income.
Not sure how all this affects Bfc, if no one can afford to buy our players then we have a bit of continuity for once,which is always a good thing.

 

Been watching the Sunderland til I die stuff on Netflix and I wonder about Sunderland. They’re servicing a massive debt.

 

Yes, I've watched that. I think they could be in real trouble, their ownership doesn't have that deep pockets, given that level of debt.

 

was wondering how BFC are coping financially in the current situation.

 

All speculation and opinion...

I would imagine we can survive longer than most before a cash injection is required by the owners. When all the money does run out, I don't think they'll put any in. They're not here to lose any money.

The current crisis is difficult for any business in any sector. Well run companies will go to the wall. The financial mismanagement of the majority of professional football clubs leaves the entire industry exposed. I can't see it surviving. The EFL plan to complete the season in May does not have a basis in reality.

April is usually one of the most lucrative for a football club. The games come thick and fast and season tickets for next season are on sale. Football clubs aren't generating any money. The majority are in millions of debt. The astronomical wage bill still requires paying. It's going to fall down like a house of cards.