Member Article

2021 Football Distress Report: Govt and League support gives English clubs extra time but experts warn of future woes citing 94% rise in ea

The annual Football Distress Survey, conducted by business recovery specialist Begbies Traynor since 2012, has revealed a deceptively rosy picture of football club health, skewed by a number of Covid-related factors that cloak an undercurrent of rising debt and financial issues, pushed onto next season and beyond.

None of the clubs in the English Football League showed signs of significant distress according to their latest filed accounts, but worryingly the very early ‘Red Flags’ of financial problems rocketed by 94%, with 33 out of the 72 clubs in the three tiers below the Premier League displaying early signs of distress, compared with 17 in the previous survey, in May 2020.

“What we can see is that the Covid-relief packages from the Government, as well as the money that came down from the Premier League, have gone some way to easing the pain of clubs in the EFL during 2020, but we can also see from a detailed analysis of the Premier League accounts that have been filed so far that other cash flow measures have been needed,” said football finance expert Gerald Krasner, a partner at Begbies Traynor.

“Against the backdrop of the European Super League debacle, and an ever increasingly polarised picture of health between the billionaire-owned, super-rich clubs and the majority of British football, we’re seeing a whole raft of fundraising or actions to relieve cash flow, many of which will not necessarily impact balance sheets and P&Ls for another 12 months.”

Krasner, who led the team of administrators that successfully sold Wigan Athletic Football Club out of administration in March this year, has previously been on the board of Leeds United and is one of the UK’s leading football restructuring experts.

He said: “Rights issues by shareholders have injected capital in some cases where owners have the means to step in, and in other cases bank debt and deferred payments to creditors including players and senior managers have helped.

“However, although these measures have been successful in securing the short-term survival of clubs and pushed the threat of administration further down the road, the cumulative effect is to build up a wall of debt that will have to be serviced and ultimately paid off.

“As in the wider economy, the continued suspension of court cases is also creating the illusion of stability among clubs that is likely to be shaken when the courts reopen. So while the help that football has received from the Government and the Premier League have provided the lower division clubs with much-needed ‘extra time’, the escalating symptoms of early financial distress are a very real signal that for many clubs the full financial effects of Covid are yet to be fully felt.”

This was posted in Bdaily's Members' News section by Emma Kilmurray .