Begbies Traynor Red Flag Alert Football Distress ReportEnglish Football League – March 2016

Football Distress Report

Football ‘fitter than ever before’ – club distress rates plummet to record lows

Of the 72 teams in the top four divisions of the English football league, only two lower division clubs now show any signs of distress, representing just 3% of clubs.

This is a dramatic 85% reduction from a total of 18% of all clubs that were in financial distress in March 2012, when the data was first analysed by corporate recovery experts Begbies Traynor.

“To say that we have seen the end of football clubs going under is a step too far, as relegation impacts clubs harder than ever before, but it’s certainly less likely now,” said football finance expert Gerald Krasner, a partner at Begbies Traynor.

“The football industry has never been fitter, and while many might think that it is down to the influx of big money foreign club owners, it is as much to do with the Football Fair Play rules and the HMRC stance to arrears, which have forced good housekeeping,” added Mr Krasner, who is also a former director of Leeds United Football Club.

In 2012 a total of 13 English clubs faced significant financial distress, and several, including Portsmouth, Port Vale and Coventry City, have since entered administration as out of control wage costs, poor management and falling attendances took their toll.

“...clubs have increasingly been forced to live within their means...”

Since the introduction of UEFA’s Financial Fair Play rules in England and Wales in 2012, clubs have increasingly been forced to live within their means, and limit losses that had swollen with billionaire owners supporting huge player wage bills and gambling on promotion to the super lucrative Premier League.

02English Football League – March 2016

The trickle-down effect of football TV money and good housekeeping forced by the Football League and HMRC has all but eliminated business distress in English football.

“The amount of TV money has grown, along with the popularity of our leagues overseas, but that brings its own downside. The fiscal cliff that faces newly relegated clubs is huge and growing, even with the so-called ‘parachute money’, and this is probably the biggest challenge to football club finances now,” said Mr Krasner.

“...more and more famous clubs were snapped up by overseas investors...”

“It is however sad that as football distress has been reduced to a trickle, the UK ownership of our clubs has dwindled to just a handful as more and more famous clubs were snapped up by overseas investors during the toughest times,” he added.

In the last 18 months HMRC, typically the single largest trade creditor in football club failures, has tightened its approach to late payments ensuring that arrears of millions of pounds that were accrued by clubs such as Glasgow Rangers and Portsmouth are no longer able to build up and threaten clubs’ long-term stability.

“...attendances north of the border have grown by 9%...”

The average gates at English clubs have remained largely static, with just a 1% rise in the last five years, but attendances north of the border have grown by 9% in the same time period, largely attributed to the growth of Rangers’ average gates.

The ownership of clubs, once characterised by benefactor and fan owners such as Blackburn Rovers’ former chairman Jack Walker, has shifted dramatically to overseas individuals and investment groups as the English Leagues have gained profile globally in the last decade.

Average English League Attendances – 2012/2016 Seasons

Average Scottish League Attendances – 2012/2016 Seasons

2012/2013

2012/2013

2013/2014

2013/2014

2015/2016 (March)

2015/2016 (March)

2014/2015

2014/2015

40,000

12,000

35,000

8,000

10,000

30,000

6,000

25,000

4,000

20,000

2,000

15,000

10,000

5,000

0

0

Source: ESPN

Source: ESPN

PREMIER LEAGUE

PREMIER LEAGUE

CHAMPIONSHIP

CHAMPIONSHIP

DIVISION 1

LEAGUE 1

DIVISION 2

LEAGUE 2

0.4% VARIANCE SINCE LAST SURVEY

13.5% VARIANCE SINCE LAST SURVEY

-2.4% VARIANCE SINCE LAST SURVEY

5.7% VARIANCE SINCE LAST SURVEY

2.4% VARIANCE SINCE LAST SURVEY

0.9% VARIANCE SINCE LAST SURVEY

5.5% VARIANCE SINCE LAST SURVEY

4.6% VARIANCE SINCE LAST SURVEY

35,931

9,901

36,657

10,228

35,956

8,250 9,362

36,083 17,504

2,293

16,555 17,638

2,004

17,223

7,351 7,773

6,319

686

7,488

1,508

6,901

954

7,069

963

4,390

5,598

4,346

470

4,541 4,793

504 527

03

Football Distress Report

English Football League – March 2016

Football Club Distress – 2012/2016 Scottish Football League

Football Club Distress – 2012/2016 English Football League

14

3

6

13

32

8

1 1

44

12

10

5

8

4

6

3

41

2

2

00

Mar

12

Mar

12

Mar

13

Mar

13

Mar

14

Mar

15

Mar

16

Mar

14

Mar

15

Mar

16

Number of clubs in distressNumber of clubs in distress

Source: Red Flag AlertSource: Red Flag Alert

Ref: BTG 1587/03.16

Offices across the UK. www.begbies-traynor.comBegbies Traynor (Central) LLP, a limited liability partnership, registered in England and Wales No: OC306540. Registered Office: 340 Deansgate, Manchester M3 4LYA member of the Begbies Traynor Group: Specialist Professional Services. www.begbies-traynorgroup.com

For Further InformationIf you would like to discuss any of the issues raised in this survey or would like further details about the services we provide to help underperforming businesses, please contact:

Gerald Krasner Partner

T: 0191 269 9820M: 07836 607782E: gerald.krasner@begbies-traynor.com

Football Distress Report