Four English Clubs Now Facing Administration

Gareth Llewellyn-StevensCorrespondent IJanuary 28, 2010

WOLVERHAMPTON, ENGLAND - JANUARY 23:  Crystal Palace manager Neil Warnock reacts during the FA Cup sponsored by E.ON 4th Round match between Wolverhampton Wanderers and Crystal Palace at Molineux Stadium on January 23, 2010 in Wolverhampton, England.  (Photo by Jamie McDonald/Getty Images)
Jamie McDonald/Getty Images

Crystal Palace became the latest Football League club to go into administration after months of financial problems.

The Championship side joins a growing list of clubs to suffer in recent years as they struggle to compete with the financial demands of the modern game.

Wrexham, Rotherham, Stockton, Southampton, Darlington, Luton, and the most high profile club Leeds are just some of the clubs to have suffered a similar fate, with only Leeds starting to make a recovery albeit after several years of becoming stable in the hands of former Chelsea owner Ken Bates.

This season Palace has twice failed to pay its staff on time, and the club has appointed Sheffield-based PA Partnership to act as administrators.

The Football League today confirmed Palace has received the 10-point deduction penalty for entering administration, which sees them drop from ninth in the Championship to 21st, just three points off the relegation zone.

For Wednesday's league game against Newcastle, Manager Neil Warnock could name just three substitutes.

It might be Palace's longest away trip of the Championship season, but one would expect that they'd be able to fill the bench.

Crystal Palace isn't the only Football League club to suffer as Notts County, and Cardiff City also face a winding-up petition from HM Revenue & Customs over unpaid tax bills, while Watford has already warned that it could go into administration, with the club quickly running out of cash.

Cardiff City has admitted it is in financial crisis and fans are rounding on Chairman Peter Risdalethe man responsible for the destruction of Leeds Unitedafter £3m raised by the fans for transfers has been used elsewhere.

The club has also revealed it received a second winding-up petition from HMRC, and faces a date in the High Court on February 10the same day Portsmouth are due in court.

County is the third club in English football known to face a winding-up order in recent months after Portsmouth was handed a writ in December 2009.

Despite having former England Manager Sven-Goran Eriksson among their number and backed by Middle East consortium Qadbak, League Two side County have few saleable assets, and need their foreign investors to get their hands in pockets within 28 days to avoid a date in the High Court.

That is a situation not afforded to Portsmouth,  rumoured to have £60m of debt to a number of creditors including a former owner, HMRC, and other football clubs.

Both Wrexham and Luton dropped out of the Football League after their financial problems, largely caused by maladministration and unethical business practices by their owners who were driven by personal greed, rather than trying to successfully run a football club.

A number of other clubs in England have been hit my financial problems including West Ham United and Cardiff City, the latter now facing fresh problems.

Both were close to entering administration, but were saved by fresh investors and successful renegotiation of existing debt repayments.

Palace's problems further highlight the sorry state of clubs across the country as owners strive to make as much money as possible, often signing players for extravagant fees on over-inflated wages, while supporters stay away due to the recession of the last couple of years.

The decision for Palace to move into administration has been criticised by manager Warnock who has revealed the club is set to sell star striker Victor Moses "for millions" by the end of the current transfer window this month.

Such a sale would have allowed the club to have paid off some of its immediate financial concerns. As such, the club is now battling to stay in the Championship.

It's a sorry mess when administrators come in and tell a manager his star player can't play in an important away game over the fear he might be injured.

The call across Europe for clubs to operate within their means from Uefa and Fifa is one thing, but it needs to be written into the rules of competition, to safeguard the future of clubs.

When clubs like Manchester United and Liverpool have debt levels that we cannot imagine, what hope is there for clubs in the lower tier?

The consensus is that you have to spend big to win, that much is clear across the top leagues in Europe, and to an extent in the second tier of English football as clubs aspire to reach the multi-millions and glamour of the Premier League.

For some it is a desperate dream that will never be achieved, often at the expense of a club.

An owner will never lose out too much if his club doesn't make it if he's not putting his own money into the club's endeavours to achieve success.

How many do that nowadays?

I don't know the exact figures, but I'd speculate that it isn't many.

The majority of initial income will come from bank loans secured against other assets, including a number of those relating to  the club.

Because the majority of money isn't that of the owner, the responsibility and prudence goes out of the window.

The UK may have just crept out of recession, but banks of whatever nature cannot throw money at football clubs.

Gross lending and overdraft facilities have to stop, and clubs should be forced to generate their own revenue through other means.

Political parties and charities raise money through fundraiser events with famous figures.

This should be easy for many football clubs to do. They have the famous names, and supporters and others who can afford to would pay good money for such, particularly if the money was going back into the club.

There are a large number of different viable revenue streams available to clubs if they pursue them.

If they can't afford a new stadium or a big name player, then so be it.

Of course we all want success, indeed most of us are driven by it, but would you really be prepared to lose everything to achieve it?

Why lose your football club in the same way?

Thousands of fans across the United Kingdom and many more abroad are now left with the nightmares that have been caused by gross financial mismanagement at their clubs.

Many have paid for season tickets up front for the season, and even subsequent seasons, many will have bought merchandise through the club's own stores, to ensure the money goes directly back into the club, but where is that money now?

It is easy to imagine the anger of Cardiff City fans who raised £3m for new players this January, only to be told with days of the transfer window remaining that the money is being used for other means.

The money came from around 10,000 fans investing in advance season ticket purchases for 2010/11, a season when Cardiff could be playing in the Premier League - they currently occupy a play-off place, and an extra player or two could help their promotion push.

But with another winding-up order and a £2.7m tax bill to HMRC, it doesn't take a genius to work out where that money will now end up, although it will save the club from suffering the same fate as Palace, which would end their promotion hopes.

Paul Corkery, chairman of the Cardiff City Supporters Trust said,

"It's totally their [the club's] fault. They need to prove to the fans that they can run this football club properly for 12 months without any [outside] investment.

"Because that is how you are supposed to run a business, not on hoping you are going to win the lottery.

"The statement [not buying new players] really upset a lot of fans because we are shareholders in the football club and the vast majority of shareholders are not behind this."

While Risdale blames moving into the new Cardiff City Stadium as the reason for the increased, and said, "We had anticipated that if we launched these tickets early and had received new investment pre Christmas or in January this year as promised, we would have been able to invest in new players in the January transfer window.

"In the absence of the new investment this will not be possible. We have to ensure that other overheads and financial issues are properly addressed.

"Whilst we apologise for this, we do not apologise for ensuring that the viability and financial health of the club is the ultimate priority."

However, when asked if the ticket money would be used to pay the debt, he said: "No, there is money to pay for that."

So why is the money not being used to buy new players Cardiff desperately needs? Where is the money going?

No comment on that.

This only smacks of poor management. The stadium move wasn't exactly an overnight thing, it was known for a number of years, and the added relocation costs should have been anticipated.

Cardiff is supposedly beyond the days of having to sell a player a year to survive as a club, and their new stadium was believed to generate a much larger amount of revenue for the club.

Even with the global financial problems, it is not unreasonable to expect that a club would seek to secure additional investment long before something is due to happen, to avoid the trouble not having finances in place would cause. Or maybe I'm wrong.

It's worth remembering that after March, a club's 10-point penalty is suspended if they're in the relegation zone, giving rise to a number of clubs trying to stave off administration until then.

But how many more clubs will face winding-up orders from HMRC by the end of this season?

How many will simply run out of cash as they struggle to compete, from the top of the Premier League to the bottom of League Two?

Established Premier League clubs might be able to attract investment from mega-rich businessmen from the Middle East and Asia, but what about the smaller clubs out there.

The economic divide is massive, and in the current climate will only continue to widen.

If the biggest club in the country can't manage its finances despite the vast income it attracts from ticket sales, merchandise and TV revenue then what hope for the little teams?

I maintain that clubs need to become more self-reliant, go back to what I said earlier about clubs raising money through fundraisers, or schemes similar to the advance purchase scheme at Cardiff.

Clubs need to become more creative at raising capital without the burden of debt. I could easily list a few more ideas here, and I'm sure you could too.

They also need help from the footballing authorities, and it can't come too soon.


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