Football will NEVER be the same again
Wage cap could be only solution to save our game as clubs fear worst
THE sign still posted to an exterior stadium wall provides a hint of how Chesterfield are suffering.
It promotes a home match with Stockport County — which would have been an improbable contest just five years ago, when the club were contesting a League One play-off final and those near-local rivals had crashed into non-League obscurity, amid crisis after crisis.
But now Chesterfield have barrelled down football’s pyramid too, experiencing a more precipitous fall than any other British club of the past decade, with consecutive relegations and the threat of a third these past 18 months.
Their Easter Monday National League match would have been a particularly crucial source of income.
They had banked £11,000 from Stockport fans clamouring to make the short drive across the Pennines. The emails and calls from those now looking for their money back are the least of the club’s problems at present. Chesterfield’s March wage bill, which they’ve managed to cover, was £140,000 — second only to Notts County in the division — but how April’s will be managed looks deeply uncertain, given that their numbers frankly don’t add up.
They take £25,000 on an average match-day and £60,000 a month from their stadium banqueting facility and there’s an annual EFL parachute payment which works out at £16,000 a month.
But the wages dwarf all of that and the attempts to cut costs here and there — identifying four away matches to cut out overnight stays (£10,000 saving) and subcontracting groundsmen’s work (outlay still about £50,000 a season) are fingers in the wind.
They would be bust without owner Dave Allen, who runs bingo halls which are currently closed, pumping in £150,000 a month. That’s the same Dave Allen who is reviled by most fans because of the club’s demise and who, The Mail on Sunday are advised, doesn’t put his head above the parapet, even to discuss a crisis like this.
No one saw things turning out this way for one of Britain’s most venerable old clubs, formed in 1864 in the one-time coal and iron-ore town whose industrial core provided the players to compete in the early years of the FA Cup. A club which, after myriad ups and downs, reached the semi-final of that competition in 1997.
But someone probably should have done. The days of mass employment have long gone, along with the quaint notion of multiple generations of the same family holding fast to the same place. The club are an emblem for the struggle of myriad British towns in a global, postindustrial world. Though they have commendably become a community hub — pensioners, mothers and toddlers, the local chamber of commerce and the Blood Transfusion Service all use their new purposebuilt stadium — the world the club once knew has gone.
Chesterfield spent £40,000 on agents’ fees between July and December 2018, as part of the desperate scramble to get back into League Two. Madness. Allen has written off £10m, wants out and had been in advanced discussions to sell to the Supporters’ Trust before
Covid-19 struck. No one in the Derbyshire town is sure how that will pan out now.
The club’s position is one reflected across the country and arguably not even the worst, given that Allen has not yet turned the money tap off, despite three futile years seeking a buyer.
By common consent, the Championship clubs — spending like crazy to get promoted to the Premier League — are the ones living furthest beyond their means. The EFL last week provided a £50m bailout package, including a capped interest-free loan, to help keep its own clubs afloat, with no money coming in.
But research for The Mail on Sunday by Kieran Maguire, football finance specialist at Liverpool University, reveals that the Championship’s biggest spenders will burn through that cash in little more than a week.
Recent wage data suggests Stoke City and Fulham will get through it in just nine days and Swansea City in 10. According to their budgets last season only the promoted clubs — Barnsley, Luton and Charlton — would make it last a month. Maguire estimates that the total losses of Championship clubs promoted to the Premier League since 2010 are £864m.
The bailout package is not even all that it seems. A substantial proportion of it is an advance of the final Premier League solidarity payment of the season, which will not magically rematerialise in May. The EFL does not have vast cash reserves to save anyone.
For League One Tranmere Rovers, welcome as the timing of the cash advances are, only £180,000 of the £430,000 bail-out cash received will effectively be ‘new money’ into the cash-flow hole over the summer and even this has to be repaid. The cancelled matches will take £500,000 out of the club’s cash flow and, with the expectation that 2020-21 season tickets will take a very substantial hit, owner and chairman Mark Palios anticipates this crisis costing the club at least £1m in cash flow through the summer.
The club has a degree of insulation that others may not. When Palios, former FA chief executive and PriceWaterhouseCoopers business recovery partner, took over five years ago, the club were on a downward spiral, living hand-to-mouth with no real cash reserves.
The rebuilding has included developing affiliate businesses not dependent on performance on the field, although the club has won back to back promotions.
Rovers will be able to maintain their usual total wage bill of £10,000
per day, by diverting funds from capital projects, furloughing staff and other measures. For others, it’s an bleak, hand-to-mouth existence. The EFL does not yet know just how big its clubs’ financial black hole is.
Palios is part of the newly-established EFL financial working group, which will tomorrow begin the process of asking clubs for financial data to help establish an accurate picture.
That will equip the EFL to approach the Government for ‘business interruption loans’, administered by the banks which are highly averse to lending to football clubs. The cold, hard truth is that clubs are going to have to offer copper-bottomed guarantees that the days of unsustainable wages are over. Banks will otherwise assume that clubs are going to take loans and spend them on players, when we are over this hill.
‘This can’t be a one-way street,’ Palios said. ‘If you go with a begging bowl, you’ll get a short, sharp response. If we are going to ask for more help, then it must be accompanied by some self-help. The most obvious is a commitment by the whole industry to agree to better financial control, particularly in respect of wages. ‘We should be looking at a wage cap. It’s simple. It’s done. And it’s not as esoteric as Financial Fair Play, where you are having to define which areas of spending are valid or not.
‘Two or three years of a wage cap and then we see what the landscape looks like. Some might feel it’s unpalatable. The PFA would need to be involved. But to do otherwise would be to emerge from this crisis with a large number of clubs weakened by the losses they will surely incur and continue with a financial model that clearly isn’t working in good times.’
The prospect of League One and Two sides working together seems realistic, though Championship sides seem to be in a world of their own: a lost, parallel universe of unexpurgated spending. Sources have told The Mail on Sunday that a substantial Premier League bail-out to the EFL clubs will come. But we are witnessing an end to club football as we have known it. The benefactors who have propped up clubs are seeing the values of their capital and their dividends evaporate. The small businesses who advertise and pay for club hospitality will also be hollowed out.
Some clubs will perish, with wealthier ones picking up their best players. Many will become part-time.
Had Chesterfield held on to their Football League status, they would have benefitted from the EFL’s support but sadly, those days are gone. ‘There’s been no correspondence from the National League yet,’ said chief executive Ashley Carson. ‘We’ve sent financial statements to them. But we’ve had no guidance. We’re in the last season of our parachute payments. ‘So if the season’s scrapped do we get that again next season? If the season starts again in June, I’ll only have nine contracted players. We’re in the dark.’