Photo : D.R.
Thanks to their multi-million pound budgets, English clubs are able to attract the world’s greatest footballers. For the last five years, every final of the Champions’ League – the apotheosis of the European club game – has featured at least one English team. In 2008, Manchester United and Chelsea went head-to-head in an all Premier League affair which saw the North-West outfit triumph in a penalty shoot-out. The staggering sums pumped into the game in recent times have created something of an English hegemony. But, according the Jonathan Hall, member of the FA (Football Association) Executive Committee, “those same sums have pushed some clubs to the edge of bankruptcy.”
According to Deloitte, the Premier League has an annual turnover of 2.5 billion euros. But total debts, which amount to 3.9 billion euros, are even more outlandish. A heavy burden to bear, especially in the midst of an economic crisis that has given many sponsors cold feet. The collapse of the Bear Stearns bank cost Tottenham Hotspur’s biggest shareholder, Joe Lewis, over a billion euros. The US insurance giant AIG, shirt sponsor of Manchester United, has taken a huge hit, while the imbroglio at UK bank Northern Rock has undermined long-suffering Newcastle United. Meanwhile, the wealthy owners of Chelsea, Liverpool and Manchester United are re-negotiating mountainous debts just as generous credit facilities are becoming a thing of the past. According to reports, fifteen of the Premier League’s twenty clubs are currently looking for new owners and investors. When Southampton, a club quoted on the stock exchange, went into administration in April, English football looked on in horror.
In the wake of the financial crisis, a number of billionaires have lost a substantial percentage of their fortunes. Chelsea’s flamboyant owner, Roman Abramovitch, is said to have said goodbye to between 11 and 20 billion euros. And news on the sponsorship front has also been bad. According to the consultancy firm, Sport + Markt, income from Premier League shirt sponsorship declined for the first time last season, contracting by 15%. West Bromwich Albion, relegated last year, provided an illustration of the trend. After T-Mobile pulled out, the team shirt was entirely free of advertising.
Bloodied but unbowed
But the fact that Premier League games are broadcast in 208 countries is enough
to attract investors. Over the course of the last few years, a dozen clubs have changed hands. In 2005, quoted club, Manchester United, was the subject of a successful takeover bid on the part of American billionaire, Malcolm Glazer. Shortly afterwards, Tom Hicks and George Gillett, also from the US, took over at five-time European Champions, Liverpool. Meanwhile, once and perhaps future greats, Manchester City, have been purchased by a group of investors from Abu Dhabi led by Suleiman Al Fahim.
In spite of the air of crisis, there is no shortage of money in the English game. Last summer, Premier League clubs spent a combined total of 554 million euros on new players. For many observers, the financial situation of England’s top teams is not as bad as it is painted. After all, most of the debts are accounted for by three clubs: Manchester United (780 million euros), Liverpool (507 million euros), and Chelsea (935 million euros). But these amounts are still three times higher than the clubs’ annual budgets. However, investors can take reassurance in the loyalty of English football fans. Attendance and TV viewer figures are holding up. And TV rights for 2010-2013 have been renegotiated. Two billion euros sounds like a reasonable figure, after all.
A need for regulation
Football has become a business like any other. Or perhaps not quite like any other. “What kind of industry would accept such colossal levels of debt while at the same time ignoring common management rules?” asks Jonathan Hall, member of the FA Executive Committee. Hall believes that the situation is “unprecedented in its gravity.” With cumulative debts of 3.9 billion euros, his worries concerning the future of England’s clubs are understandable. Hall continues: “Premier League clubs spend 87% of their income on player salaries. This is a dangerously high percentage.” UEFA’s idea of limiting the figure to 50% would, in Hall’s view, be “a first step towards getting this financial spiral under control.” The FA executive adds that, “stricter management rules and constraints are needed in order not only to improve the economic situation but also to take into account the sporting aspects of the game, the loyalty people feel for their clubs, and the respect due to supporters.”
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