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17/Jan/10   

 

The Premier League on borrowed time in the red, in the headlines for the wrong reasons and in for a big shock as they prepare to cope with Uefa's crackdown on overspending - David Conn The Observer

The lurking dangers stored up in complacency during the Premier League's world-conquering boom have finally broken to the surface. Portsmouth, at the bottom, have had their share of TV money withheld as they stagger towards court to contest a winding-up order. At the top end of the table Manchester United, who still make more money than any other club, launched a plan to borrow £500m to part-refinance the £700m debt loaded on to them by their American owners.

The time is drawing to a close when the Premier League can convincingly maintain their laissez-faire approach to the national sport, in which the clubs, cherished by fans for generations, are simply commercial companies, available to buy and sell by anybody without a fraud conviction, from anywhere, with whatever plan.

 

 

When Lord Triesman, the FA's first independent chairman, tried in October 2008 to persuade the Premier and Football Leagues into stronger moves to protect against "pitfalls" among which he identified "debt mountains" and "cavalier ownership", he was relentlessly trashed by the Premier League.

 

 

"I don't think anybody who is rational can look around [in the economic downturn] and think they are immune," Triesman warned, estimating that English professional football was £3bn in the red. "The debt mountains are owned, and therefore the clubs are owned, by either financial institutions some of which are in terrible health, or very rich owners who are not bound to stay, or not very rich owners who are also not bound to stay … I think this poses very tangible dangers."

 

 

In response, Richard Scudamore, the Premier League's chief executive, who was paid a £1.537m salary package in the year to 31 July 2009, including a bonus of £745,566 for negotiating the TV rights, defended the "responsible" approach of his paymasters.

 

 

"Our clubs are all heavily regulated but they've also got directors and owners who will assess the level of risk of their overall debt," Scudamore said reassuringly. "This is at the top of clubs' agendas and I think they are managing it responsibly."

 

 

Events since include financial restrictions at debt-laden Liverpool, a £72m loss for 2007-08 declared by West Ham, who were repossessed by a broke Icelandic bank, overspending at Hull City and questions about whether several clubs are viable "going concerns" without investment from owners. These lend perspective to deciding which was the shrewder assessment, Triesman's or Scudamore's, of the state the game was in.

 

 

Scudamore has spent the past few months notching up lucrative new international television deals in countries where the appetite to watch the Premier League appears to be ever-expanding. With £1.7bn already in the bag for the 2010-13 domestic rights from Sky and the BBC, the Premier League expect to equal or even better the record £2.7bn deal for the 2007-10 on which the clubs are currently feasting.

 

 

That in itself signals the question being asked not just here but around the world, as Portsmouth's plight and United's dispiriting debts have garnered global attention. How has the world's richest league, with the most lucrative TV deal and some of the most expensive match tickets anywhere, whose clubs have become merchants of football and vigorous exploiters of their own "brands", generated such financial carnage? What mismanagement has been permitted, and why, to result in Portsmouth fans marching in protest yesterday and Manchester United supporters' groups ­gathering in Stretford to plan action against the club's owners, the Glazers?

 

 

All the clubs script their own soap opera, but as time lends patterns to the spate of takeovers in which mostly British owners sold out for multi-millions to mostly overseas buyers in the Noughties, certain categories are becoming clear. Portsmouth's financial state is the most alarming since the "live the dream" meltdown at Leeds in 2003, and the takeover by Ali al-Faraj, a Saudi businessman of modest wealth who has not yet been to Fratton Park, is one of the most bewildering. Yet the cause of the crash is fairly simple to explain.

 

 

Portsmouth won promotion to the Premier League in 2003 having been backed financially by the Serb-US businessman Milan Mandaric, and were then taken over in January 2006 by Sacha Gaydamak, an Israeli-Russian who was 29 years old at the time. The club have stayed in the top flight since, but have never expanded Fratton Park from its 20,000 capacity, the smallest in the division, and so have not been able to accommodate more fans, and earn more money from them. They also have no training ground of their own and until 2007 did not have a youth academy.

 

 

When Harry Redknapp was manager he assembled a side that brought the FA Cup back to a chiming Portsmouth in 2008 and featured at various times David James, Sol Campbell, Glen Johnson, Sylvain Distin, Niko Krancjar, Pedro Mendes, Sulley Muntari, Jermain Defoe, Peter Crouch and Lassana Diarra. He achieved this by massive overindulgence, to pay those players their ­millionaires' wages.

 

 

The club had gobbled up all the TV millions that Scudamore and his consultants had dutifully reaped for the clubs, and still managed to lose £17m in 2008, and £23.5m the year before. Was the FA chairman wrong to warn this could not go on? Was Scudamore right in October 2008 to say the debt was being managed responsibly?

 

 

The excessive spending was being absorbed by borrowing from banks and from Gaydamak himself, who was putting in his own money, as loans. After the economic crisis hit, Standard Bank called in a £30m loan: they did not want it rolled over, with the interest serviced, they wanted their money paid back. ­Gaydamak, the backer, is said by his advisers to have experienced financial problems of his own and to have tired of the bottomless demands of owning a Premier League club. So he stopped pouring money in and suddenly Portsmouth's debts were no longer sustainable. For three months running, their wage bill, despite the mass sale of all the star names except James, was not paid on time. Her Majesty's Revenue and Customs have slapped in a winding-up petition for unpaid PAYE on the players' mammoth wages, Faraj cannot secure bank lending, and the fans marched in protest against this reality yesterday despite their game against Birmingham being postponed, which is rather harsher than the dream they lived.

 

 

Most other Premier League clubs are in this same category: despite the huge wealth they have generated, and football's remarkable resilience in the ­recession, the majority overspend on wages, and rely on money paid in by their owners to keep them solvent. Some of the owners are still English, even hometown men-made-good, such as Dave Whelan at Wigan, and Peter Coates, whose bet365 Group has invested in Stoke City's robust recent rise.

 

 

Wigan's accounts for 2008 noted Whelan celebrating the club's "momentous" Premier League survival, at a cost of losing £11.2m, and accumulating net debts of £48.2m. The auditors wrote: "These conditions indicate the existence of a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern."

 

 

Without Whelan's financial contribution, and the support of the banks, Wigan would be bust. That same warning has been reproduced in other clubs' most recent financial reports, including Hull City's and, most sobering, Liverpool's. The overspending trickles down into the Football League, where Championship clubs are desperate to reach the Premier League, yet have to survive on far less TV money: £3m on average per club compared with £40m. When Lord Mawhinney, the League's chairman, announced in November that he would be resigning this spring, he noted that 70% of clubs had changed owners in his seven years, said overspending was the league's worst blight and called again for a salary cap.

 

 

Liverpool and their bitterest rivals, Manchester United, make unlikely partners in a debt-laden category of their own, giving unsuspecting football fans a crash course in a common financial practice: the leveraged buyout. The Glazer family at United, and Tom Hicks and George Gillett at Liverpool, did indeed borrow huge money to buy the clubs in the first place, then loaded the debts, and the responsibility to pay the interest, on to the clubs. At United, ticket prices have almost doubled since the Glazers' takeover and the fans' money can be said to have been used directly to service the £325m of interest for which the takeover has since made the club liable.

 

 

United's prospectus, launched this week to borrow £500m, finally confirmed that Sir Alex Ferguson does not, as he has claimed, have the money from the £81m sale of Cristiano Ronaldo to spend. If they manage to raise their £500m, at a mooted 9% annual interest, United will take £70m in cash and pay off part of the Glazers' hedge-fund debt, which is running at 14.25% interest.

 

 

Of the top clubs, only Arsenal are regularly making a profit without significant outside investment from an owner. But that happy financial position, and the promise of Arsène Wenger's blooming side are compromised by the takeover threat from two battling investors, the American Stan Kroenke and the Uzbek-Russian Alisher Usmanov.

 

 

At the root of all this is that English football's boom has not been managed with a sense of prudence and care for the future. Unlike clubs in Germany, 51% owned by their supporters, or the famous member-owned Barcelona and Real Madrid, English clubs are companies, up for sale. Ownership of them is a lottery, best illustrated in Manchester. If you get lucky, like City, so improbably bought by Sheikh Mansour bin Zayed al-Nahyan of Abu Dhabi, as recession-proof as anyone, you have almost £400m invested in the club, all of it converted to shares, not loans. If you are an unlucky red devil, you get the Glazers' leverage.

 

 

Roman Abramovich, at Chelsea, has also invested hugely, £700m, converted into shares too, but even City and Chelsea face the looming halt being called by Uefa and their "fair play initiative". The European governing body, putting detail into the gut instinct of Michel Platini, their president, that all the debt and sugar daddy investment is not sustainable or good for the game, have dictated that from 2012-13 no club who run consistently at a loss, or rely on benefactor investment, will be allowed to compete in the Champions or Europa Leagues.

 

 

It is an admirably solid move by Uefa, only now dawning on the Premier League clubs who, with their debts and sugar daddies, have dominated the Champions League's latter rounds in recent years.

 

 

While the Premier League's free-­market ownership lottery has allowed clubs to beam in the glow of popularity, Platini, who learned his football in smoke-filled post-match hubbubs in his father's bar in Joeuf, a mining town in north-east France, has called a halt. We cannot, argues Uefa's football man, carry on like this.

 

I can't see anyone coming to 'rescue' us from Mike Ashley. He may in fact turn out to be some sort of perverse blessing in disguise!

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17/Jan/10 

 

Club debts could lead to European ban - Leading English sides could be excluded from the Champions League if a Uefa proposal to limit overspending is successful - Nick Harris, Sunday Times

LIVERPOOL and Manchester United would be banned from the Champions League if Michel Platini’s “Financial Fair Play” criteria for European club competitions were introduced, according to senior sources within Uefa. Manchester City and Chelsea would also be at risk, despite their owners having paid off their debts recently.

Rules governing the amount of debt clubs can accrue are being discussed within Uefa committees and though they are far from fixed, and at least three years away from being implemented, it is clear that many of Europe’s biggest clubs would fall foul of the criteria being proposed by Platini, the Uefa president. His guiding principle is that over a period of time clubs cannot spend more than they earn.

 

 

“Manchester United and Liverpool would be barred from the Champions League and the Europa Cup because they have debts piled directly on the club as a result of their owners’ takeovers,” a Uefa executive told The Sunday Times.

 

 

“Chelsea and Manchester City would fail to meet the requirements because we want to prevent a situation where you can overspend a great deal, then inject cash to balance the budget at the end of the season. Arsenal would qualify. They make more than they spend, including debt repayments. So do Tottenham.”

 

 

However, it is not just English clubs that would be affected. Some of Europe’s most celebrated clubs have built up huge debts and they too face exclusion from the Champions League. “As things stand, Real Madrid would fail and Inter Milan. But for now it’s all theory, based around a principle that needs to be made into something workable,” the source said.

 

 

Debt in English football has been highlighted again because United’s new financial figures, released last week, showed they made an annual profit of £48.2m only thanks to the £80m summer sale of Cristiano Ronaldo, inset. United paid £41.9m in interest in the year on debts that are now above £700m. Chelsea’s most recent figures showed a £44.4m loss, while City’s showed they lost £92m. Both those clubs’ owners have wiped out debts in excess of £300m to clean up their balance sheets. Liverpool’s debts are £240m-plus. Arsenal have £297m of debt, but this was acquired mainly for building Emirates stadium, now a cash cow that helps fuel profits. Arsenal’s repayments are easily serviced.

 

 

England’s Big Four plus City can take solace in that Uefa’s plans are far from complete. Even Uefa officials are uncertain whether rules will be applied retrospectively. “That might not be possible,” the source said. All clubs will have to meet requirements to balance income and spending, but grey areas and loopholes will remain.

 

 

Uefa’s only public statement on the subject so far is nebulous, saying there is an “obligation for clubs whose turnover is over a certain threshold, over a period of time, to balance their books or break even”.

 

 

The rules will be framed by an independent 11-man Club Financial Control Panel, chaired by the former prime minister of Belgium, Jean-Luc Dehaene. The aim is to introduce the rules in the 2013-14 season. Most of the CFCP, and Platini, accept that debt is not to be outlawed per se, but want it to be manageable if it is on a club’s books.

 

 

Uefa insiders are aware that if it banned most of the biggest clubs from its competition there would be a danger of a breakaway league. They also accept that its rules are susceptible to legal challenges. For now, there are three more years of work before proposals turn to rules.

 

THE BIG DEBTORS

 

£727m Manchester United

£609m Real Madrid* (Real claim only £296m)

£436m Barcelona*

£386m Internazionale*

£348m AC Milan*

£297.7m Arsenal

£240m approx Liverpool

£147m Juventus*

£136m Roma*

£96m Bayern Munich*

£0 Chelsea, after £340m write-off, announced Dec 2009

£0 Man City, after £305m debt-to-equity write-off, announced Jan 2010

 

* * * * * English data from Premier League club records or accounts * * * * *

Figures marked * from Prof Jose Maria Gay de Liebana, football finance specialist at the University of Barcelona

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I've just been reading the first article on the Guardian's website, it is very stark indeed. Football in a few years' time could look very different, some of these clubs look completely fucked especially Pompey.

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A lot of text

 

I can't see anyone coming to 'rescue' us from Mike Ashley. He may in fact turn out to be some sort of perverse blessing in disguise!

 

This is quite an interesting thought. Between the top clubs there's a "space race"-thing going on and when the fortune turns on them they're in  trouble. The way Man United and Liverpool are run is not sustainable in the long run and we can see this now both on the pitch and off it. The winners in all this will be the clubs who doesn't really go over the top in the transfer market, a bit more careful when it comes to salaries but mostly whose owners are economically sound when it comes to the club finances, in other words no Glazers och Gillette/Hicks thing with putting the debt on the club with huge interest. I might be way wrong here, but the way Spurs and Aston Villa are being run must be considered good examples? Sure, they've spent a lot in the transfer windows but not excessively on one player and are keeping the wages under the magic six-figure mark...

 

So, with the papers reporting Ashley putting a £30k wage roof, he might be a blessing in disguise but he's most likely a cheap idiot who doesn't know how to run a club

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A lot of text

 

I can't see anyone coming to 'rescue' us from Mike Ashley. He may in fact turn out to be some sort of perverse blessing in disguise!

 

This is quite an interesting thought. Between the top clubs there's a "space race"-thing going on and when the fortune turns on them they're in  trouble. The way Man United and Liverpool are run is not sustainable in the long run and we can see this now both on the pitch and off it. The winners in all this will be the clubs who doesn't really go over the top in the transfer market, a bit more careful when it comes to salaries but mostly whose owners are economically sound when it comes to the club finances, in other words no Glazers och Gillette/Hicks thing with putting the debt on the club with huge interest. I might be way wrong here, but the way Spurs and Aston Villa are being run must be considered good examples? Sure, they've spent a lot in the transfer windows but not excessively on one player and are keeping the wages under the magic six-figure mark...

 

So, with the papers reporting Ashley putting a £30k wage roof, he might be a blessing in disguise but he's most likely a cheap idiot who doesn't know how to run a club

Aston Villa have Lerner putting in cash to pay for transfers. Spurs yes are a good example in how to run a club (for how long with arry in charge remains to be seen)

The wage cap sadly makes sense for this window, why pay prem wages for the kind of players we can realisticly get in the championship.

 

As for the 1st article, sober reading

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As for the 1st article, sober reading

I hope all the people who go on about someone buying the club off Ashley read it. I'm no fan of Ashley but going by the type of owner's Man U and Liverpool have got maybe we are better off with the devil we know. For all his many faults, at least he is trying to run the club on what it brings in rather than what it may bring in in the future.

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I hope all the people who go on about someone buying the club off Ashley read it. I'm no fan of Ashley but going by the type of owner's Man U and Liverpool have got maybe we are better off with the devil we know. For all his many faults, at least he is trying to run the club on what it brings in rather than what it may bring in in the future.

 

Us not being run like Liverpool and Man U has provided nothing but problems so far.  It's a bit like having games in hand, I'd rather have the points on the board.  Both Man U and Liverpool have trophies in there trophy cabinets, we've got cobwebs in ours.

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I hope all the people who go on about someone buying the club off Ashley read it. I'm no fan of Ashley but going by the type of owner's Man U and Liverpool have got maybe we are better off with the devil we know. For all his many faults, at least he is trying to run the club on what it brings in rather than what it may bring in in the future.

 

Us not being run like Liverpool and Man U has provided nothing but problems so far.  It's a bit like having games in hand, I'd rather have the points on the board.  Both Man U and Liverpool have trophies in there trophy cabinets, we've got cobwebs in ours.

You could say the same for Portsmouth. They won the FA Cup in 2008. Will the memory of that trophy keep them happy as their club goes down the pan? Both Man U and Liverpool fans hate their owners. That's why I'd be worried about some unknown person or group buying Newcastle off Ashley. Look at the state of Portsmouth for how that can work out.

 

In a world where clubs only spend what they earn Newcastle would be sitting pretty money wise due to our loyal fan base and 52000 seater stadium. The 'natural' order would be restored to some extent with the well supported clubs like Newcastle, Leeds, etc. replacing the clubs with a smaller following but a wealthy owner in the top division.

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You could say the same for Portsmouth. They won the FA Cup in 2008. Will the memory of that trophy keep them happy as their club goes down the pan? Both Man U and Liverpool fans hate their owners. That's why I'd be worried about some unknown person or group buying Newcastle off Ashley. Look at the state of Portsmouth for how that can work out.

 

In a world where clubs only spend what they earn Newcastle would be sitting pretty money wise due to our loyal fan base and 52000 seater stadium. The 'natural' order would be restored to some extent with the well supported clubs like Newcastle, Leeds, etc. replacing the clubs with a smaller following but a wealthy owner in the top division.

 

I agree with you but Man U and Liverpool are not Pompy, they've won loads in the past and will probably win more than us in the future as they'll still have the income.

 

Uefa are in as much danger as Man U and Liverpool as they could easily force a breakaway with the bigger clubs going alone.  You just have to look at which clubs are carrying the debt to know Uefa will more than likely bottle it.

 

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heh, Prof Jose Maria Gay de Liebana.

 

But seriously, £727m? Is that really the figure? If so, bloody hell. Club should be shut down.

 

It won't ever be shut down. If the Glazers can't pay, their creditors will simply take shares in exchange at a value that both can agree on, otherwise it's administration, but the Glazers would never let it get to that point.

 

If they're able to refinance, they'll be fine because their interest payments will be reduced by over £15m per year, and their debt will mature much later which means they can repay the initial bank loan and not get into trouble. The real problem that Man Utd have and have always had is what happens when Fergie retires.

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A salary cap is a short-term idea.

 

Look, the clubs that get in trouble because they borrow too much are paying the price, which is what's supposed to happen. That is the way the market works.

 

Just because it's taken a few years longer than most people expected doesn't mean that UEFA, FIFA or the FA now suddenly have the right to impose regulations on entities that they have no right regulating.

 

Leeds were rightly punished because they took on too much debt and that's what's supposed to happen. Pompey are suffering, Liverpool and Man Utd may, and other clubs are likely to suffer as well. When these clubs suffer, it'll be the equivalent of a correction in the attitude of clubs and you'll see clubs run on a better financial footing because they've seen the consequences of taking on too much debt. This is what will naturally happen; UEFA doesn't need to do jack because the problem will solve itself.

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You could say the same for Portsmouth. They won the FA Cup in 2008. Will the memory of that trophy keep them happy as their club goes down the pan? Both Man U and Liverpool fans hate their owners. That's why I'd be worried about some unknown person or group buying Newcastle off Ashley. Look at the state of Portsmouth for how that can work out.

 

In a world where clubs only spend what they earn Newcastle would be sitting pretty money wise due to our loyal fan base and 52000 seater stadium. The 'natural' order would be restored to some extent with the well supported clubs like Newcastle, Leeds, etc. replacing the clubs with a smaller following but a wealthy owner in the top division.

 

I agree with you but Man U and Liverpool are not Pompy, they've won loads in the past and will probably win more than us in the future as they'll still have the income.

 

Uefa are in as much danger as Man U and Liverpool as they could easily force a breakaway with the bigger clubs going alone.  You just have to look at which clubs are carrying the debt to know Uefa will more than likely bottle it.

 

man u and liverpools income may be huge but its been eaten up by debts the prosepect of old trafford and carrington training ground was raised this week things are that bad

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I'd impose tougher penalties on going into administration because when Pompey eventually go, they'll only lose 10 points, which is recoverable (if they were a decent team). Why not automatic relegation? That'll be sure to get the Americans in Manchester and Liverpool to try even harder to solve their debt problems.

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I'd impose tougher penalties on going into administration because when Pompey eventually go, they'll only lose 10 points, which is recoverable (if they were a decent team). Why not automatic relegation? That'll be sure to get the Americans in Manchester and Liverpool to try even harder to solve their debt problems.

 

This is a far better idea, question is do you replace one of the teams that would be relegated, or relegate more than 3 teams ? Also if a club goes in to Administration say 4 weeks in to the season, why would they even bother to play if they know they are relegated ?

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22/Jan/10 

 

Shocking debts among football clubs prompts Uefa action to rein in excessive spending - Half of all European professional football clubs are running at a loss, with more than 20 per cent recording "huge" deficits in the last year despite the game generating record revenues, The Daily Telegraph can disclose - Paul Kelso, Chief Sports Reporter, The Telegraph

The shocking figures, compiled by Uefa and due to be published next month, reveal the full scale of the financial excesses in club football across the continent.

Speaking exclusively to The Daily Telegraph, Uefa's general secretary Gianni Infantino, said the financial plight of clubs in England and across Europe demonstrated the need for new regulations.

 

Uefa, fearing a spiral of wage inflation across the continent, is pressing ahead with new rules requiring clubs to live within their means rather than relying on wealthy owners or bank debt to underwrite player wages and transfer fees.

 

 

The intention is to prevent a repeat of the difficulties being felt at Portsmouth and West Ham, as well as limit the ability of benefactors such as Sheikh Mansour bin Zayed al-Nahyan at Manchester City to fast-track success with short-term spending that the club's revenues could not otherwise sustain.

 

 

Uefa president Michel Platini's "financial fair play" initiative will require clubs competing in European competition to break even or turn a profit, relying only on what they earn from football revenues.

 

 

Clubs repeatedly making a loss over a three-year cycle could be barred from the Europa League and Champions League.

 

 

The new rules, which will be welcomed by those concerned at the financial extremes of the Premier League, will be published in the summer and introduced from the 2012-13 season.

 

 

They will not limit the amount of debt that clubs can carry, but interest payments will have to be covered by income. Clubs will be able to record losses as a result of long-term football investment such as stadium improvements and youth academies.

 

 

Short-term spending, such as the £170 million lavished on transfers by City in the last year, will have to be funded from club earnings, and heavily-leveraged models such as that imposed on Manchester United by the Glazer family will be imperilled. United's holding company has regularly recorded losses as a result of interest on its £716 million debt burden, though last season the £80 million transfer of Ronaldo contributed to a £6.4 million profit.

 

 

The implications for English football are serious. In the 2007-08 season 14 of the 20 Premier League clubs made a loss, including Manchester United, Chelsea and Liverpool. Major European clubs including Inter Milan, AC Milan and Real Madrid will also be affected.

 

 

Infantino said: "What we are doing, with the support of all the stakeholders in the game including the major professional clubs, is to try and improve the long-term stability of European club football by encouraging clubs to live within the revenues that they generate," he said.

 

 

"We are concerned, and many of the clubs and owners are concerned, about the sustainability of the game. We survey more than 650 clubs all over Europe, and found that 50 per cent of those clubs are making losses every year, and 20 per cent of them are making huge losses, spending 120 per cent of their revenue every year."

 

 

Infantino said the primary reason for the losses is wage and transfer inflation driven by clubs relying on owner finance or debt.

 

 

"Around one third of the clubs are spending 70 per cent or more of their revenues on wages. Revenues across European football grew by 10 per cent last year, but the salaries of players and coaches have gone up by around 18 per cent.

 

 

"It is clear that if we continue like this it will end up with a spiral of inflation, so we need to bring a more rational and reasonable approach to this crazy game."

 

 

Uefa's proposals have been backed by the influential European Club Association, but there remain misgivings in the English top flight.

 

 

Premier League chief executive Richard Scudamore said earlier this week that he opposed any limit on the ability of benefactors such as Sheikh Mansour to invest freely.

 

 

He argued that requiring clubs to break even would mean the big clubs would always dominate.

 

 

Infantino disagreed, but said Premier League clubs had nothing to fear. "Our intention is not to make all clubs equal with the same money to spend. What we see now is that the rich owners already go to the big clubs because they make more money.

 

 

"We want a healthier environment which will allow smaller clubs to invest in their infrastructure and be able to compete with the bigger clubs, knowing that they can only spend what they earn."

 

 

 

How will the rules work?

 

What are the new regulations?

 

From the 2012-13 season, clubs will have to consistently break even – spending only what they earn – if they want to compete in European competition.

 

Does that mean they can’t have debts?

 

No, but the debt has to be affordable. If the interest on the debt means that the club or its holding company make a loss, they would fall foul of the rules. Clubs will still be able to borrow to fund new stadiums and youth academies.

 

 

What about wealthy owners?

 

It will be harder for them to subsidise transfer spending and player wages from their own pocket.

 

 

Which English clubs will be affected?

 

 

Chelsea and Manchester City, as they both need their owners to pay the players. Manchester United will be hit if their debts stay high. In fact, the whole Premier League could be hit: 14 of the 20 clubs made a loss in 2008.

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You could say the same for Portsmouth. They won the FA Cup in 2008. Will the memory of that trophy keep them happy as their club goes down the pan? Both Man U and Liverpool fans hate their owners. That's why I'd be worried about some unknown person or group buying Newcastle off Ashley. Look at the state of Portsmouth for how that can work out.

 

In a world where clubs only spend what they earn Newcastle would be sitting pretty money wise due to our loyal fan base and 52000 seater stadium. The 'natural' order would be restored to some extent with the well supported clubs like Newcastle, Leeds, etc. replacing the clubs with a smaller following but a wealthy owner in the top division.

 

I agree with you but Man U and Liverpool are not Pompy, they've won loads in the past and will probably win more than us in the future as they'll still have the income.

 

Uefa are in as much danger as Man U and Liverpool as they could easily force a breakaway with the bigger clubs going alone.  You just have to look at which clubs are carrying the debt to know Uefa will more than likely bottle it.

 

i'm not so sure about liverpool. should they finish outside the top 4 things could get tricky for them.
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http://www.bbc.co.uk/blogs/mattslater/2010/01/taxing_times_for_footballs_fri.html

 

Taxing times for football's fritterers

 

Post categories: Football

 

Matt Slater | 22:34 UK time, Thursday, 21 January 2010

 

If fans of Portsmouth FC have not acquainted themselves with the recent history of King's Lynn FC they might want to take a crash course now. The seemingly tenuous links between the two clubs are getting painfully close and the next three weeks could decide if they make the ultimate connection.

 

Non-league King's Lynn became a non-club last month when Her Majesty's Revenues and Custom (HMRC) gained a winding-up order from the High Court. The taxman was tired of IOUs and wanted his unpaid PAYE, NI and VAT - £77,000 of it.

 

The club, with total debts of more than £200,000, couldn't pay and that was that. 130 years after their formation, the Linnets were no more. It was a cruel end for a relatively well-supported club but it was entirely avoidable.

 

King's Lynn had been living considerably beyond their means for years. This was compounded by a failure (not entirely their own) to upgrade their stadium. Sound familiar?

 

It should, because leaving aside all the conspiracy-theory shenanigans of who actually owns the club (and why), Portsmouth's tale is straightforward. You can call it "living the dream" or you can follow Premier League chief executive Richard Scudamore and call it what it really is, "rank bad management".

 

The South Coast club's myriad problems, on and off the field, have been played out in public for the last six months. Keeping tabs on Pompey has become a blood sport.

 

The three different owners, the seven straight league defeats to start the campaign, the missing wages, the crippling debts and the withheld TV money - it has been a humiliating experience for a club that was competing with Europe's finest only 14 months ago.

 

And it could be about to get much, much worse.

 

On 10 February, Pompey's battle-weary legal team will probably be suiting up for the biggest clash in the club's 112-year history: Portsmouth v HMRC in a sudden-death VAT play-off.

 

I say probably because there is still a smidgen of hope Pompey can sidestep this rocket. An attempt to have the winding-up petition unwound before it got started was rejected on Wednesday by Justice Newey. But it was clearly not a straightforward decision (he described it as "difficult) as he spent two days listening to Pompey's claims of being overcharged and then another day pondering his verdict.

 

When that finally came, it was in HMRC's favour but Newey did grant Pompey a seven-day window to appeal. Neumans LLP, the solicitors acting for the club, said any appeal would have "a real prospect of success", although there has been no word of when that appeal will come.

 

Portsmouth fans should start praying the confidence of their lawyers (and they've got a few) is not just bravado. Reporters following their travails have become accustomed to hearing optimistic noises from the club only to discover the worst-case scenario has actually occurred.

 

Like almost everything involving the club at present, the details of the case are murky.

 

The taxman, who doesn't say much, is believed to be chasing almost £11m in missing payments. The club, however, says more than £4m of this has been paid since absentee landlord Ali Al Faraj took control in October and they dispute the rest. They have even suggested the club could be due a small refund.

 

This may well be true but circumstantial evidence suggests otherwise. The club has fallen behind with transfer payments to at least five different teams and failed to pay its staff on time in three of the last four months (the players are not expecting to see February's wages on schedule either).

 

In fact, it would be fair to say that being a bit behind with VAT is almost a default (excuse the pun) position for football clubs, particularly those further down the league ladder.

 

Southend United are a good recent example of this paper-shuffle approach to accounting. It took numerous trips to the High Court to persuade owner Ron Martin to finally write a cheque for £2.1m. He later admitted the club had been guilty, "almost inadvertently", of using the "HMRC Bank as a stop-gap".

 

Accrington Stanley have also been down this road of late and Cardiff City and Notts County have winding-up orders of their own to stew over.

 

Pompey's predicament is so perilous because the taxman is thoroughly fed up with football clubs and is in the mood to make an example of somebody pour encourager les autres. But nobody can say they haven't been warned.

 

The clubs should have got their houses in order as soon as HMRC lost its preferential status in insolvency cases in The Enterprise Act of 2002. Whereas it had once been at the front of the queue when a company went bust, it was now in the scrum with all the other creditors.

 

This had enormous implications for the national game because of league rules about paying all football-related debts (wages, transfer fees and so on) first and in full. At a stroke, the HMRC's indulgence of club debt was over, and who could blame it, particularly when faced with the well-intentioned but morally unjustifiable practice of putting footballers first.

 

This season's spate of tax crises is part of the post-2002 trend but it is also a more acute response to the global downturn and this country's ravaged finances. Every penny counts.

 

It is ironic that another of Pompey's problems is a lawsuit for unpaid image-rights payments to Sol Campbell. There are many at the Treasury who feel image-rights clauses in contracts are a con to avoid tax, particularly as the cash is usually paid to off-shore accounts. One of the juicy details to emerge from the Manchester United bond prospectus is that HMRC is investigating £5m-worth of these payments at Old Trafford.

 

Another factor to consider is the timing of Portsmouth's hearing. HMRC knows its transfer windows and clearly feels calling in its debts whilst the indebted have a chance to do something about it is a canny move. Further player sales seem inevitable if Pompey are to avoid the fate of becoming the first Premier League to enter administration.

 

That, of course, would increase the likelihood of relegation, a Domesday scenario for a club as indebted as the 2008 FA Cup champions. If that happens "doing a Leeds" might be the best Pompey's blameless fans can hope for, as doing a King's Lynn is...well, let's not go there.

 

We should remember in all this that football is only being asked to do what the vast majority of us do as a matter of course. Former US President Franklin D. Roosevelt once said taxes "are dues we pay for the privileges of membership in an organised society". That is something Pompey, and football, should ponder.

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Just a few months ago they were the ManCity of the lower leagues... that went south fast.

 

http://www.sportinglife.com/football/news/story_get.cgi?STORY_NAME=soccer/10/01/25/SOCCER_Notts_County.html&TEAMHD=soccer

 

NOTTS COUNTY FACE RACE FOR FUNDS

 

By Sean Taylor, Press Association Sport

 

Notts County are facing up to the prospect that they need £2million by Wednesday in order for the club to survive.

 

The Magpies are due in the High Court in two days after the club's owners Blenheim 1862 were served a winding-up petition from HM Revenue and Customs over an unpaid £600,000 tax bill.

 

Executive chairman Peter Trembling still hopes to pay off the debt and avoid going to court.

 

He and director of football Sven-Goran Eriksson have scoured Europe for suitable investors since completing a management buyout at Meadow Lane last month.

 

Trembling was confident of securing major investment by the end of last week, but that did not happen.

 

He told the Evening Post: "We hope to be able to satisfy the winding-up petition before Wednesday by paying off our debts. The critical thing is to get £2million into our bank account before then.

 

"It's a challenge but that is what we have been working towards for the last few weeks and I'm ever hopeful we can do that.

 

"It will give us a bit of room to play with. We could actually go to court and pay off our tax bill of £600,000.

 

"But the danger with a winding-up petition is that we could have all of our creditors turning up on the court steps and jumping on the back of the petition.

 

"In which case, we have to satisfy the judge that we have got the funds to pay everybody.

 

"If we haven't got that in our bank account our next course of action is to show proof of funds committed to pay these creditors off and that we just need a bit more time, and really plead our case."

 

Trembling added: "We have been speaking to a number of investors for a few weeks now and we have got two investors who are very close to the line.

 

"Sven and I have met them and we have presented our vision to them. They are very enthusiastic and they have got the funds - we have seen the proof of that.

 

"Given what has happened in the last six months, I'm not going to say we are definitely there until we are over the line. I won't believe it is definite until it is over the line.

 

"The two investors want to work together, and we have got a couple of back-up plans as well. I think the two we are talking to are best for the future of the club because they can invest the sort of funds that will take the club further forward, of £25million to £50million over five years.

 

"They want a long-term return on the investment but the important thing is that they are football fans and they love this idea - the project of taking Notts County through the leagues.

 

"The idea of putting £25million in to get us in the Championship and having Sven at the helm to lead us on that appeals to them enormously."

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