EFL football clubs to suffer most financial distress

Just a handful of British clubs were in peril before the shutdown but majority now face unprecedented financial distress in wake of coronavirus pandemic, according to Begbies Traynor

Football club finances were continuing to grow in stability by March this year, with only five clubs in financial distress across the 71 clubs that make up the English Football League (EFL) since Bury FC’s expulsion in August 2019, according to the eighth annual Football Distress Report, produced by insolvency specialist Begbies Traynor.

However, the impact of the coronavirus pandemic and the social distancing regulations that have caused all play to be suspended since mid-March looks set to have far-reaching consequences for the game, with the English Football League (EFL) clubs hardest hit.

Football finance expert Gerald Krasner, a partner at Begbies Traynor and former chairman of Leeds United, said that the suspension of football during the pandemic had caused a financial crisis and that for clubs’ survival the EFL must resume playing matches, behind closed doors, as soon as possible to avoid long-term disaster for the sport.

‘We’re unlikely to see the wealthy clubs in the Premier League succumb to profound financial distress as long as they continue to be bolstered by large television revenues. But what is absolutely essential, especially for the EFL clubs, is that they finish the season by playing the remaining matches behind closed doors,’ said Krasner.

‘The reality is that people have managed without football for more than a month now and there’s a real danger that unless the momentum can be regained and fans can begin to watch matches on TV again, the impetus will be lost and the draw of football will be diminished in the long term. If that was to happen, the television money would soon desert the game too.’

He added: ‘With rigorous testing and as much social distancing as is practical, there is no reason why the season shouldn’t restart in the first week of June, with two televised matches a week scheduled, so that it concludes by the end of July. The new season could then kick off with a delayed start.’

While the Premier League clubs look financially secure enough to cope with the consequences of the pandemic, Krasner said the Championship clubs and those below them were in a far more precarious position due to their reliance on the revenue generated by match day crowds.

‘Invaluable income for EFL clubs, which receive a far smaller proportion of their revenue from broadcasters, has traditionally been generated by the hire of stadiums and facilities for corporate and other uses, but that will also have been wiped out by social distancing requirements,’ he said.

Mr Krasner added that he estimated that even with a rapid restart there were as many as half a dozen clubs in divisions one and two that were in danger of financial collapse. ‘Unfortunately those clubs with wealthy foreign owners may not necessarily be immune from disaster either. Overseas owners will be forced to respond to the effects of the global pandemic on their own finances and business interests, and for some that could mean that ownership of an English football club is simply no longer viable.’

Scottish football

Scottish football club finances had gained unprecedented stability by the end of March this year, with none of the 42 professional clubs showing symptoms of severe financial distress for the second year running.

However, without much-needed matchday revenues, or government support in the event that the isolation measures are extended into the 2020/2021 season, it is believed that the majority of clubs in Scotland could face financial peril.

Ken Pattullo, head of Begbies Traynor in Scotland, said: ‘Our Scottish Premiership clubs are the most reliant on ticket sales of all the top-flight European clubs, which also makes them extremely vulnerable to escalating financial problems, especially if it is decreed that the remainder of the season is to be played, behind closed doors.

‘It also means they lack the financial clout of the English Premier League, and the cost to clubs of completing the outstanding games, when they have little or no income, could be devastating.’

Zak Jakubowski |Reporter, Accountancy Daily [2019-2021]

Zak Jakubowski was a reporter at Accountancy Daily, published by ...

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