2020 has been a strange year for nearly every industry, but the future of English football has fallen under the spotlight as the true impact of the Covid-19 pandemic comes to light four months on from the UK officially entering lockdown.
Finance in football has been a rising concern for years, with much debate through the last decade of the ever-expanding margins between the Premier League and the English Football League’s lower divisions.
While the financial woes of former top-flight regulars Leeds United and Southampton saw both clubs slide into the third tier — League One — were well catalogued, it was Bury FC’s untimely demise in August 2019 that really brought the issue of football finance back to the fore just days before the current campaign commenced.
In this article, we will look at the impact of Covid-19 on the professional game, the threats to the future of clubs that have been around for over 100 years and the avenues of support available to clubs who find themselves on the brink of liquidation.
The coronavirus pandemic brought the UK economy to a halt back in March, and although most sectors are gradually returning – in some form – to a sense of normality, the consequences are only starting to rear their head now.
For football, one of the major challenges to restarting the season was an assurance that no fans would attend matches, keeping transmission rates to a minimum and ensuring health and safety measures could be maintained as far as practicable.
Taking the average attendances for clubs in the current campaign, where each fan enters with the cheapest ticket price and buys one pint, one pie, and one programme, we found that the 91 current clubs in the English league system would lose more than £305m — based on each club losing revenue from five home games until the end of the campaign. It’s a monumental loss, and that’s before you take into account broadcasting revenue, shirt sales, and corporate sponsorship.
It’s no surprise then to see famous names teetering on the brink of administration. Bradford City in League Two, when not bolstered by TV revenue, are set to lose £2,123,250, by closing their doors to fans.
The ever-widening financial margins between the Premier League and the EFL come into sharper focus when 2018/19 champions Manchester City are set to lose £23.9m. Even for one of the richest clubs in England, this is still 84 times more than near neighbours Salford City, whose estimated revenue loss sits at £284,715.
Tickets to the Etihad will always cost more than at Moor Lane but you can get in to watch Salford for just £10, while a trip to the Etihad Stadium will set you back at least £77 — that’s seven matches more than for one afternoon with Raheem Sterling and Sergio Aguero.
When you delve into the cost of season tickets, the disparities become even clearer. We hope they serve pints in golden goblets at the new Tottenham Hotspur Stadium, where the most expensive season ticket costs £1,995.
In contrast, the most expensive season ticket for League Two clubs came in at £750 which was at Northampton Town, whose fans will get to watch the likes of Sunderland and Ipswich Town next season after winning promotion to League One.
Covid-19 has stripped some of the simple pleasures away from life including the little things such as the joy of a pre-match pie and pint with mates.
The cheapest pies are to be found in their spiritual home of the North West, with Carlisle United fans tucking into their favourite cuisine for just £2, and Accrington Stanley, Blackpool, and Rochdale costing not much more at £2.50.
Less surprising is the fact that London clubs have the most expensive pies with Chelsea (£4.60), Tottenham Hotspur (£4.50), and Fulham (£4.50), making up the top three in this league.
A pint at Arsenal’s Emirates Stadium will burn a hole in your pocket at £5.70. For just 70p more you could buy two pints at Huddersfield Town, as they offer the cheapest pint for £3.20.
Surprisingly, Colchester United offer their matchday programme for free to loyal fans, but still face estimated losses of £413,000. Southampton have the most expensive programme, charging £4 to read their pre-match offering.
With the lost matchday revenue causing many a headache for clubs, a saving grace during the Covid-19 pandemic has been the benefit of the government’s Coronavirus Job Retention Scheme (CJRS), which has enabled the clubs to furlough staff during the lockdown period in order to reduce costs.
However, the lost matchday revenue from seasons being cut short in Leagues One and Two and the Premier League and Championship being concluded without fans, means the true impact of the coronavirus on English football may not be seen for many months.
When the Premier League was launched back in 1992, the idea behind it was for the country’s top players to benefit from a reduced calendar and give the national team a better chance of winning tournaments.
In reality, the main beneficiaries were the clubs who not only benefited from enhanced broadcasting revenue and TV rights, with Sky TV fresh on the scene to deliver pay-to-view matches but also being able to keep 100 per cent of their home match receipts for the first time.
Within ten years, the gap between Championship clubs — Division One as it was known at the time — had grown to such a point that parachute payments were introduced for clubs relegated to the second tier in order to mitigate the huge loss in income.
By 2004, points deductions were introduced for Premier League and EFL clubs entering administration — the process which sees creditors take control of the club to ensure that from its debts, wages owed to players and staff, and transfer fees owed to other clubs would be paid first — after some clubs were taking advantage of the process to clear debts while retaining their star players.
Wrexham became the first league club to be hit by the deductions, with 10 points being docked in December 2004, before higher-profile cases like Leeds United and Southampton followed suit a few years later.
Points deductions became the norm last summer as two North West clubs — Bolton Wanderers and Bury’s plights worsened. 27th August 2019 was a dark day for football when Bury were expelled from the Football League. The first team to suffer this fate during a season since Maidstone United in 1992.
With Bury FC expelled, the Football League was operating with 91 professional clubs when the Covid-19 lockdown cut the season short. Teams from Southend United to Macclesfield Town, and even Charlton Athletic in the Championship, had already been battling off-field complications regarding winding-up petitions owing to unpaid player wages, failure to fulfil fixtures, and controversial takeover plans.
Earlier this month, Wigan Athletic became the 20th club to enter administration since points deductions were introduced, with the club citing the coronavirus pandemic as having had a detrimental impact on finances. A 12-point penalty was applied on 22nd July upon completion of the league campaign, and, although subject to an appeal from the club, the Latics were relegated to League One by two points, with Barnsley profiting from the North West outfit’s plight and escaping the drop.
Wigan’s surprising trouble brings into sharp focus the difficulty of running football clubs, from the Premier League right down to League Two. Premier League clubs are facing a £1bn reduction in revenue because of the coronavirus crisis, so it comes as no surprise that the government’s Digital, Culture, Media and Sport (DCMS) Committee has announced that it expected more clubs to follow Wigan into administration.
In a report on BBC Sport, committee chair Julian Knight said: “We know that 10 to 15 clubs could find themselves in the same position. (On Monday) the DCMS Committee sought clarification from (Premier League chief executive) Richard Masters on what action it was taking to provide extra money for clubs at risk — he told us that the Football League hadn't asked for extra funding and the Premier League hadn't provided it.”
As the league campaigns conclude, the DCMS went further by calling for parachute payments to become a thing of the past, a report stating that ‘the current football business model is not sustainable’.
During the last few months, the debate around the continuation of sport and its importance in society at a time when the health of the nation is on the line, has brought varied reactions. When Boris Johnson announced the return of sport at the beginning of June, he said it would ‘provide a much needed boost’ to the nation. Some sports fans would agree.
At a time like this, football is not just a game, it’s a livelihood — for players who might only get a 10-15 year career, for managers, for sponsors, and for all those staff working at the 91 professional clubs who all face an uncertain future.
While clubs have benefited from the CJRS and a £195m funding package from Sport England — which professional and community sports clubs can access — let’s hope teams across the country can weather the storm and line up for the start of the 2020/21 season — whenever it is and eventually with fans there to cheer them on as they have done for generations.
Sport is a central pillar of British society.
Not just in terms of shared experience and associated culture but also in taking part and the numerous benefits it brings through exercise and social engagements. The lockdown has been particularly tough for sports enthusiasts.
Economically, like every other sector of the UK economy, sport has taken a big hit. We’ve previously written extensively about sport and insolvency but the coronavirus pandemic and lockdown have acted as an accelerant.
More than a game?
Not for the first time, football and it’s response to the predicament has split it down the middle. Fans, players, managers, CEOs, broadcasters, medical staff and government all have a vested interest in how the sport responds and so far it has been a little of everything.
Non-league football up to and including the National League have declared their seasons over as has League Two in the EFL. They have completed their season using a points per game formula to obtain a final league table and have accordingly promoted the top four teams.
League One are deciding how they will proceed but seem like they will vote to finish in a similar style while the Championship and Premier League are pushing ahead to play on and complete their seasons behind closed doors.
The government has given them permission to begin modified and social distanced compliant training this week with an expected resumption date to be June 12th under the aptly named “Project Restart”.
Playing in front of empty stadiums will be a new experience and not necessarily a positive one. The German Bundesliga restarted this week and the experience was described as sterile and unsettling.
Crowds are the scenery, backdrop and special effects at matches and without them the experience might not be as compelling as the authorities are hoping it will be for viewers and broadcasters.
Finishing the season and maintaining sporting integrity are just two of the issues facing football. The financial outlook for teams in an extended offseason is another.
Swindon Town Chairman Lee Power estimates that without immediate financial support from the government or higher up in the football food chain then 30/40% of clubs in League One and Two will be at risk of insolvency.
This is in addition to many lower league footballers contracts running out at the end of June and some teams such as Oldham Athletic and Macclesfield Town already struggling to pay staff on time.
Even if the season is completed in this truncated format, there will still be restrictions placed on crowds when the following season is due to start and fans might not be allowed into stadiums until at least 2021.
Football finance expert and insolvency practitioner, Gerald Krasner who has been involved with several football administrations underlines the financial imperative for restarting football at a time when less high profile industries are still locked down.
He said: “The reality is that people have managed without football for more than a month now and there’s a real danger that unless the momentum can be regained and fans can begin to watch matches on TV again, the impetus will be lost and the draw of football will be diminished in the long term.
“Unfortunately those clubs with wealthy foreign owners may not necessarily be immune from disaster either. If that was to happen, the television money would soon desert the game too.
“Overseas owners will be forced to respond to the effects of the global pandemic on their own finances and business interests, and for some that could mean that ownership of an English football club is simply no longer viable.”
And this, regardless of health and safety, is the prime consideration for the elite of English football.
Any “one” for Tennis?
Other sports, while not taking a direct lead from football, will be at least watching closely to see how any solutions play out.
Rugby and Cricket are looking to hold some kind of competition to avoid their 2020 seasons being written-off and Silverstone have announced that they are hoping to stage two Formula One races albeit in front of empty grandstands.
Golf and Tennis appear to be faring better at least in terms of participation as they were also allowed to restart in the first wave of recreational reopenings recently.
David Rickman, Executive Director of Governance with the R&A said: “We’re fortunate that golf lends itself to social distancing, so by making a few relatively small changes to the rules and the environment in which we play, we can make it safe for golfers.”
Of course most golf clubs will be operating at a minimal level initially as their bars, restaurants, golf shops and practice facilities will all remain closed.
Additionally, a majority of staff including green keepers remain furloughed so playing will be even more of a challenge for some although the clubs themselves will welcome any influx of income.
Now unlimited exercise is allowed, the demand for facilities will be as large as it is immediate.
Playgrounds, outdoor gyms and ticketed outdoor leisure venues will still remain closed but one-on-one sports such as tennis, basketball or even batting and bowling in cricket nets is now permissible as long as social distancing rules are observed.
All of these changes are based on the latest best practice and advice based on the Covid-19 infection rate continuing to fall. Any second wave of infections, or worse any that could be directly attributable to a sporting event, might mean a second lockdown and further restrictions throwing any further plans into doubt.
One of the key tenets of sporting faith is hope. There’s always another match or season. Always the chance to start again and win this time if you’ve suffered a defeat.
In business, administration can offer a similar hopefulness and route to redemption. A lot of otherwise good and profitable companies are finding themselves in terminal circumstances because of the Covid-19 pandemic but there could be a way for them or any business in difficulty to dust themselves down and start again on a level playing field when it’s time to go again.
If this sounds appealing or you’d like to know more than you can get in touch with us here.
We’ll arrange a convenient and free initial consultation with one of our expert team of advisors who can begin our dialogue.
Once we have a clearer view of your business, it’s financial situation and immediate circumstances, we can help you plan out an effective and efficient way forward for you and your business.
Rumours have begun circulating that the Championship, the top division of the English Football League, are considering an unprecedented group or collective administration involving each of their 24 member clubs.
This would mean that as well as some of the most storied and famous names in English football such as Leeds United, Nottingham Forest, Sheffield Wednesday, West Bromwich Albion and Middlesbrough potentially folding and reforming as new entities, while releasing every single one of their players, managers, coaches and match-day employees.
They would then look to re-employ them on new but reduced terms. Alternatively, they could exit from administration via a Company Voluntary Arrangement (CVA) and retain the previous ownership and identity.
Regardless what method is chosen, the rationale for what would still be a unique and staggering move, is that it would be a way of reducing outgoings and debt.
It’s also important to remember that these scenarios are being discussed at the same time as the players PFA union are in negotiations with the EFL to agree to league-wide wage deferrals or reductions which would alleviate some of the immediate pressure on the clubs.
Under current EFL rules, any team going into administration or suffering any other kind of insolvency event during the season is immediately liable for a ten point deduction, which as the season only has nine matches left to play, could be pivotal in promotion or relegation scenarios.
The league would either have to waive the penalties in this case or apply them to every club in the division simultaneously so that nobody would be at a competitive advantage.
Football also has specific rules concerning the payment of debts and the reformation of clubs at the same or a lower level.
Currently all football creditors such as players, are entitled to receive 100% of what they’re owed before any new club can be launched whereas other employees or non-football creditors, such as the St John’s Ambulance or HMRC, would only receive 25p in the pound following the takeover of the club’s assets, although this could rise to 35p if repaid over a longer period.
One of the main hurdles to this plan would be reaching an agreement against the poaching of players from other teams as every player would be a free agent and legally entitled to sign for whoever they wanted, regardless of the status of their previous contract and that their registrations would fall outside of the usual transfer window periods.
This would only apply to clubs within the EFL and there could be nothing to stop Premier League or foreign teams poaching them. Football is notorious for being based on a series of “gentlemen's agreements” rather than contractual law so this could see previous loyalties and alliances broken forever.
1,500 EFL footballers are out of contract at the end of May or June and usually leave or are free to leave or renegotiate new deals but if the season is artificially extended into July or August then this creates obvious difficulties.
It also raises questions of professionalism - if a star striker knows he is leaving at the end of the season regardless, then how motivated will they be to risk injury and put their body on the line in a vital relegation battle?
Several sports leagues have collapsed in the UK before including the National Basketball League and the British American Football League but none as high profile or consequential as the Championship or any EFL division.
Other sports such as county cricket and rugby league and rugby union are also trying to find funding formulas to keep as many clubs functioning as possible so will be looking at developments within football with interest.
Formula One, possibly the most expensive sport in the country, is also facing an existential crisis.
Chief Executive of McLaren Zac Brown has warned that as many as four of the ten teams set to contest the 2020 season could fold if no agreement is reached between teams and staff if racing restarts at some point later in the season.
Nine of the 21 grand prix’s have already been cancelled or postponed and their rules state that at least eight have to be completed for a meaningful championship to be awarded.
While the clock is ticking, Eamonn Wall, Managing Director of Business Rescue Expert is sceptical that the clubs would pursue their doomsday strategy.
He said: “As we’ve seen previously this season with Bolton Wanderers and Bury, administrations are not unknown in the EFL and sadly there may be more to come especially if the enforced lockdown means that the season is elongated or even declared null and void.
“What would be highly unlikely is that all the clubs would enter administration at the same time. As well as the contractual chaos it would cause, there’d be lots of objections - especially from their creditors and would likely be led by HMRC.
“The PFA and EFL are still negotiating for a mutually agreed settlement which would require 75% of clubs to agree to change the EFL rules and allow this or any other collectively agreed changes to the players contracts to take place.
“Each side is looking to gain leverage over the other - it’s a business negotiation after all - and the potential threat of multiple administrations might be enough to get the PFA and players to renegotiate their contracts, which is the main outcome that the clubs are seeking.
“It’s certainly a lot easier and cheaper for them to conclude the issue this way than by looking to launch a unilateral group administration before the season has formally concluded.”
We’ve written previously about sporting administrations and insolvencies and while they may look the same as other businesses and sectors they also have the added complexity and interconnectivity of being part of a wider association or league.
They also have a disproportionate emotional hold on supporters and communities.
We’ve all got a favourite shop or beer but not many of us have got that name or logo tattooed on our bodies, or can reel off the names of the previous 12 CEOs like a stanza.
But they are businesses with employees to pay and debt repayments to meet and like any business if they can’t meet these obligations then they’ve got to make some serious choices - and quickly.
If you contact us one thing we can guarantee is that you’ll be listened to.
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