In 2005 Accountancy Age wrote an article entitled “When Saturday Comes”, in
which football accounting experts suggested that clubs had learned the lessons
of Leeds’ (first) financial collapse, and their poor use of TV money. Move on
five years, and new owners are making old mistakes.
The potential to lean on accountants as the standard bearers for financial
rigour and good governance is effectively being ignored, advisers say.
“The beancounter doesn’t get the attention they deserve [in the clubs],”
according to Joe McLean, recovery and restructuring partner at Grant Thornton.
“FDs lose the intellectual battle every day – those in the industry are
endeavouring to get fellow directors to live within their means, but press and
local pressure pushes clubs to live outside their means.”
Others that lose out when clubs collapse are, of course, the creditors.
HM Revenue & Customs has shown that it will not tolerate clubs failing
pay their tax ad infinitum. Last week it issued winding-up orders against
Cardiff City, Southend United and Premier League Club Portsmouth – with the
first two given 28 days to settle their bills with HMRC, and the latter given
until tomorrow to prove the club can avoid insolvency.
Advisers have suggested that it is not just the taxman who is fed up with
clubs’ credit antics. Several told Accountancy Age that banks were looking to
steer clear of involvement with football clubs.
“If you take the macroeconomic view, where banks lent aggressively, they can
only now lend to viable businesses,” said McLean.
Reports have claimed that the government is looking to set up a football
governance regulator to watch over the industry. But that model is flawed,
experts suggest, because watching from the outside will have little impact on
the day-to-day decision-making process in clubs.
Proving wrongdoing would also be a mammoth task – and such a body would
require substantial funding. The biggest problem clubs face is handling their
massive wage bills, and making sure that key creditors are staved off.
Suggestions by football experts from Deloitte and other governance
specialists that the wages-to-turnover ratio must not exceed 60% has been heeded
by some, but
The Premier League might want to follow the Football League’s introduction of
a transfer embargo if clubs fall behind on their tax payments.
McLean would like to see clubs forced to live within their means, but he is
concerned that with Premier League clubs set to receive up to 25% more in TV
funds from next season when a new contract comes into force, this money could be
squandered rather than shoring up balance sheets.
“You cannot spend your new-found wealth until your football creditors and
HMRC are paid – that’s what has to happen.”
IN OUR VIEW
With UEFA leaning down hard on the Premier League to tighten rules on clubs’
debt levels, it seems certain that football financial governance will require an
iron fist rather than a watching brief. Then, finally, fnance professionals can
help a club manage itself rather than get involved when they are close to
Steve Absolom and Will Wright from KPMG Restructuring have been appointed joint administrators to City Motor Holdings and associated companies
Partners from Johnston Carmichael have been appointed as joint administrators to Axon Well Interventions Products UK
Begbies Traynor have been appointed administrators of William Anelay Ltd, York, one of Britain’s longest-established construction and heritage restoration companies
Smith & Williamson has been appointed administrators of charity 4Children