Football League clubs face the recession
Brendan Guilfoyle explains the challenges ahead for football clubs and how best to undertake the administration of a club.
Warning bells are sounding in the world of football as Football League clubs face up to the harsh realities of recession and the credit crunch. It is inevitable that more clubs are going to face financial stress and possibly administration, failing as a result of declining revenues, fixed costs and players’ wages that cannot be
reduced in the short term. Income generated from fans is reasonably constant
but commercial income is dropping in a recession. Some clubs do not currently
have a paying shirt sponsor.
The challenges football clubs play against
What differentiates football clubs from other businesses is that they have the substantial fixed overhead of the wages of their players, who are on long-term contracts. If clubs have budgeted for levels of income that cannot be achieved due to recession, then while their income drops they cannot readily reduce their costs. They will gradually build up debts and eventually fail.
Approximately 70 per cent of football clubs bridge the income gap with a benefactor, but if the benefactor has financial, health or marital difficulties then it could impact on the club. Many benefactors have made their fortunes in property, but with the decline in property values and the lack of liquidity it may prove difficult for them to keep pumping money into a club...
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