Premier League money woes expose Financial Fair Play fears

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Football News

Three of the Premier League’s leading clubs were in the news this week for reasons they would much rather not be.


Money and football have never been the easiest of bedfellows, and now Liverpool, Manchester United and Chelsea have been forced to face up to questions of one kind or another over their finances in the last seven days.


Liverpool’s accounts, revealed this week, showed a £49 million loss before tax for the financial year ending July 31, 2011, a rise from the previous year’s figure of just under £20 million.


The club’s American owners also arranged a £120 million borrowing facility, the accounts reveal, while they also lent the Anfield outfit £30 million upon their arrival.


The gaping hole in their accounts was largely down to the folly of attempting to build a futuristic new stadium on Stanley Park which cost a startling £49.6 million.


The plans for the stadium were scrapped in 2010 following the takeover by John Henry and his Fenway Sports Group, with the £50 million spent on exploring the viability of the stadium labeled as an exceptional item in the accounts.


While the club’s much-maligned previous owners Tom Hicks and George Gillett shoulder the blame for that fruitless endeavor the club must now pick themselves up and prove they can be profitable in the future.


They face the problem of being stuck in something of a vicious cycle currently; namely increasing their wage bill in order to move up the league table and secure lucrative European football, but failing to secure a spot in the top four for the last three seasons.


Figures show their wage bill has increased to £3.1 million per-player per-year, making them the 18th highest playing professional sports team in the world, ironically one place above the Boston Red Sox, who are also owned by Fenway Sports Group.


Manchester United are another Premier League club who have had their finances held up to the light, and it didn’t make for pretty reading.


In contrast to their great rivals Manchester City, who could go some way to beating them to the title with victory against Newcastle on Sunday, United have seen money drained from the club rather than invested back in it, like City.


The Guardian report that around £500 million has been taken from the club since the Glazer family took over, funds which have been generated by increased ticket prices, and TV and commercial income in order to pay off interest and charges arising from loans taken out to finance the American family purchase of the club in 2005.


While United have been fairly active in the transfer windows over the past few seasons, bringing in David de Gea (£18.9m) on Phil Jones (£16.5 million) and Ashley Young (£17 million) in the summer, it is felt by some fans that the club are being held back from making a world class signing because of their financial trouble off the pitch.


All that is in contrast to the £1 billion ploughed into City by the club’s Abu-Dhabi based owners, funds that look to have delivered them to their first ever Premier League title.


It was interesting to note that while Liverpool and Manchester United were forced to see their finances aired in public Chelsea were taking a bold step forward by announcing their bid to buy Battersea Power Station and build a new stadium on the site.


If Roman Abramovich’s long-term commitment had been questioned following another turbulent season at Stamford Bridge then it would have been comforting for fans to hear of the project to build a new stadium, although the fact that is could be away from Stamford Bridge will cause an issue for some.


The capacity of their traditional home has been a problem for some time and they met problems when it came to buying the land Stamford Bridge sits upon in order to redevelop earlier this season, meaning the club were forced to seek out alternatives despite the potential problems with over a move.


Interestingly the move, likely to cost hundreds of millions, could help them when it comes to the introduction of Financial Fair Play in 2013 by increasing their ticket revenue, while naming rights could also be used to help boost their income which in turn would give them greater scope for spending, something which has never been a problem for Abramovich.


Of course while the only immediate consequence for clubs like Liverpool and United is embarrassment - clubs such as Rangers and Portsmouth must face up to the very real prospect of going out of business because of financial mismanagement.


Mervyn King, governor of the Bank of England, had some sage words of wisdom for football clubs struggling to make ends meet.


“They have to think through how they want to organise the finances of football,” he said.


"The UEFA fair play rules come in in the next few years and the great virtue of those rules is that they do give fans for all teams the chance to think that the outcome won't depend on which team has managed to find some rich person from around the world to come and put money in."


At a time when football is in the headlines as the season nears its climax it is sobering to see teams as big as United, Liverpool and Chelsea hit the headlines, with the first two appearing more vulnerable than ever in terms of finances.


Both clubs have spent big and expect big returns in the process, but with the impending introduction of Financial Fair Play, accounts and figures such as the ones revealed this week could cause a genuine problem in years to come.

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