The International Monetary Fund (IMF) has talked this weekend of a ‘meltdown’ in the world’s financial system which could lead to a further 20 per cent being wiped off stock exchange values. We don’t claim to be economic forecasters on this page, but one of the difficulties with statements of this kind is the so-called ‘Oedipus effect’: making the prediction increases the chances of it occurring. Some of the commentary in recent days has come from people whose agenda is the failure of the Premiership.
The International Monetary Fund (IMF) has talked this weekend of a ‘meltdown’ in the world’s financial system which could lead to a further 20 per cent being wiped off stock exchange values. We don’t claim to be economic forecasters on this page, but one of the difficulties with statements of this kind is the so-called ‘Oedipus effect’: making the prediction increases the chances of it occurring. Some of the commentary in recent days has come from people whose agenda is the failure of the Premiership. As we have emphasised before, we think that the real threat could come to lower or non-league clubs in the near future. Two examples: work on a new stadium for Northern League Penrith has been hit by the credit crunch. The National Bank of Australia has withdrawn backing for the purpose-built £80m development which would have included a superstore. Following Blue Square premier club Salisbury’s appeal for donations (£40,000 against a target of £100,000 raised so far), Kidderminster has asked individuals to pay £50,000 for a place on the board. The chairman’s building company has been hit by the slowdown and gates at the former Football League club are currently 1,000 below a 2,500 target.
What the Premiership model really rests on is the television money. For a club like Manchester United, gate money along with corporate boxes and merchandise is important and the latter two categories could be hit in a slowdown. But a club like Wigan Athletic can get along with relatively low gates (a lot of them youngsters), the television money and a benefactor. Of course, benefactors may be hit by a slowdown. There are a lot of factors to consider, and it’s a fast-moving picture, but we will try to provide as much in depth analysis as we can. What we don’t know – and nor does anyone else – is what the length and depth of the global economic slowdown will be.
When Cash Is King
Net debt figures for football clubs don’t really make a lot of sense. Take the four most indebted Premiership clubs on the basis of 2007 figures: Manchester United (£666m); Chelsea (£578m); Arsenal (£318.1m, 2008); Fulham (£181.7m). Two of these are ‘benefactor’ clubs. Now even Roman Abramovich is not immune to losses on the stock exchanges. But he can lose a lot of money and still be very rich. Chelsea are not immune to, for example, slowdowns in merchandise sales in the run up to Christmas. But they are not suddenly going to be impoverished. Arsenal have caught a bit of a cold with the way that their Highbury property development has been hit by the changing market, but they are not going to default on their payments. Manchester United is a more complex case, because of its quite complicated financing arrangements, while at Liverpool the American owners cannot deliver on their promises if they are unable to borrow money. However, even for a club as financially troubled as West Ham, there is a buyer waiting in the wings. However, it is the sovereign wealth funds or billionaires from India who now have the whip hand. If you have lots of money in gold and a basket of currencies, you can still buy a club, but it may not cost as much as it would have done a few months ago. One consequence is that Newcastle may be difficult to sell at a price which would recoup Mike Ashley’s investment.
Richard Scudamore, the chief executive of the Premiership, is a man that many love to hate, although it could be argued that what he does is fight his corner which is what he is paid to do. But even he has been moderating his tone. He has had talks with government ministers. Admittedly, those talks are part of an ongoing dialogue, but they are taking place in a context where there is more emphasis on regulation. When Mohamed Bin Hammam, the president of the Asian Football Confederation, who had previously been opposed to the 39th game proposal indicated that he might have changed his mind, Scudamore’s reaction was very cautious. He said that nothing might happen for a year and emphasised, ‘I’ve gone on record as saying that the idea will not come back in exactly the same form as announced in February is wrong. We’re not daft and we’re not insensitive to the reactions of fans. We’ve never been confident that the 39th game will happen.’ With the number of purchasers of clubs from the United Arab Emirates, with more probably yet to come, they will soon be in a position to stage their own local competition between clubs they own!