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Championship on the brink of cash catastrophe, warns football finance expert

This is a story from the FSF archive – the FSF and SD merged to become the FSA in 2019.

Coventry City narrowly escaped going into administration, Cardiff City remain in dire straights, while a clutch of their Coca Cola Championship contemporaries exist in constant fear of financial ruin.

And leading football finance expert Phillip Long predicts things are going to get even worse in English football’s second tier, because, in bidding to board the Premiership gravy train, many clubs have spent way beyond their means.

“Before the first ball of the season was kicked, I warned that the Championship had become a pressure cooker and that this situation might arise”, said Long, of the PKF Football Industry Group.

“As a life-long football fan, it gives me no pleasure to be proved right, but I argued at the beginning of the season that spending beyond their means was a high-risk strategy. The Premiership status that Championship clubs are fighting for is a glittering prize, but the investment gamble only ever pays off for three clubs a season.

“In the close season, the banks were already concerned about the level of debt they were exposed to among Championship clubs. We believed even then that it was a case of the banks being unwilling to extend club overdrafts, rather than the clubs adopting a more cautious approach to their finances.”

In May 2007, PKF’s Football Industry Group completed independent telephone interviews a total of 59 finance directors from clubs in the English Premier League, The Coca Cola Championship, Football Leagues One and Two, Scottish Premier League and Scottish First Division.

Four of every five Championship club officials interviewed predicted that they wouldn’t make a pre-tax profit in their next accounting period – and a third had come under more pressure from their bank.

“Since then the credit crunch has hit the banks and football clubs looking to increase their borrowing without the TV revenues available to Premiership clubs are not going to get a positive response”, PKF’s Philip Long said.

“The frightening thing is that with such a large percentage of Championship clubs not expecting to make a profit, there may be more facing the prospect of administration, and the automatic 10-point deduction that follows, before the end of the current season.

“I wish Coventry well and I hope that there are no other clubs in the same position. But I fear that this might not be the last time this season a Championship club finds itself on the brink of administration.”

Free copies of the PKF survey on the line between silverware and insolvency are available from the via margot.lohan@uk.pkf.com or from the firm’s website – www.pkf.co.uk.

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