Why Administration in Football Clubs Common
Going into administration is a very common reorganisation device for football clubs. Research by John Beech at Coventry University says that since 1986 there have been 68 cases of clubs in English leagues becoming insolvent, some of them more than once, although liquidation remains rare. This is because administration is a tactical move by a financially challenged club. You put yourself in administration, proceed to a company voluntary arrangement and re-emerge with new directors and a refreshed balance sheet. The problem now is that the number of financiers (or benefactors) willing to risk money on football is diminishing. According to Supporters’ Direct, the real question is how deep are directors pockets and how willing would they be to bail out their troubled assets. Dave Boyle of Supporters Direct commented, ‘If your chairman is drawn from hard-hit industries like the construction industry, that is going to affect your liquidity.’ Warnings about clubs disappearing are not new, but Mr Boyle is not the only person to think that we are in the most ominous situation for some time.
There is an interesting correlation between relegation from the top flight and going into administration a few years later. Examples are (relegation year followed by administration year): Middlesbrough (1985/1988); Crystal Palace (1998/1998); QPR (1996/2000); Bradford City (2001/2001); Leicester City and Ipswich Town (2002/2002); Wimbledon (2000/2002); Derby County (2002/2003); Leeds United (2004/2006); Southampton (2005/2009). Southampton is not the only club to have debts of £30m plus as five others were in that category, including Leicester City which also had a new stadium to fund and debts of £40m, as did Derby County (£33m).
Writing in today’s Sunday Times, Rod Liddle obviously thought it was still April Fool’s Day when he suggested that Portsmouth and Southampton should merge to form Solent United, playing at St.Mary’s. If this was a business like any other, or even a sports franchise system, that might make economic sense. But the dislike between Saints and Pompey fans is one of the most intense in the country, indeed ‘dislike’ is probably too mild a word. Presumably Liddle intended his comments as a wind up which would draw attention to his column.
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Triesman Blasts Football Debt – 08/10/2008
Lord Triesman, the chairman of the FA, and Richard Scudamore, the chairman of the Premiership, got in an argument yesterday about the effect of the credit crunch on football at the Football Leaders conference, ironically held at Stamford Bridge…
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