Premier League clubs are finally paying the price for the culture of debt
Published 09/04/2010 | 16:55
There was more than an element of gloating or, to use a German word, schadenfreude, in Uli Hoeness's claim that English clubs were finally paying the price for their free-spending days in the aftermath of Manchester United's dramatic exit from the Champions League.
Dominance of Europe, the Bayern Munich president said, was over. It’s time, amid the financial crisis, for a reckoning.
In a season when, for the first time in seven years – seven years in which income has grown, revenues boomed, bursting the £1bn barrier for television money alone – the Premier League has failed to have a club in the final four of Europe’s biggest competition, then now is the moment to take stock.
It may, of course, be down to sporting luck — Barcelona, Bayern, Inter Milan or Lyon are hardly parsimonious minnows of the game — but there is a sense that a re-alignment is happening across the continent and that the English clubs are the losers, paying a price for their short-term, live for the moment approach.
This has also happened in a year in which, shamefully for the Premier League, Portsmouth have gone into administration - a club which have spent massively and where wages, at one stage, accounted for almost all of the turnover while their stadium was decaying, the training ground ramshackle and with no business plan for the future.
Where has the money gone? It’s been a familiar, uncomfortable refrain.
That is the biggest indictment of English football. Portsmouth’s demise is well-documented but it should never have been allowed to happen.
It’s like someone living in a modest, terraced house with a fleet of Ferraris outside. All paid for on credit.
Administration when there is so much wealth available is tantamount to negligence and a collective negligence that stretches from the south-coast to the Premier League’s headquarters in Gloucester Place, central London.
The organisation’s chief executive Richard Scudamore defends with a passion the right of clubs to spend and the right of owners to pump millions into fulfilling ambitions.
Recently he said he would “protect to the nth degree the ability of Mohamed Al Fayed to do what he has done at Fulham” and talked about the right of every club to “speculate” and “assess the risk”.
Fayed has brought success to Fulham but at a high price – he is thought to be owed as much as £180?m and although he has not shown any desire to call in those debts, what would happen if he did to a club with a smallish fan-base and a stadium whose capacity is just over 20,000?
It feels, and has been, precariously dangerous and is all the more unbelievable because football is not exactly the most sophisticated of businesses.
Revenue streams are simple and for the large part guaranteed. It is, as one chief executive put it, a case of “farming” the fans while keeping the contracts of key employees – such as the players – ticking over.
But it is those contracts that are at the heart of the problem. Don’t be misled into believing that foreign players come to England for the football or the competition. When they talk of the “atmosphere” inside the grounds they are just being polite.
They come for the money. And that money leaves the game. There are more millionaires in the Premier League than in any other league in the world. Average players earn millions.
When West Ham United awarded Freddie Ljungberg, who was on his way out after a glittering career at Arsenal, an £85,000-a-week salary, then the world had officially gone mad.
When a journeyman right-back such as Aston Villa’s reserve Habib Beye receives £48,000-a-week it is simply unbelievable.
Inflated transfer fees are one thing but at least – except for ridiculous slices paid to agents – that is ploughed back into clubs. Wages are a drain.
Surely it would have been better to have shown more restraint and ploughed a greater share of the cash into the bricks and mortar of a club, improving infrastructure, youth development and so on? But that takes patience.
A recent Uefa report – the European club footballing landscape – showed that Premier League clubs owe more money than the rest of Europe’s top divisions put together and now, with the new financial crisis, that is finally catching up on them.
The weakness of the pound and the increase in taxes have also had an effect while Uefa’s impending financial fair play rules — an attempt to get clubs to live within their means – will hit hard.
No representative in the last four of the Champions League is embarrassing enough. But it may be about to get worse for the Premier League.
Who has the greatest debt?
Manchester United.... £649m