But whilst attention focuses on the likes of Real Madrid or Manchester City, little is paid to the smaller clubs further down the football pyramid, who tend to suffer the consequences of the debt spiral in football. Spending in the Premier League forces teams to try to compete financially beyond their means, leading to the kind of problems seen at Portsmouth, and now at West Ham and Birmingham, recently relegated to the Championship.
But there is also pressure from teams competing to rise through the leagues. Wigan Athletic and Fulham are great examples of teams who have spent their way to the top from the very bottom of the football pyramid. A decade or so ago both languished in what was then the third division, now League Two.
Recent years have seen teams struggling to keep pace with the financial demands of the lower leagues. In the Championship, teams such as Crystal Palace and Plymouth have struggled in recent years. Plymouth went down, and are now in the bottom tier of English football, whilst Palace still hold onto their status in the second tier. QPR have just spent their way to the Premiership, and follow the path trodden by the likes of Stoke.
Stoke are perhaps an apt example of this trend. Peter Coates, their wealthy owner, funded the team’s promotion to the Premier League, spending far beyond the club’s means in a successful gamble. Had it gone wrong, the club would be in dire straights today. Their spending was unsustainably high when they won promotion, and the combination of the Premier League’s lucrative TV revenues and a functional, if dull, style of football have kept the club afloat despite having had to operate far beyond their means to reach the level at which they are now at, which in turn, funds their Premier League existence.
This is not the way football is meant to be.
Dean Hoyle, the upwardly mobile owner of League One outfit Huddersfield Town, who narrowly missed out on promotion, is another in the Coates mould. A local man who made a fortune has spent significantly on his squad, though mainly on wages rather than transfer fees, in an attempt to help the club reach the Championship. Their failure to do so last week shows the perils of the strategy. The margins are so fine between success and failure, and as Chelsea are finding, sometimes it isn’t something you can affect with more money, different players or a new manager – dumb luck plays a significant role in football. Football owners taking chances do so should bear this in mind.
This isn’t so much playing the lottery, as winning the lottery and then being forced to pay extraordinary sums to continue winning. So much so that you becoming essentially reliant on winning the lottery (i.e. staying in the particular league you compete in) season after season. This happens from the top to bottom. The top clubs, Arsenal and Tottenham Hotspur apart, need Champions League TV revenues to pay down debt, and most of the rest of the league need Premier League TV revenue to pay the debts required to pay the wages to compete at this level.
It’s a dangerous game, which goes right down into the championship, League One and League Two. It’s even spread to the conference; Crawley Town have been promoted after spending huge sums of cash in recent years to reach the football league.
The situation is getting worse; football league clubs combined have debts of around £700 million, more than 80% of which is in the Championship. League Two has implemented a salary cap,, whilst a similar concept is being discussed in League One.
Who pays when it all goes wrong? The fans, whose clubs are forced into a spiral of decline, and ultimately the taxpayer. Stoke City borrowed £5 million from their local council to build the Britannia Stadium in 1997, and paid off the figure in December 2009. What if the club had failed to reach the Premier League? A parlous financial position could have forced the club into administration, like so many teams in the lower leagues, and would the council have then got their millions that were laid out? And where do the council get their money from? Of course, ordinary people. Is it right that hard working men and women, many of whom don’t care for football, should have their hard earned money gambled with by fantasist football owners?
Surely not. The madness of football’s debt must end.