Football Economy - Portsmouth, Premier League, Chester City

Portsmouth’s entry into administration had been signalled well in advance and closed an unhappy chapter for the south coast club.  If the club had not gone into administration, it would certainly have been wound up and might have disappeared altogether.   It will suffer a nine point deduction which seals its relegation from the Premier League, but its chances of survival were not all that good anyway.   The administrator has said that he will apply to the Premier League to make early sales of one or two players to provide working capital and reduce the wage bill.   With the club available at a realistic price, hopefully it will be possible to find a buyer.    Providing everything can be settled by the start of next season, there will be no further points deduction and the club should be competitive in the Championship.

That does not mean that there are no losers.   The tax authorities, and therefore the taxpayer, will only receive a small proportion of their outstanding claim.   The biggest losers in such situations are usually small businesses such as builders who can ill afford to lose what are to them relatively large sums of money.  The whole episode, with the succession of owners at Portsmouth, once again casts doubt on the adequacy of the Premier League’s fit and proper person which covers probity but not whether a purchaser has the assets, or even more important, the liquidity that they say they do.

The Prime Minister, Gordon Brown, pitched in with a series of comments about the need for better football governance.   Perhaps he has forgotten that when Labour came into office they set up a Football Task Force under David Mellor.   This raised the possibility of an independent regulator of football, but the plan encountered resistance from the football authorities and the Premier League in particular.   This is probably not the time to revive such a plan, nor is it necessarily the best solution.   But the game does need to show a new determination to put its own house in order.   The events at Portsmouth have hardly enhanced the reputation of the Premier League brand.

The European football authorities have pitched in with a report showing that the Premier League has the biggest level of debt in Europe.  Because football clubs own their own stadiums whereas in Europe they are often publicly owned, they have the highest levels of assets and in fact there is a positive balance sheet overall.   The comparison with Spain’s La Liga, the second most indebted league, conveniently overlooks the fact that some loans made to Spanish clubs, Real Madrid in particular, are written off.

The report was particularly critical of the leveraged buyouts at Liverpool and Manchester United and fans’ resistance has increased in the last month at Old Trafford in particular.   Fans have been wearing the green and gold scarves of the predecessor club, Newton Heath, despite some heavy-handed attempts to stamp the practice out.  Plans for a boycott of key matches are gathering momentum.

At the other end of the football pyramid, 125-year old Chester City was expelled by their fellow clubs in the Blue Square Premiership.    Chester had been unable to fulfil their most recent fixtures because the players got fed up with playing without being paid and the police refused to turn up for home matches.    Most fans were boycotting matches because of an ongoing dispute between Chester Fans United and the owning Vaughan family, with Stephen Vaughan criticising the fans as ‘idiots’, a not untypical response of beleaguered owners.   A Danish consortium formed on the internet appeared over the horizon in a last minute rescue bid, but never really looked credible.   As for the fans, they wanted the debt-laden club to be expelled so that it could re-form as a phoenix club at a lower level.  Chester city council, who owns the stadium, seems to be well disposed to their plans.

In the Championship, Crystal Palace remains in administration with a resolution complicated by the fact that the ground is separately owned.   In the lower leagues, Notts County were rescued by a former owner of Lincoln City but their debts were thought to be as much as £4.5m.   Southend United have been unable to pay their players the wages they are due for January.   But League Two Hereford United recorded a profit for the sixth year in a row, showing it is possible to run a club at the lower level prudently.

The Premiership received a boost with the news that next year’s three-year overseas broadcasting rights contract is likely to jump from £625m to over £1 billion.  The size of the contract reflects the popularity of the Premiership for gambling in Asia.  For all its problems, the competition remains popular with television audiences.

The Financial Times issued a warning that only clubs from London, Manchester and Liverpool could expect to achieve the ‘glittering prizes’ in the Premiership.   Teams from provincial towns should settle for ‘solid mediocrity’.   It’s an unpalatable message, but perhaps a realistic one.

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