Football League club finances

[Warren]

I think there is a game wide problem including the Premier League. If the remaining games are not played and therefore the Premier League clubs are not paid TV income and lose attendance related income, they will incur large financial loses and have severe adverse cash flow unless they do what a non sporting business would do, which is to dismiss most staff. That is because of the large salaries paid. Even if 2019/20 is extended indefinitely that remains the position. In the lower leagues the same position exists but with smaller sums of money involved. In other words the whole of professional football could go bust.

[Wrex]

23 minutes ago, Warren said:

I think there is a game wide problem including the Premier League. If the remaining games are not played and therefore the Premier League clubs are not paid TV income and lose attendance related income, they will incur large financial loses and have severe adverse cash flow unless they do what a non sporting business would do, which is to dismiss most staff. That is because of the large salaries paid. Even if 2019/20 is extended indefinitely that remains the position. In the lower leagues the same position exists but with smaller sums of money involved. In other words the whole of professional football could go bust.

As we've seen with Boris guaranteeing 80% of worker's wages, that just won't happen. Those in the corridors of power will not allow it. For a start the UK taxpayer makes huge revenues from football. Here is a list of organisations with a vested interest in football clubs not going out of business:

- UEFA, FIFA and all domestic organisations such as the FA, Premier League and EFL

- HMRC and various political bodies from tourist boards to local MPs to the foreign office, I'm sure the Premier League being a worldwide phenomenon helps boost the UK government in many ways even in terms of soft power

- The banks and lenders. They are not interested in seeing huge clients go out of business. I'm sure Lloyd's for example wouldn't be particularly thrilled about repossessing dozens of stadiums around the country with sod all use for them

- Fans, whether that be the old man that runs the paper shop down the road or billionaire Roman Abramovich

- The broadcasters. BT Sport, Sky Sports etc won't accept paying huge sums for matches that won't take place. But they will accept some kind of compromises as circumstances dictate.

Sure there will be a lot of smaller clubs in huge danger and if anywhere between 3 - 7 current or former Football League clubs went to the wall I wouldn't be surprised. But the entire multi billion pound footballing structure of the nation? Nah, that will carry on somehow

[Warren]

1 hour ago, Wrex said:

As we've seen with Boris guaranteeing 80% of worker's wages, that just won't happen. Those in the corridors of power will not allow it. For a start the UK taxpayer makes huge revenues from football. Here is a list of organisations with a vested interest in football clubs not going out of business:

- UEFA, FIFA and all domestic organisations such as the FA, Premier League and EFL

- HMRC and various political bodies from tourist boards to local MPs to the foreign office, I'm sure the Premier League being a worldwide phenomenon helps boost the UK government in many ways even in terms of soft power

- The banks and lenders. They are not interested in seeing huge clients go out of business. I'm sure Lloyd's for example wouldn't be particularly thrilled about repossessing dozens of stadiums around the country with sod all use for them

- Fans, whether that be the old man that runs the paper shop down the road or billionaire Roman Abramovich

- The broadcasters. BT Sport, Sky Sports etc won't accept paying huge sums for matches that won't take place. But they will accept some kind of compromises as circumstances dictate.

Sure there will be a lot of smaller clubs in huge danger and if anywhere between 3 - 7 current or former Football League clubs went to the wall I wouldn't be surprised. But the entire multi billion pound footballing structure of the nation? Nah, that will carry on somehow

I expect one adjustment that will come is that League 1, 2 and National league in England will become part time. This has been needed to rationalise the finances of clubs for some time. It is ultimately better for the players as well who won't go through cliff edge contract situations each season plus finally being pushed off the cliff at retirement.

As an accountant I disagree above, several Premier League clubs already have marginal financial positions including Aston Villa and West Ham within public viewing. Sky is allowing cancellation of customer sports channel subscriptions; given all its sports are cancelled and therefore it can't pay its TV money if games aren't played. Banks have bigger fish to fry than football clubs in this situation. Going into administration enforces current cost reduction and coming out of administration via upstart of continuing TV rights sale when resumed eventually saves millions when they are likely preferential creditors. Government can't intervene, football is a business like any other business, so there is a cap on paying wages which falls massively short of real player and backroom staff wages. 

[Warren]

Also, take the Liverpool situation. Their ownership is based around baseball in the US. It looks like the whole baseball season will be lost. A common practice in the US is to use a company law power to enter protected administration where creditors must pause their claims against a company. This was used to shelter General Motors in the financial crisis and facilitate restructure. Again this is a useful way out of player contract liabilities and to force reality that with no revenue the players can't be paid. Fenway Park holds 41,000 fans and would usually have at least 70 home games a season plus TV money. The loss of a season is catastrophic. I'm not sure about the Liverpool club structure in this, but its parent looks in real trouble to me. 

[Wrex]

https://www.bbc.com/sport/football/52148955

Good on the Premier League players for this. This £125 million should keep EFL and National League clubs afloat.

https://www.dailymail.co.uk/sport/sportsnews/article-8178177/beIN-SPORTS-withholding-Ligue-1-TV-money-coronavirus-shutdown.html

However potential trouble down the line. The wealth of the Premier League can help out the EFL and themselves not have matchday revenues for 8-10 game weeks. But if those broadcasters start hold back payments on those massive TV deals then Premier League clubs are in trouble and the whole pack of cards can fall down.

[JRC]

I can't see a government bailout of football. The sheer scale of government spending on the crisis is staggering. Despite talk of austerity government spending has exceeded revenue every year since 2007. This year the government revenue will be a fraction of what was anticipated, so even without the extra spending in the crisis there would have been a large increase in debt.

Due to our current accout (difference between imports and exports ) deficit a relatively high proportion of uk government debt (about 30%) is owed to overseas customers. In current account surplus countries like Japan and China its much lower whilst USA it's almost 40%. Germany is an exception with China owning a fair chunk as a currency hedge and Germany owning a fair chunk of US bonds because they have positive interest rates. That position may have changed as the drop in the dollar straight after the Fed lowered interest rates was due to large scale German selling of US bonds and repatriating dollars. So in the UK for every 100 pounds of deficit we roughly need overseas investors to lend 30. At some point domestic sources of funds will be exhausted so you would expect that proportion to be higher. That would need higher interest rates on new debt. That will reduce spending on schools  and hospitals.

They could use QE, sell debt and buy it back through the Bank of England for a higher price. That will enrich rich people, overseas and domestic banks. It will depress the pound as overseas banks will want to take profits in domestic currency. It will also increase the money supply, which will at some point create inflation or raise asset prices .... probably both.

When the crisis is over there will be another crisis for government to deal with. Getting the economy working and funding basic services will be an acute problem in itself. Football will be a relatively small consideration for the next couple of years.

 

[Wrex]

A couple of things. Actually Japan has the highest level of government debt in the world. Over 200% of it's GDP. The Japanese government has over $11 trillion of debt. Japan is also the world's third biggest economy. So don't let ten years of David Cameron's pleading that austerity is necessary get to you.

Also this pandemic is worldwide, and some countries and economies are getting hit worse than the UK. So it's not like the world will suddenly see us as financial deadbeats and start calling in the balliffs.

But you're right that there won't be the public or government will to bail out football clubs. They do indeed have bigger things on their mind. It's up to the footballing authorities to act to protect clubs and governing bodies, players and others need to come together to ensure the continued existence of the game. There is enough money in football to do that, it's just a matter of sacrifices and compromises being made.

[JRC]

48 minutes ago, Wrex said:

A couple of things. Actually Japan has the highest level of government debt in the world. Over 200% of it's GDP. The Japanese government has over $11 trillion of debt. Japan is also the world's third biggest economy. So don't let ten years of David Cameron's pleading that austerity is necessary get to you.

Also this pandemic is worldwide, and some countries and economies are getting hit worse than the UK. So it's not like the world will suddenly see us as financial deadbeats and start calling in the balliffs.

But you're right that there won't be the public or government will to bail out football clubs. They do indeed have bigger things on their mind. It's up to the footballing authorities to act to protect clubs and governing bodies, players and others need to come together to ensure the continued existence of the game. There is enough money in football to do that, it's just a matter of sacrifices and compromises being made.

The situations are not comparable due to Japanese debt being almost entirely domestic; owned for pensions. One of the issues with Japans policy of more debt with lower interest is Japanes workers saving increasing percentages of income, so failing to increase consumption. So Japan more than cover any deficit due to repayment on goverment bonds through their current account surplus. They run a much bigger capital account imbalance due to the purchase of overseas productive assets than repayment of overseas owned national debt. Ours doesn't and we rely on international governments and investors to prop up government deficits. Indeed there is some evidence that the traditional domestic bond demand for annuities is falling as providers such as Legal and General diversify into areas like social housing where the return is higher. So Japan doesn't have to consider the international markets when considering issue of debt and setting interest rates, whereas the UK does for 30% of its funding. The question is at what level that starts to be significant. That point will be significantly lower than for Japan but higher than some other countries. Debt crisis around the world always start at the point when international investors pull out and that point can't be proved until it happens. Once it starts to happen its difficult to stop, although uk debt being sterling denominated does reduce pain to a degree, even if the consequences are a rise in inflation and reduced access to international markets.

[Fosse69]

 

EFL agree pay deferment with PFA

 

https://www.msn.com/en-gb/sport/football/efl-clubs-given-green-light-to-defer-25-per-cent-of-player-wages-in-april-after-deal-struck-with-pfa/ar-BB12CzzR?ocid=spartanntp