English football in 2009 - a review

The first thing to remember is that if you are in work in Britain you may well be better off, even if your earnings have not gone up.   Interest rates have fallen sharply and for those on variable interest mortgage deals the amount they have to pay has also fallen.   Inflation is very low and those on benefits will get an inflation busting increase in April.  Unemployment has risen, but not as much as many feared, although there has been an increase in short-time working.

Television still going strong

If anything people are going out less as they seek to reduce debt and this has made the home entertainment offered by Sky even more attractive.   The television deal is really the basis of Premiership football as we know it today.  Admittedly, Setanta collapsed: their offer was not sufficiently attractive to bring in enough subscribers to make them viable.   But ESPN stepped in to the Premiership slots and they are there are for the long haul and have the resources of the Walt Disney corporation to back them up.  The real casualties of the collapse of Setanta were Scottish football, which has had to conclude a less attractive deal, and the Conference, which has no deal at all.  Admittedly, the sums involved in the Conference deal were relatively small, but at that level every little helps and it gave clubs a profile.

Nevertheless, there are some worrying signs.   There are fewer buyers of clubs out there, with even the Dubai economy hitting the rocks, and those that do appear often have difficulty in raising the short-term cash that is needed (Portsmouth) or disappear after a short involvement (Notts County).   The latter case emphasised the risks involved in the lack of transparency surrounding companies based in tax havens.   It is often difficult for the football authorities to find out who the real owners are and in that case to apply a searching ‘fit and proper person’ test other than to the local front men.

Foreign Ownership Grows

However, that does not mean that all interest in acquisitions in ended.   The long drawn-out battle for control of Arsenal continued.  By the end of the year American sports entrepreneur Stan Kroneke was just 17 shares short of the number at which he would be obliged to make a takeover bid under stock exchange rules.   For various reasons, particularly the level at which he would have to bid for shares, it would be sensible to delay such a bid until the spring.   However, it cannot be long before Arsenal joins Aston Villa, Chelsea, Liverpool, Manchester City and Manchester United as leading Premiership clubs in foreign ownership.   Given all the concerns that are often expressed, it should be noted that Villa fans are generally complementary about Randy Lerner.

Clubs with large debts are finding the costs of servicing loans increasingly onerous.  In the case of Chelsea, owner Roman Abramovich has simply wiped the debts out at a stroke.   That is what you can do when you are a billionaire.   However, Chelsea is now moving to a ‘Phase II’ model in which it will be expected to balance the books and there will be less money available to buy in players.     The club’s capital expenditure, particularly on its new training centre, has now come largely to an end.   In the longer run, a new ground less cramped than Stamford Bridge would maximise both gate and corporate revenue in the way that Old Trafford does for Manchester United.   But a suitable site has never been identified and it would involve considerable capital expenditure.

For Liverpool tensions between the American owners, and the cost of servicing the club’s debts, has led to a continuing delay in the building of the much needed new stadium in Stanley Park.   With Everton’s stadium plans at Kirkby turned down, in a game other than football the logical solution would be a shared stadium.   Given their plight, some Everton fans might accept such a solution, but the overwhelming majority of Liverpool fans would not.   It is not likely to happen.

Manchester United's Debt Mountain

In many ways Manchester United faces the greatest debt problems.  Its debt mountain is £699m, involving annual servicing costs of £60m.   Particular concern has been expressed about the £175.5m of the debt owed by the Glazers.   Much of it is in a relatively complex form of debt known as PIK notes.   These are owed to hedge funds and the interest rolls up to 14.25 per cent.    There has been one re-financing, but a new one will be difficult to organise in the current situation of financial crisis.   Ultimately the hedge funds could place constraints on the operation of the club or even take control.   Hence the credence that has been given to reports that a consortium of Asian billionaires was contemplating a one billion pound bid for United.

Against the background of falling tax revenues and huge government debts, the tax authorities have begun to lose patience with clubs who do not pay their tax bills.   Five winding-up orders have been issued against clubs in the last two months.   The most significant has been against Portsmouth which could be the first Premiership club to go into administration.    They are not permitted to buy in players until football debts are settled and may have to have a fire sale of players in the January transfer window which would not produce good prices.

Elsewhere, West Ham are in bad need of new owners, but are asking for £80m, far more than the £50m former Birmingham City owners David Gold and David Sullivan are prepared to offer.    As a Plan B they may acquire Charlton Athletic which could also go into administration if they are not promoted or find a new owner.   For now, the board has propped up the former Premiership club with an extra £7m of working capital.

Non-League Struggles

Some of the biggest hits have occurred at the non-league level.    King’s Lynn disappeared, although a phoenix club may be formed and Weymouth teetered on the brink of oblivion for months.    One level above, Accrington Stanley struggled to survive until they found a white knight.

Very often, the real action is off the pitch rather than on it.   We shall be covering these events for Albion Road in 2010 and at www.footballeconomy.com.     I also take part in Radio Scilly’s weekly sports show hosted by Merryn Smith from 5 p.m. to 6 p.m. (GMT) on Friday evenings.    The world’s smallest radio station also covers the world’s smallest football league which has only two teams which play each other every week in both league and cup competitions with the same referee.