The price of success
Debt is casting a long, dark shadow over football and it is an issue that shows no sign of leaving anytime soon. The Premier League’s 20 teams currently find themselves a combined £3.1b in the red, which is an astonishing amount especially as the ‘big four’ make up over half of it, according to Radio 5 Lives’ Premier Banking programme (03/08/09).
Levels of debt
Manchester United – £700m
Arsenal – £420m
Chelsea – £340m
Liverpool – £260m
That is an incredible £1.72b of debt that the top four have incurred in their bids for Premier League and Champions League glory. Are these levels of debt sustainable? Should one of these clubs fail to qualify for the Champions League would the Leeds scenario take effect? David Taylor, UEFA’s general secretary is certainly concerned about a repeat of the collapse of Leeds United as he believes that clubs are living beyond their means. During his interview on 5 Live he launched a rather scathing attack on the finances of English clubs and he also raised the deeply worrying prospect of debt-ridden Premier League teams being banned from the Champions League and Europa League competitions. Should that come to pass it would surely spell the end for the Premier League as we know it, the ‘big four’ would all suffer unsustainable losses and it could see them having to drastically restructure and sell most of their assets in a very similar way to Leeds who sold practically all their players and Elland Road. David Gold however casts a more positive light over the debt, stating that while £3.1b is a large amount of money, the revenues generated by Premier League football through TV and merchandising means that the level of debt is sustainable at this present time. This was a view shared by Premier League spokesman Dan Johnson who agreed that the sustainability and not the level of debt was the main issue and he believes that the current levels are sustainable. He went on to state that clubs in Italy and Spain were possibly worse offenders than those in England, when asked if UEFA were singling out Premier League clubs, he simply replied: “some would say that.”
Manchester City crashing the party
David Taylor briefly spoke of Manchester City and Real Madrid’s incredible summer spending sprees, stating that: “There is certainly disquiet in the corridors of power here.”
The ‘big four’ will also be worrying about Man City, quietly and in private of course, because should they muscle their way into the top four that will lead to a £30-40m shortfall for whichever team they replace. That is a huge change in revenue and there are very few businesses that can cope with such a change in income, outside of banks and oil companies. Liverpool were identified as the team with the most to lose, should they end up 5th next season. Arsenal’s debt is the result of the Emirates stadium – however, that generates a lot more money for them whereas Liverpool’s debt is as a result of the takeover by George Gillett and Tom Hicks. The Merseysider’s have just re-negotiated their debt by extending it for another year, however, there are still huge worries that the banks may call in the loans which could pose a serious threat to the future of Liverpool. Former Liverpool chief executive Rick Parry shares the views of David Gold and Dan Johnson. He stated that it is the ability to repay the debt and not the level of debt that should be a cause for concern, but at the moment there is no need to panic. He also alluded to the fact that UEFA could be focusing on the English clubs as they have become “too competitive” in Europe.
The current world recession has hit most clubs hard, Portsmouth and West Ham are two such clubs. West Ham’s former owners, headed by Icelandic businessman Bj