Today’s Times publishes an informative survey of the finances of each club in the Barclays Premier League. Net debt figures at many clubs are high in relation to turnover. But one has to remember that many businesses operate on the basis of a platform of debt. Of course, if insecure debts are divided up, re-packaged and sold on, that is when you get the kind of problems that led to the global financial crisis.
Today’s Times publishes an informative survey of the finances of each club in the Barclays Premier League. Net debt figures at many clubs are high in relation to turnover. But one has to remember that many businesses operate on the basis of a platform of debt. Of course, if insecure debts are divided up, re-packaged and sold on, that is when you get the kind of problems that led to the global financial crisis.
What is key about a debt is whether you can service it. Manchester United has the biggest net debt at £366m, but that is not much in excess of annual turnover and no one has suggested that it cannot be serviced. United fans complain that it has held back to the team, but they are marching towards an emphatic reclamation of the Premiership title, even if the Champions League eluded them.
What is often unusual about football debt is that it is often owed to one person, but then they may choose to write it off as has happened with Mohammed al Fayed at Fulham. At Sunderland £83.9m of debt is largely made up of loans from Ellis Short via his investment vehicle Drumaville.
It is relegation that tests a club’s finances. This is why Sunderland took a risk on Paolo di Canio. Their wage bill last season was a worrying 82.9 per cent of turnover, although the club does do well on commercial and matchday revenues.
For Wigan Athletic, seven eights of their income comes from the central pool, although their cup run this year will have given them a boost and they can look forward to the mixed delights of the Europa League next year, even if they are relegated. Their wage bill is low at £37.7m and with some offloading of payments could be largely met by the £23m parachute payment.
QPR offer a textbook example of not spending well that still ends up with the club likely to be relegated and with a wage bill that last year accounted for 92 per cent of turnover. This year’s figure is certainly significantly higher. Not all of these players will be easy to shift. Net debt is £88.9m.
Reading took a fairly circumspect approach to the Premier League, perhaps too much so. Wages are 180 per cent of turnover, but then turnover is the lowest in the top flight.
Relegation would be a challenge for Stoke City as they are very reliant on central broadcast revenues. However, the Coates family would back them and, if they did go down, they would be favourites for a quick return.
Finally, spare a though for the clubs at the bottom of League 2 where there is a very tight relegation battle. With only two teams promoted, one via the play-offs, the Conference is a tough league to get out of as many former Football League clubs have found to their cost. Most clubs are full time, Dartford being a shining exception, and Forest Green Rovers is a benefactor club punching above its weight.