Cash pressure forces clubs to dig deep
FOOTBALL clubs across England are having to juggle their finances to stay solvent in the current economic climate, according to a survey of football club finance directors.
Accountants and business advisers PKF’s eighth annual survey, Staying on the ball – how clubs are responding to the credit crunch, shows that all leagues are suffering from the recession, but in different ways.
Charles Escott, partner at PKF and a football sector specialist based in Leeds, said: “Given the cataclysmic financial and economic events over the last 12 months, it is not surprising that the results of our survey reflect the predominant themes affecting the UK economy.
“More clubs are finding it harder to raise funding, more are digging deep into their overdraft facilities to keep going, and fewer expect to make a profit this season.
“Finance directors are also clamping down on the size of the squads and trying to curb both player salaries and transfer fees – although the recent Premier League signings suggest that the big clubs are still immune from some of the financial pressures on the smaller leagues.”
The study has revealed that merchandising and corporate hospitality have shown the largest falls in the last year – for both, 38% of clubs reported reductions of greater than 5%.
For the year ahead, three quarters of Premier League respondents are anticipating a reduction in income of between 5% and 20% for corporate hospitality, but appear largely confident that match and season ticket sales will hold up.
Clubs in the Coca Cola Championship, however, are concerned about match and season ticket revenue, while those in League 1 are most concerned about a fall in merchandising revenue.
At the same time, more than a third of clubs are under more pressure from their banks – an overall increase from 24% last year – and half of all respondents envisage using more than 90% of the bank overdraft facility in the year ahead – up from 41% in 2008.
Mr Escott said: “Arguably, it is clubs in the Championship that have the biggest gamble, do they spend to try to reach the Premier League (the Holy Grail) or spend to avoid relegation?
“Either way, the price of failure could be catastrophic. Clubs must plan for all eventualities and unsuccessful speculation using bank debt could be a one-way ticket to insolvency.”
Finance directors’ control over player costs will also tighten, with almost two thirds planning to have a smaller squad size this year compared with 35% in 2008 and just 25% in 2007.
The Premier League clubs’ restraint on squad size, however, does not extend to payroll costs with 75% budgeting for a larger payroll perhaps indicating a strategy to concentrate on quality rather than quantity.
