Half of Premier League clubs are "insolvent"
In a review of credit ratings for the top flight, Equifax declared that 10 clubs would struggle to repay their debts if they were asked.
“We have listed 10 clubs as insolvent because they would struggle if everyone came at once to ask them for the money they owe," explained Equifax's external affairs director Neil Munroe.
"That's unlikely, but the reality is that no firm is safe these days, as what happened to a number of key retailers at the end of the last year proved."
Indeed, Woolworths stores across the country have closed their doors this week, the latest in a series of big names to have been rocked by financial uncertainty. In November, the UK Government had to bail out the Royal Bank of Scotland, while US car giants Ford, Chrysler and GM are begging for help from president-elect Barack Obama.
"Like most of other sectors of the UK economy, it is likely to be a difficult year ahead for the nation’s favourite sport,” says Munroe. “Football has more investment from wealthy individuals, but if there’s a sudden crisis, those individuals may struggle and this would impact on the clubs. Not even Premiership football is safe from the recession if investors decide to withdraw funds."
The Premier League table bears only a passing resemblance to Equifax's results, in which the lower the score, the more likely a business is to default on payments. Whereas Hull have suprised everyone with their performances in the Premier League, their Equifax rating – 1 out of 100 – is firmly in the relegation zone. Aston Villa, Fulham and Wigan scored just two points.
Abramovich-bankrolled Chelsea scored just 10 points. Without the Russian’s investment, heavily indebted Chelsea would struggle – worrying, considering recent City chatter that he may be considering pulling out.
Meanwhile, although West Brom have struggled on the pitch, their a credit rating rating of 71 is bettered only by Manchester United and table-toppers Arsenal. The Gunners' boss Arsene Wenger refuses to spend big in the transfer market, preferring to buy young players with large resale potential.
“Every business is facing tough times and our latest analysis shows that the business of football isn’t immune," says Munroe. "A consumer-driven business, like retailers, the football clubs might struggle in the coming months. As households tighten their belts to cope with the rising cost of living, many fans could decide to watch the match at home, instead of splashing out on a season ticket. And, of course, if they’re not at the football ground there’s less chance of them spending on other club items.
“Even some of the most successful clubs need to take a look at how well they’re scoring off the pitch to make it through the recession, in particular keeping a close eye on cash flow management and ensuring that they don’t fall foul of bad debt themselves. Arsenal prove that good money management goes a long way in times like these.”
The Equifax Table
93 Man United
71 West Brom
40 Manchester City
37 West Ham
--------- CLUBS BELOW THIS LINE TECHNICALLY INSOLVENT
17 Stoke City
2 Aston Villa
* No accounts filed for Portsmouth at Companies House