Football's financial bubble set to burst, says expert
£3BN LOST IN RECESSION That fortune makes the sheikh worth more than twice as much as Roman Abramovich, who has topped all five previous Football Rich Lists. The Chelsea owner is said to have lost more than £3 billion in the recession. At £7 billion Abramovich is now third in the Rich List, with many sources indicating that Chelsea manager Luiz Felipe Scolari will have little or no transfer money to spend this month. Some respected commentators are even saying that Abramovich may be considering selling Chelsea, on whom he has spent around £578m in the form of an interest-free loan. Despite the Russian's input, Chelsea's overall debt is £736m and the club are still not breaking even. Champions Manchester United are a similar amount in the red, with the Glazer family having borrowed heavily to buy all the shares in the club.
GOVERNMENT BAILOUT And Liverpool owners Tom Hicks and George Gillett were recently given an extra six months to repay the £350m they borrowed from US investment bank Wachovia and the Royal Bank of Scotland – which itself was only saved from collapse in October by Government bailout.
It's not just the big clubs. The latest Premier League report by accountants Deloitte revealed that total borrowings had rocketed from £674 million in 2005 to £1.6 billion in 2006, leaving clubs exposed to the risks of the debt-ridden markets. Deloitte's report raised special concern that the overall level of gearing – a financial term for the level of debt in companies compared to shareholders' funds – had increased to 220 percent at the end of the 2005-06 season. In October, FA chairman Lord Triesman went further, claiming top-flight clubs are “at high risk levels” with £3 billion of debt, which brings about “tangible dangers”. “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,” said Triesman. UNSUSTAINABLE DEBT
UEFA president Michel Platini also weighed into the debate, noting of English clubs' Champions League domination that “This success is often built on an unsustainable level of debt, which is distorting the level playing field in Europe”.
For his part, Professor Cannon is convinced football will soon feel the pinch and recession will drain the coffers, forcing clubs to tighten the purse strings. “Merchandising income is already dipping, local advertising is almost certainly going to dip quite sharply, as are things like player sponsorship,” he said. The professor added that no one will be safe – from the players to the rich chairmen bankrolling the clubs. “You’re already seeing a number of clubs where even quite key players don’t have a sponsor, because it’s very hard to see a relationship between what you spend to put your name on – say, a Mido – and an end result. It’s not vast sums of money but it adds up.” “Those owners who have been in equities... Mike Ashley must have taken a hammering. All of the rumours revolve around Portsmouth and West Ham at the moment, financially, and that’s entirely because of the owners. “And a lot of players have invested heavily in property: they’ll take a hammering too, particularly those who have invested in low-cost areas. So I think you’ll see a lot of movement in the Rich List this year.”
For the full Rich List, see FourFourTwo magazine, out now. If quoting, credit FourFourTwo magazine and link to FourFourTwo.com.
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