With the number of clubs being forced into administration already at record levels, the full extent of the crisis facing the British football industry is revealed today in the most comprehensive survey yet of football finance.
The survey, by Accountancy Age and PKF, shows around half of Britain’s top clubs have increased their bank facility within the last 12 months.
And the reality is that most are likely to be overstretching themselves as more than half expect to use over 90% of their available facility.
The level of borrowing is also putting unprecedented pressure on individual directors. Almost one in four clubs is now relying on a director to personally guarantee loans. The problem is most acute among First Division clubs, which have been hit hardest by the collapse earlier this year of ITV Digital.
‘This is a cause for concern given the high level of borrowing within the sector versus corporate security,’ said PKF head of corporate recovery Philip Long.
The terms of most clubs’ borrowing is likely to prove expensive, according to interviews conducted on condition of anonymity with 22 of the 56 finance directors working for clubs in the English Premiership, the Nationwide League First Division and the Scottish Premier.
Almost half the FDs polled refused to divulge the interest rates they are currently paying – and no First Division FDs would say.
‘This may indicate interest rates are considerably in excess of 2.5% above base,’ according to PKF.
‘Given the state of the wider economic environment it would be fair to characterise 2.5% over base as being for a “slight risky” business.’
What will worry fans, players and investors alike is that the future of many clubs is very much in the hands of their bankers. Some 43% of clubs generally have facilities that are repayable on demand – in the First Division a massive 83% of clubs’ borrowing is payable on demand.
But the survey also suggests the banks may be compromising themselves.
With so many clubs looking to use almost all their borrowing facilities, ‘bankers should be worried about their potential exposure if nearly 60% of the larger clubs that have increased their bank facility use that facility in the coming year,’ PKF warns.
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