Survey issues financial health warning to one in five English Football League clubs

A new survey into the corporate health of the English Football League by Begbies Traynor the corporate recovery specialists, reveals that signs of financial distress are alarmingly widespread among professional football clubs in the Football League.

With both Port Vale and Portsmouth football clubs entering administration, recent weeks have not held good news for the finances of football.

The Red Flag Alert survey, which monitors business distress levels, has found that of the 68 clubs currently playing in the Championship and divisions one and two of the Football League, 13 are recorded as displaying signs of corporate distress, indicative of poor financial health.

The figures show that while just 1 per cent of UK businesses are showing symptoms of distress, a massive 19 per cent of the football clubs surveyed show the same degree of financial ill health.

The financially distressed clubs include three in the Championship, six in Division One of the Football League and four clubs in Division Two.

Business distress signals, as measured in the survey, comprise a range of significant financial problems that include clubs with serious court actions against them, including winding up petitions and high court writs; clubs that have been issued with striking off notices for late filing of accounts; those with county court judgments against them; and those with serious negative balances on their balance sheet.

Commenting on the report’s findings, Gerald Krasner, a partner at Begbies Traynor who has a track record of dealing with troubled clubs, said: “That 19 per cent of clubs in these three divisions are showing signs of ill-health when directly compared with just 1 per cent of all businesses in the wider economy clearly shows the sector is facing a very challenging time commercially.

“Football’s popularity and income are holding up comparatively well in the economic downturn, but nevertheless many clubs are continuing to spend too much, principally on players’ wages, as they always have done.”

Krasner added: “Football as an industry also suffers from an enormous financial gap between the Premier League and the Football League. One effect of this disparity is that Football League clubs are often tempted to overspend on players to try to gain promotion, and the promised riches and prestige that come with it.

“While Premier League clubs are guaranteed huge television money every year and some have extremely wealthy backers, there are signs of genuine financial distress among a significant number of football league clubs. The sales of season tickets for next season, many of which are paid for during April and May, could provide some short term relief for struggling clubs, but it won’t solve the underlying problems.”

Gerald Krasner concluded: “For football clubs, like any other business, when there are signs that a company is in trouble, getting good professional advisers on board before the decline has gone too far is key. The earlier a club takes advice, the more options its directors will have available to help turn things around.”