English club football is currently in the middle of a major boom with clubs generally performing well in European competitions, consistently attracting the world’s biggest stars, and being able to sell itself as a modern and relevant brand on an international scale. The same was once said of the UK banking sector although as has been well documented, in recent years the sector has seen a very rapid fall from grace. However, as I attempt to show in this article, the English football industry is now being run in a very similar manner to the banking sector – something which could have serious implications for the football world going forward.
One of the main parallels that can be drawn between the top English football clubs and the major UK banks is that both seem to be run not in the interests of their owners but in the interests of their star employees, an issue picked up recently by James Moore in the i newspaper. Earlier this year RBS provided a bonus pot of £607m despite making a loss of £5.2bn. In a similar vein we’re seeing West Ham United posting a loss of £18.6m (albeit in the 2011 financial year) yet still paying £90k a week to Andy Carroll.
I’m not here to pass judgement on what footballers and bankers earn – ultimately if they’re able to command and secure that kind of wage then fair play to them. What worries me more is that star performers in the football world are being paid astronomical wages even in cases where they are losing their clubs tremendous amounts of money (e.g. through poor performances). This clearly can’t be sustainable in the long run. After all, the banking crisis has taught us that even the best regarded and highest paid workers can become complacent and rack up huge losses for their bosses.
Certainly I think there is reason to be concerned at the current state of football finances. The loss-making football club is now sadly becoming the norm. For instance, Fulham, an established Premier League club made a pre-tax loss of £5.4 million in 2011 and held debts totalling some £46 million. Even Liverpool, one of football’s biggest brands, held debts of £192 million in 2011. The banking crisis has shown that an industry can only handle widespread losses and debts for so long before serious problems emerge. After all, famous names like RBS (who incidentally are now backers to Liverpool and Fulham) needed state aid to survive while others like Lehman Brothers and Bear Stearns simply went to the wall.
Hopefully, the football world will get its house in order before several of the major clubs begin to come under serious threat. There are two things that should ultimately stop English football from imploding in same way the banking sector did. Firstly, football clubs aren’t deemed too big to fail and won’t receive state bail outs – ultimately they know they have to sort themselves out or face the consequences.
Secondly, to some extent the problem has been identified early and measures are in place to address it. Most notably, UEFA will be introducing the financial fair play regulations which will aim to bring wage expenditure levels down to more sustainable levels. Clubs in theory will be rewarded for sound financial management rather than generating success through unsustainable spending levels. That essentially means though that we’re relying on Michel Platini to save English football. Worrying thought isn’t it…?
