Why are so many heading for an early bath?
Two years ago during the Covid-19 pandemic and lockdown, we produced an investigation called The Price of Football.
In it we looked at how much football supporters spent on an average match day including a pie and a pint and extrapolated how much the 94 professional football clubs in England and Wales would be missing out on when supporters weren’t allowed to attend matches.
Now we’re three years on from the original lockdown and supporters have been able to revisit grounds for two years but sadly more and more sports teams have continued to go into administration.
The most important thing in sport used to be what happened on the pitch or the track but now it appears that this isn’t as critical as what goes on in the boardroom.
We look at how sports teams approach insolvency and what options they have when they face administration or liquidation.
Why are their finances so poor?
Sports teams and clubs are often told or proclaim themselves that they are part of the entertainment business.
But fans are more than customers and provide a cornerstone shared experience for many with often whole families supporting one team or another for generations and sharing those memories.
A local football or rugby team isn’t just a fast food outlet – they are a part of the community and if they get into financial difficulty and insolvency there is a sense of dissociation because they seem more than a business.
But in other ways they are very much like any other company and if outgoings and debts are greater than income then they will discover how similar.
Since 2019 six professional football clubs have gone into administration including Derby County and Bury FC who were later brought by a community group called Bury Football Club Supporters Association.
This is in addition to new research that shows that in the past season – 2022/23 – more than 2,600 amateur and grass roots football clubs folded and another 8,000 say they are facing financial difficulties too.
Two clubs in the top division of Rugby Football Union (RFU), Worcester Warriors and Wasps have gone into administration and been suspended from the premiership as a result, with London Irish expected to join them this week.
Several other clubs across a variety of sports including Newcastle Diamonds in speedway have also had to close their doors for the last time.
No matter what their sport or support level, one thing they all have in common is that they have large amounts of debt that they are unable to pay.
Due to the strains placed on clubs during the previous three years with fixture cancellations, cost of living affecting staff and supporters and other challenges – a reckoning has arrived.
The larger and more elite clubs have now more or less fully recovered from this period but smaller clubs still have to overcome the large funding gaps and existing obligations that have to be serviced.
One of the reasons Wasps went into administration was they were no longer able to service a £14.1 million Covid Sport Survival Package (SSP) loan from the Department of Digital, Culture and Sport (DCMS) which was administered by Sport England.
Sports insolvencies since 2019
|Number of sports insolvencies
|2023 (to end of April)
The artificial restraints on creditor actions helped reduce the number of sporting insolvencies during the pandemic period of 2020 and 2021 but the lifting of these in 2021 show a rebound.
In addition to financial sanctions, a lot of leagues and sporting organisations also implement their own sanctions for insolvency.
In the English Football League for example, a club going into administration will see an automatic points deduction depending on when they enter (either to be deducted immediately from this season’s points total or next season if it is too close to the end of the season).
In the Rugby Football Union Premiership, Worcester Warriors were expelled altogether.
When an administrator or insolvency practitioner is called into a club their primary aim is to get a handle on the finances and see if the business can be restructured and reemerge without being liquidated.
Their primary aim is to work with the various stakeholders to build a plan that gives the club the best chance of survival while at the same time ensuring that creditors are paid as much as possible.
They will also have to manage any non-sporting assets the company has acquired as well as working with the relevant governing bodies involved as the sporting context always has to be taken into consideration.
In February 2023 the Government published a report called “A sustainable future – reforming club football governance”. Among the recommendations included committing to a new independent regulator with a primary strategic purpose so that football clubs are sustainable and resilient, with one of their primary duties being to assess the financial stability of clubs, which will be backed by legislation.
The reforms have not been adopted yet but are said to act as a critical step in the right direction to support a stable future for clubs.
That said, it’s a constant balancing act for an administrator.
Having to potentially renegotiate players’ contracts or even sell them is quite common for clubs in administration but will be a challenge as it will make the club potentially less attractive as a proposition to potential buyers.
Whether you are a sports club that is wondering how you can survive the close season or just a concerned fan with similar issues in their own business you don’t need to pray for a last minute winner – you can get some impartial professional advice right now.
Once they get a full picture of your situation they will be able to outline the options you’ve got – which will probably be greater than you first thought, especially earlier in the process.
Act while you still can because the final whistle will be too late .