Premierleague clubs are fortunate, for the time being at least, in that the sponsor of the league is Halifax Bank of Scotland (HBoS), which acts as main banker to all the top-flight clubs except Celtic and Motherwell. Goodwill towards football undoubtedly exists — up to a point. In reality, though, financial institutions involved in football have a responsibility to look after the interests of their shareholders, and institutional shareholders care little for the fortunes of football clubs.
The apparent patience of the banks is actually based on hard-nosed number-crunching to make sure they are covered if things go wrong. In many cases, if a club ever came close to going to the wall, there are valuable property and land assets, often near the centre of towns and cities, that can be sold. In the words of John Moore, football finance analyst at stockbrokers Bell Lawrie White, banks view the business of a football club just as they view that of a farmer.
“Many farmers may be in deficit for their entire life,” Moore said, “but the bank is happy as long as the interest is serviced and the freehold property can be sold if the worst came to the worst. That’s the same principle that banks can apply to football clubs. It might not make sense in many other kind of businesses. So it is not impossible for Scottish clubs (to compete). For a number of English clubs, it is impossible.”
Moore cited Hearts as a prime example of a club outside the Old Firm that is trying to bite the bullet on its financial position and plan for the future. Many star players have been sold and the Tynecastle wage bill has been cut. The club has secured the services of probably the best young manager around, Craig Levein, and has started building a youth academy to rear young talent. This is the realistic business model many would like to see emulated by clubs of a similar size.
“The market capitalisation of Hearts has been as low as £1.5m,” said Moore. “If they get one good player from the youth academy, he could be worth at least that amount. What would really help them, though, is another 3,000 people through the gate every other week to break even.”
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Other clubs are not so prudent, and banks at some stage will clamp down. When a club of limited resources like Dundee spends on players at the rate it has in recent years, financial observers become concerned at the sustainability of such a strategy.
Celtic and Rangers at least have the lucrative prospect of a possible run in the Champions League to influence financial decisions, but it would be very unwise for either to repeat the big mistakes of the past on expensive player purchases that sometimes do not work out. Again, though, Moore put the debt of Rangers in some perspective. “A lot of people go on about Rangers’ debt, but it is about four times season tickets (income),” Moore added. “That is just like a first-time house buyer. It is not entirely desirable, but it is not impossible.”
The ambitions of the Old Firm and the rest of the Premierleague have been hampered by their current TV deal, which at £16m over two years was described by Moore as “buttons”. English Premiership clubs can each receive between £15m and £20m every season from Sky. Moore is optimistic that Celtic’s Uefa Cup exploits and the super-Sunday finale to the championship involving the Old Firm will help bring a better deal to the table next time around.
Some clubs obviously have other income streams like merchandise, financial services and catering. Some are introducing new and innovative ways of making money. Gavin Masterton, the former Bank of Scotland treasurer, is chairman of a firm that has helped his beloved Dunfermline and other smaller clubs in Scotland and England to realise the value of the land surrounding their stadiums by developing hotels, gyms and leisure facilities. Innovation of this type will be required if clubs are to survive.
Despite the problems, there is money to be made in Scottish football. In the new Deloitte & Touche annual review of football finance, the Premierleague emerges impressively as the seventh biggest revenue-earning football league in Europe behind England, Italy, Spain, Germany, France and Holland, but ahead of Belgium, Portugal, Greece, Norway, Sweden, Denmark, Austria and Switzerland. Without Celtic and Rangers, the Premierleague would slip way down the table. If the Old Firm ever moved to the English Premiership, the same Deloitte & Touche review estimated both clubs would make at least an extra £10m in income every year.
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The rest of the Scottish clubs have no choice but to soldier on, cutting their cloth and being innovative.