The Premier League has never been more popular — globally as well as at home, says Mihir Bose. But the explosion of money is pushing clubs into insolvency — and squeezing British players out
As a global brand, English football has never been more powerful. The Premier League crosses all cultural barriers and has devotees in every corner of the world. Fans in Singapore, for instance, even change their sleeping patterns to keep up: on match days, they go to bed early evening and get up at 3 a.m. to watch live broadcasts. It is hard to think of anything else this country produces that has such reach. No matter how England’s national team fares in the World Cup this year, England’s football industry reigns supreme in the world’s favourite sport.
So it is odd, indeed, to talk about the death of English football. Look closely, however, and a financial plague is spreading. Last week’s Financial Times carried an advert seeking a buyer for the bankrupt Crystal Palace. Portsmouth FC, winner of the FA Cup just two years ago, is unable to meet players’ wages or pay for a website. Dozens of clubs are wrestling with their creditors, and the game is effectively divided into two financial leagues: those with, and without, a foreign sugar daddy to write the cheques.
Worse still, the global success of the English game has done nothing to nurture English, or even British, talent. It has never been harder for an English player to make it in the English Premier League. The Spectator has pulled together the figures. When the Premiership was set up in 1992, nine out of ten players who appeared in league fixtures were British. Today, well over half of them are foreigners. When Portsmouth met Arsenal seven weeks ago, there were no English players in either starting line-up.
For all their problems, clubs are still eager to splash a few million on a player from abroad rather than wait for a local lad to come good. This is the era where 17-year-olds are imported from Serbia and Mexico, rather than being spotted in local schools. Foreign players have been all too happy to pack their bags, attracted by the riches and prestige of the English leagues. According to The Spectator’s figures, the number of foreign players in the Premiership has risen fivefold since it started 18 years ago. In 1992, British under-25-year-olds made up 44 per cent of the Premiership. That figure now stands at a lowly 17 per cent — and it’s falling.
English football’s financial explosion remains a relatively recent phenomenon. In 1985, the Football League sold its overseas television rights for £200,000. Nowadays, the same sum would not pay John Terry for two weeks. And it pales beside a TV deal currently being negotiated with American and Chinese satellite channels, thought to be worth around £1 billion.
This influx of money has undoubtedly helped English clubs to compete as never before. The on-field product — the actual football — is of a staggering quality, played at a pace and intensity that the once-dominant Spanish and Italian leagues cannot match. And it shows: Premier League teams have dominated the European Champions League over the past five seasons, providing 12 of the 20 semi-finalists, six of the finalists and two of the winners.
Yet despite the burgeoning revenues, much of this success has arrived on the back of a financial illusion. For years, the owners and chairmen of Premiership clubs have been outbidding each other for the world’s greatest players — going further than even they can afford, and paying with money that they simply do not have. Take Portsmouth FC: a Premier League club for seven years, and winner of the FA Cup two years ago. In footballing terms, it has enjoyed one of the most successful spells in its history — but it may yet be closed down by HM Revenue & Customs.
It is far from alone. Seek out the accounts of each Premiership team, and you will find monstrous debts. Manchester United, the most successful team in the world, are £716 million in the red. Arsenal owe £297 million; Liverpool, £237 million; Fulham, £180 million; and so on. Indeed, half of the nation’s 20 biggest clubs are technically insolvent.
It is a familiar tale of profligacy on a massive scale. Clubs borrowed from banks to chase outrageously expensive stars and pay their mind-blowing salaries. In doing so, they created a bubble that would put our bankers to shame. Football fans expressed concern, but the British establishment remained unfazed. ‘It’s not a burning ambition for me to make sure that David Beckham earns less money,’ said Tony Blair in the last election campaign. Yet Beckham’s salary — and the salaries of many like him — was just one sign of a debt bubble. Clubs were using money they didn’t have, in a game of high-stakes roulette which now threatens the national game.
Beckham, like so many players of his generation, owes his success in large part to the English club system — in the days when top-flight teams grew their own players and did not buy in 17-year-olds from Estonia. When he first captained England, ten years ago, the average Premier League player was on the then-astronomical amount of £409,000 a year. It has now risen to £1.1 million — a rise driven by the crazy economics of the game, in turn fuelled by crazy massive lending and the egos of billionaires who see football as a social calling card rather than an investment. Normal laws of the market do not apply.
Yet in spite of this astonishing financial brinkmanship, driving so many clubs to financial ruin, almost nobody who has invested in English football has lost any money. Indeed, some have made millions. Investors have been able to buy and sell football clubs as if they were trading shares.
It is foreign money, used to write off debt (or forgive any bad management) which has skewed the incentives. Global businessmen are seduced by a combination of Britain’s liberal investment market and soft policing from the sport’s authorities. In the case of Portsmouth, the recent changes of owner have seen an Israeli sell the club to an Arab for £1, who then sold it to another Arab businessman for £2, who then gave it up to a Hong Kong property dealer of Nepalese origin when he failed to meet his loan payments — all in the space of six months. Clubs can be passed about like hot cakes.
And, so it seems, anyone’s money goes. After flirting with Liverpool and Fulham, the former Thai premier Thaksin Shinawatra finally bought Manchester City for £20 million in 2007. One year later, he sold it on to Sheikh Mansour of Abu Dhabi for a £100 million profit. And where is Shinawatra now? Hiding out in the Middle East, having been convicted of corruption in his motherland.
This episode focused attention on how the English leagues can ensure club directors are ‘fit and proper’. There are plenty of people in and around football who feel that the current tests, which no one has ever failed, need reworking. But Lord Mawhinney, the retiring chairman of the Football League, says a comprehensive test will cost £1.5 million a year — a price he says the league cannot meet.
Once ensconced at an English club, a new owner or backer can then take full advantage of Britain’s liberal financial system. The rules that prohibit buyers from borrowing money against assets have been progressively eroded over the past 25 years. Moneymen can argue about whether this laxity has been good for Britain’s economic development, but one thing is certain: without the changes, the American owners of Manchester United (the Glazer family) and Liverpool (George Gillett and Tom Hicks) would never have had enough money to buy those clubs. In their native America, this would be illegal. Acquisitions of sporting clubs cannot be debt-financed, and new owners have to be vetted by other club owners.
Manchester United — debt-free before the Glazer takeover — is now burdened with much of the £720 million debt that the Glazers took on to make their acquisition. And, at Liverpool, Gillett and Hicks have more than trebled the debt levels they inherited. Last year, Liverpool’s £36 million profits were all but erased by interest payments of £30 million on loans. All this leaves English football facing a grand, unsporting irony: clubs are now paying for someone else to buy them. Keith Harris, chairman of the investment bank Seymour Pierce, puts it starkly: ‘75p of every £1 Manchester United fans are spending is now going to the Glazers — either for themselves or to pay debts.’
With ticket prices rising above inflation every year — along with the exorbitant cost of everything from replica kits to match-day programmes — supporting a football club has long been something of a rip-off. But these minor swindles shrink into insignificance when compared to the giant debt pyramid that now threatens to collapse, bringing down with it some of the most historic names in British sport. Equifax, a credit rating agency, listed the ‘technically insolvent’ non-Premier League clubs last month — and it makes grim reading: Barnsley, Nottingham Forest, Ipswich Town, Leicester City, Coventry, to name but a few.
In the end, English football may find that it is brought down by HM Revenue & Customs. For a long time, football clubs felt that they could persuade the taxman to take it easy on them. A story is told of how some years ago, when Leicester City was in trouble, Keith Vaz, the local MP, phoned Gordon Brown, then Chancellor, and got the Revenue to back off. But with the government itself in such debt, HMRC is beginning to apply the thumbscrews — as Portsmouth and others are finding out.
If the market were functioning, football’s bubble should have burst, forcing teams to stop buying in talent that they can’t afford and start relying again on their youth systems. But the debts are so catastrophic that clubs are more likely to reach for the quick fix: the billionaire backer from abroad. More mega-money from sheikhs and oligarchs might save English clubs from oblivion in the short-term, but it risks condemning another generation of young English players to the substitute-benches and lower leagues. The character of English football, and the quality of the national team, would inevitably suffer.
In the last 15 years, it should be added, some staggeringly talented English footballers have made it into the Premiership elite. They have trained and played with the best players in the world, and no doubt this has rubbed off. With such stars as Rooney, Ferdinand, Gerrard and Lampard, the England team has a reasonable chance of winning the World Cup this summer. But no matter how far they get, no matter how good it feels, England fans should reflect on the financial disaster menacing the game back home. The club system that developed England’s players is on the precipice. It is debt-ridden and rotten. A World Cup victory might be a wonderful tonic, but it will not fix our beautiful game.