Football Business - December 2008

December 2008 was the month when the changed financial climate really started to hit home in football.    Newcastle United was taken off the market when a suitable buyer at the right price could not be found.   The troubles of the Icelandic economy made West Ham available for offers.   More significantly, Dubai Investment Corporation withdrew their interest in acquiring Liverpool.   This led the club’s long-running sponsors, Carlsberg, to criticise the lack of progress towards building the club’s new stadium which they saw as essential to its long-term success.  Sunderland, however, quietly arranged a takeover by a rich American benefactor to offset the particularly hard hit that the Irish economy has taken in the economic crisis.   In Scotland, Hearts faced renewed financial troubles, while Rangers were made available for sale to the right buyer.

It all went off in the boardroom at Arsenal after substantial shareholder Lady Nancy Bracewell-Smith was forced out.    She felt for some time that she had not been given the respect that her shareholding and her family links with the club deserved.   However, it appeared to be as business as usual at the Emirates.   Arsene Wenger claimed to have seen none of the action in the boardroom and no one made an early move for Lady Nancy’s shares, which could give effective control to Russian steel baron Alisher Usmanov.

Glasgow Rangers manager Walter Smith revived the idea of an Atlantic League, an idea first put forward unsuccessfully in the late 1990s.    This would bring together the top sides in Holland, Belgium, Scandinavia and Scotland, running in parallel with the domestic divisions and providing entry to the Champions League.   Under this scheme Celtic and Rangers would field ‘B’ teams to meet their domestic responsibilities.

Clubs below Premiership level in England were hit particularly hit hard.   At Plymouth directors had to dig into their pockets to keep the club afloat as average attendances fell to around 10,000.  Darlington faced the problem of dealing with a white elephant of a stadium, known as ‘George’s folly’ after the former owner that would suit a small Premiership club with its 27,000 capacity, but was attracting crowds of around 2,500.   The new owner planned to demolish one side of the stadium and replace it with commercial ventures.   A bizarre takeover bid for Chester City, which involved renaming the club after fictitious television team Harchester Rovers, was turned down.   A number of non-league clubs, including Weymouth, Lewes and Worcester City, found themselves in real difficulty.

Transfer spending in the January window looks likely to be hit hard.   Manchester City is the only club likely to have a generous budget available to them.   Across the city, Manchester United plan to limit their spending to around £15m.  There will also be fewer bargains from abroad.  Sterling’s fall means that players from the European continent are 20 per cent more expensive than they were a year ago.    It looks as if the increase in January transfer spending from £33m in 2003 to £175m in 2007 is going to be reversed.

Football League chairman Lord Mawhinney has warned, ‘Things look calm now, but the crunch comes in the run-up to next season.  Crowd numbers have held up now, but they won’t as things go on.’   He added, ‘The big problem is player contracts, which have to be honoured.’

However, one mustn’t overdo the gloom.  If we look at the recession of the late 1920s/early 1930s, which was more severe than anything likely to happen now (US GDP fell by 30 per cent), there was an impact on football attendances, but it wasn’t devastating.   The top flight was hit hardest with average aggregate attendances dropping from around 24,000 just before the recession to around 21,000 at the depth of the slump, before recovering again in the early 1930s.   Some clubs saw their attendances increase against the trend.  For example, the average attendance at Arsenal was 26,690 in 1928-9; 35,537 in 1929-30; and 37,106 in 1930-31.   They continued to increase, reaching 46,252 in 1934-5.   Spurs went up from 21,928 to 34,389 over the same period.

Being a dedicated football fan is certainly a costly business.   Dedicated football fans will spend £100,000 in a lifetime supporting a club according to research by Virgin Money.    Calculations show that supporters of a Premiership club spend as much as they would raising a child or buying a home.   The keen supporter currently shells out £1,875 a season and once inflation has been taken into account that tots up to more than £100,000.   Travel costs alone come in at £40,000 in a lifetime with another £27,500 going on club merchandise, food, drink and programmes.   The calculations are only for a single fan, including the cost of going to away matches.  The cost of providing replica kits and other items for children is not taken into account.

Football cannot escape the effects of the credit crunch, but it may prove to be more resilient than other sectors of the economy such as retailing.

Wyn Grant is a regular contributor to Albion Road and also the publisher of footballeconomy.com, a website covering the business and economy of the game of football.