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Articles and reports on financial issues within football – soccer – from The Political Economy of Football.
In a generous gesture of support, Roman Abramovich has made Chelsea virtually debt free. In the previous financial year, he reduced the debt from a peak £760m. In the year to 30 June he converted the £340m of interest free loans owed by the club to him into equity. The move has reduced the club’s debt almost to nil and puts it in a strong position ahead of proposed rules seeking to prevent European football clubs from taking on unsustainable levels of debt.
Wembley National Stadium, a wholly owned subsidiary of the Football Association, made a pre-tax loss of £31m last year and could default on finance arrangements if wealthy patrons fail to renew their season tickets. The stadium hosts England football internationals, the FA Cup final and Football League play-off finals. The company made an operating profit of nearly £6m in the year to December 2008. However, there was a £26.6m interest bill and the £10.9m write off of bank fees associated with the stadium financing in 2002.
Co-owners of Liverpool Tom Hicks and George Gillett, who were the subject of a fans’ demonstration yesterday, have hit a brick wall in their attempts to sell the club. Several potential investors think that it makes better sense to wait for the club to be sold at a knockdown price rather than inject money now. There is a strong feeling that Liverpool are heading towards a financial crisis of their own making that will force the owners to sell.
Premiership clubs have kept their fans and in some cases increased attendances since the start of the season, providing further evidence of football’s ability to withstand recession, according to Deloitte. The first six weeks of the season have seen clubs using 91 per cent of their stadium capacity, in line with previous seasons. Blackburn Rovers and Manchester City have increased attendances by 10 per cent.
Blue Square North outfit Hyde United face liquidation tomorrow. On Wednesday Hyde were wound up by the High Court with debts of £123,000. The gates of their Ewen Fields ground have been padlocked shut with the insurance on the stadium now invalid. They have got seven days to appeal the decision but they need to come up with all the money they owe HM Revenue and Customs to get the winding up order rescinded. Hyde United have collected £67,000 and the local council have pledged £23,000 in sponsorship, but when legal costs are added in, that leaves them £35,000 short.
How will the credit crunch hit football? The financial storm is not over yet, but at the moment, within the Premiership at least, the top clubs are sitting pretty, while smaller clubs in less prosperous areas are having to be more innovative in their response. Watching football at the top level either live or on television isn’t cheap at a time when incomes are being squeezed. A Sky package costs around £400 a year and season tickets have gone up by almost 800 per cent since the Premiership was set up.
Liverpool which owes two banks £350m has renegotiated its debt with the Royal Bank of Scotland. Although Liverpool fans will be relieved that a deal has been done, after fears that the loans might be called in, the sequence of events does nothing to reassure them that the American co-owners, Tom Hicks and George Gillett, have the financial clout the football club needs, particularly to build the Stanley Park stadium.
Real Madrid have said that they have a €300m transfer budget his summer, but €68m went on Kaká followed by €92m on Ronaldo. It is understood that €100m will come from cash in hand, €100m from additional revenues hopefully generated by new players and €100m from bank loans. The Spanish economy may be in dire straits, with banks not lending to anyone, but they have been prepared to give Real Madrid a four year €300m facility.
Football was a banker’s playground for much of the last decade. But have banks now reached a point where they will take their ball away and end the game? Banks have done well out of deals with Russian oligarchs, Middle Eastern royalty and American hedge funds. Banking consortia were put together to fund the takeovers of Manchester United and Liverpool, and the stadium financing for Arsenal.
Serie A was the fastest growing league in Europe in the 2007/8 season reveals the latest Deloitte Football Finance report. Total revenue increased by €357m (34 per cent) to €1.4 billion. The change of mix of clubs in Serie A for 2007/08, notably Juventus’ return, contributed two-thirds of the increase. The other clubs increased revemues by c. €120m aided by new broadcasting contracts. La Liga recorded a 8 per cent (€112m) growth in revenue to €1.4 billion, placing it joint second with the Bundesliga which grew by 4 per cent (€59m).