Football is a Religion, But Players Aren't Gods06:02 - Saturday 11 December 2010 - In Categories Sport, Money
Over the past few weeks, I’ve posted several blogs highlighting the need for executives and club chairmen to change their business models if English football is to maintain solvency, writes Peter Murray.
It appears that someone in soccer heaven either reads my weekly posts on the Insolvency and Law blog or heard my cries because English Football League Chairman Greg Clarke, above, recently announced plans to visit all 72 clubs under his jurisdiction to investigate how to improve their business strategies.
This season, we’ve seen established clubs such as Liverpool, Portsmouth and Cardiff City battle administration and last month HM Revenue and Customs took Sheffield Wednesday to court in attempt to recover £1.4 million in unpaid tax revenue.
Clarke hopes lower league clubs will look at their finances and implement new spending controls.
These include limiting spending to 55 per cent of player’s wages and possible adoption of the UEFA financial fair play regulations, which only permit clubs that break even financially to play in European competitions.
Such far-reaching controls are long overdue. Far too many English football clubs are obviously insolvent and should not be allowed to trade.
Ordinarily, directors of similarly run organisations would face disqualification and their companies would be wound up; which is what happened to Terry Venables in 1998 after he was found guilty of manipulating Tottenham Hotspur’s accounts and taking money owed to creditors.
It seems to me that because football is akin to the national religion, clubs are allowed to trade insolvent; enter administration and lose all their creditors, while paying players (who are also creditors).
Footballers are not preferential creditors, but they’re given preferential status. In an ordinary company they would lose out, but this rarely happens in English football.
When you think about how many clubs there are; the percentage that entered into insolvency procedures in the past two years is extremely high.
So the question has to be asked: can you turn football into a business that makes money, or is the English game insolvent? If Man Utd and Liverpool are barely making a profit, what chance do clubs from the lower leagues have?
These clubs’ business models are not viable and there would be no place for them in mainstream business. Emotion is dominating commercial logic to the detriment of the sport.
20 years ago, these clubs weren’t facing the serious kind of insolvency issues they are now.
Since the 1995 Bosman ruling, which allows professional footballers in the European Union to move freely to another club once their contract expires; there’s been an influx of foreign players.
As a result, wages have rocket, which has made these clubs insolvent. This is utter madness. Players are assets and you’re not supposed to acquire assets that make you insolvent.
It should be no surprise if Man Utd (the country’s most successful club) – or any other team for that matter – faces insolvency at any time in the near future because their business models are not fit for purpose. Peter Murray is director of business rescue firm Insolvency and Law.