David Gold – The 4th Official Article

Football Must Get Its House In Order

Posted by: David Gold, Chairman West Ham United

Top-level football in this country is on the brink of diving into the financial abyss.

An alarming statement, you might say, but if someone told you 12 months ago that Glasgow Rangers, one of the biggest clubs in the world, was in desperate danger of being broken down and dismantled, you may have found that even more alarming.

The truth is the English Barclays Premier League, despite all of its riches, is spending far more than it earns.

In 2010-11, the Premier League’s 20 clubs collectively made a loss of £361m. This meant they spent all of their record £2.3bn income, and then some.

A recent audit of all the English leagues by Deloitte and Touch showed only one league, League Two, was making a profit. The reason for that is they and they alone introduce wage control as a percentage of turnover. League One has followed suit and the Championship have introduced their own governance. That leaves the mighty Barclays Premier League.

The over spending on players wages and agents in the Premier League is embarrassing – and it can’t go on.

The Premier League clubs are currently spending approximately 70 per cent of their turnover on player wages. Twenty years ago that figure was 40 per cent. Revenues are increasing but costs are increasing even faster. Revenues from TV have soared. But this simply papers over a huge chasm of financial problems.

In business, profit is vital – but not in football, it seems, and it should be.

Why is profit so important?

A profitable football club means a healthy football club. It means a football club that isn’t in danger of going out of business, of crumbling into history. Profit could help freeze or even reduce ticket prices.

We need to regulate spending, reduce debt and ensure profitability – and quickly.

We have to stop football clubs racking up debt or we’ll have an even more desperate situation. We can’t have clubs running with large percentage of debt against turnover.

The lower leagues have already implemented new regulation, and the Premier League must do the same.

I would propose that there is a robust and clear debt cap – enforced by points deductions or a transfer ban on incoming players which would have to become the base level for all clubs in the first year. Each year after that the base level could be reduced until there is no debt at all, with maybe an exception for capital projects, which could be ring fenced.

As the only realistic way to achieve his would be for clubs to cut costs, I believe this would effectively reduce the money spent on wages and agents fees. At any football club, the biggest outgoing by some margin is the players’ wages. It’s not rent, it’s not the tea lady and it’s not the heat and light.

But if a club, under a new scheme governing it’s levels of expenditure on turnover, simply cannot afford the wage demands of a new transfer target and cannot borrow further to pay for him, they will have to walk away and do with who they have got or find a new target. But it will be the same for all clubs.

Sure, clubs without the players they want will be in danger of getting relegated. But ask any fan; would you take relegation over extinction? You can bounce back from one, but not the other. Of the bottom 12 clubs in the Premier League most will lose money and 3 will be relegated but with proper governance the same 12 clubs could make 100m, its true that 3 will still be relegated. However it’s infinitely more desirable to get relegated having made 10m than having lost 10m. Could this ultimately lead to a freezing of ticket prices?

Market forces would, I believe, then keep a grip on players’ wages and manage the expectations of their agents.

It would be helpful if UEFA and FIFA were involved but not critical. There would need to be independent, external auditors to police the process.

The system put forward under my proposal would be separate to UEFA’s Financial Fair Play regulations. Financial Fair Play governs clubs that play in Europe and have to be signed up to. The rules in my proposal would be for all teams in the Premier League.

This has to be done to protect the fans as well as their clubs. If a club goes into administration, as a rule, the owners and chairman disappear and leave behind tens of thousands of distraught supporters. It has to be remembered that although the real estate of a football club is owned by its shareholders the heart and soul and the memories of the clubs history belongs to the fans their grandfathers and their great-grandfathers before them.

I’ve never seen a club chairman cry over football, I’ve never seen a manager do it either. Sure, the odd player has shed tears but I’ve seen millions of fans with tears streaming down their faces. That is all over their love for their football club and that’s why we need governance to protect football from itself.

Premier League rules state that 14 votes would be needed to pass new laws. I think that there are 14 chairmen ready for change to protect the greatest football league the world has ever seen, to do the right thing in the best interest of football as a whole.

It is time to step up to the plate.

You can read more articles by David on his personal website www.davidgold.co.uk

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