Can football survive the Credit Crunch?

23 October 2008

Stephen Harrison

Despite the “credit crunch” now hitting the country very much where it hurts, football, that very beacon of financial mismanagement, continues to thrive in times of economic turmoil.
In the financial year to January 2008 Manchester United announced pre-tax profits of £59.6 million. Premiership footballers themselves received over £1 billion in wages last season whilst this summer’s transfer window saw Premier League clubs splash out a record £500million on players. On that evidence, it would appear that the Barclays Premier League has achieved something that all of us dream of: a successful escape from the strangulation caused by ever-tightening purse strings. But hang on a minute, let’s rewind there. Did I say Barclays Premier League? The very same Barclays that reported a £1.6 billion loss on assets in 2007 is the major sponsor of the richest football league in the world? Luckily though for football lovers, Barclays seem to be weathering this economic storm, sorry, make that hurricane. The bastion of English football is safe, for now at least.
Although it is certainly difficult to sympathise with the super-rich owners and directors of these clubs, it would be foolish to assume that they are exempt from the everyday worries we’re all facing in light of the current economic crisis. With the survival of many clubs relying on sponsorship revenues and ticket sales, surely it can’t be long before it’s not just those following in the footsteps of Roy Keane who’ll be seeing red in the Premier League.
Even if your interest in the footballing world only extends as far as watching Match of the Day on a Saturday evening you’ll have noticed the effects already; West Brom have been playing all season without a shirt sponsor while West Ham have resorted to wearing their numbers on both sides of their shirts in an attempt to cover up the odd-looking blank space left by the collapse of their sponsors XL Leisure. The recent match played between the two made its mark as the first unsponsored Premiership match in history. Is this to be the first of many entries into the football record book for the credit crunch?
If you only scratch beneath the surface of ludicrous wages and outlandish spending the potential for damage is apparent. Take Mike Ashley’s failure to flog Newcastle, at least at the speed and price he desired. No Arabian oligarch in his right mind would part with £300 million to acquire a club that cost barely £134 million just over a year ago, not to mention the fact that Newcastle have only been shielded from the bottom of the table by the worst ever start to the season with a decidedly lacklustre Tottenham outfit, an outfit that saw the club spend £50 million in the most recent transfer window.
It may be of no consolation to Tottenham fans (trust me it’s not), whose team have managed to scrape together a grand total of two points from eight games, but the finances of their club are the best in the business. Compared to the £268 million debt of their North London rivals, Tottenham’s debts are non-existent, probably the only bragging rights the Lilywhites will be able to claim this season. In the last month the chairman of the FA, Lord Triesman himself, has warned of the ‘toxic debt’ that could prove cancerous for Premier League clubs, the ‘Big Four’ in particular. Treisman’s claim may well be supported by the evidence that the league is £3 billion in debt, but this phenomenon is by no means new. Clubs are continually gambling their finances in the knowledge that the nation’s love for football has the strength to overcome any economic crisis.
But, is this still the case in light of seriousness of the current recession? Apparently so, whilst the public curbed their spending in high street stores, this summer season ticket sales reported no ill-effects of the economic downturn. The loss of football is one sacrifice the British public are not prepared to make. Premier League football is unlikely to bite the dust as a result of diminishing economic fortunes, but the league could see itself further dominated by the “top four” come May each year. Maybe only Manchester City’s billions can prevent such repetition.
Sponsors and investors will never cease to be excited by the opportunity of associating their company with the superstar likes of Rooney, Lampard, Torres and Cesc Fabregas – had Manchester United’s sponsors AIG not been bailed out by a US government loan it would take a gambling man (or woman) to bet against them not finding a new sponsor the very next day. These big clubs are largely unperturbed by the debt they find themselves in because, unlike Lord Triesman, they recognise that the stability of their club is determined by the players they hold. By paying Lampard £150,000 a week, Chelsea are sure to maintain their image as a club providing lucrative opportunities to investors across the board, thus keeping the money flowing. There is no doubt that football, certainly at Premiership level, is slowly moving away from its humble working-class roots to a realm of business dominated by an exclusive minority. For me, it is this which is the most worrying factor of the credit crunch.
The financial fragility of Premier League clubs has always been subject to much debate and it was never going to be long before the economic panic of a nation infiltrated it’s most beautiful game. However, the loyalty of fans to one Premier League club or another will ensure that they will never suffer a demise similar to that of the nation’s banks; customers switching back and forth when financial concerns arise are simply not in keeping with the footballing spirit.