Tomorrow, a 134 year-old club faces extinction. Unless a buyer for Bury F.C. emerges in the next 24 hours and chairman Steve Dale agrees to sell, then the club will be at the mercy of the High Court in London. They could be read their last rites.
Theirs is a story of financial collapse. It is a tale of yet another club spending beyond their means only for it to come back to bite them within a decade or less. For Bury, this has been years in the making, both in terms of the debt that was accumulated and the attitude that has emerged in English football which favours reckless, unchecked spending over long-term security.
Bury are far from the only team in trouble. Bolton, Notts County and Macclesfield have also faced the courts in the past months and have futures that are uncertain to various degrees. Meanwhile, Gateshead have just been demoted from the National League to the National League North as a result of the financial collapse of the club over a number of years. Their club was saved from extinction by a takeover at the eleventh hour. These five are part of a group of sixteen professional football league clubs to have faced winding up petitions in the courts over the past two years.
A familiar story
Bury’s is a familiar story: they spent too much; they relied on their owner to cover their losses.
Then came the less familiar part: the owner ran out of money; and so the club ran out of money.
It was recently revealed that the total debt of the club is £8m, a sum too great for current chairman Dale to pay even if he were willing to. That debt is only ballooning as the club fails to pay the wages of its players and the interest charged on outstanding loans continues to pool.
The source of this calamity is not difficult to discover. In the last three financial years up to 2017, Bury lost a total of £8.3m. Each season, the costs of running the club exceeded the money that it made by at least £2.5m. With debts already amassed, Stewart Day (the former owner and chairman) ran out of money. To be more specific, the companies he owned collapsed.
Without the money to fund Bury’s massive wage bill, he was forced to sell the club last December to Dale. Thus far, Dale has been unable to cover the costs of the team and pay off the huge debts the club was already saddled with.
Dale has taken a lot of abuse for his part, but as Accrington chairman Andy Holt pointed out, the current predicament that Bury find themselves in is a direct result of the huge debut and unsustainable wage budget constructed by the former chairman. From the outside, Dale appears to be doing a bad job – particularly with regards to communicating with the fans – albeit in very difficult circumstances.
So.@buryfcofficial is on its arse because the previous owner built unsustainable debt in the club.
This were allowed to by @EFL rules.
I’m taking it up with them because there’s no point in me sorting @ASFCofficial official, if a new owner is…
— Andyh (@AndyhHolt) June 6, 2019
Cycles of debt
Bury are far from an isolated incident when it comes to reckless spending. From the most recent club accounts submitted (for the 2017/18 season), plenty find themselves in situations comparable or worse to that of the Shakers at the start of last season.
Fleetwood currently owe £13m to their owners, even after they wiped out £4m worth of debt last season. Scunthorpe owe £9m. Bristol Rovers owe £13m. Coventry owe £42m. Southend owe £13m, despite £7m being wiped out in the past year. MK Dons owe £10m. Northampton owe £4m. Colchester owe £22m. Swindon owe £6m. Chesterfield owe £10m.
Notts owed their owner £4m just one season after he took over the club, and that is likely to be revealed to have increased to well over £10m once the club finally release their accounts for last season. Oldham are probably in a similar boat. Their accounts have not been released yet and their recent takeover is likely to mask the extent to which they rely on his funding.
If these debts were called in by their owners right now, none of the clubs would be able to pay them. What sets these teams apart from Bury is that they have not faced a liquidity crisis. That is to say, their owners haven’t run out of money to bankroll the club and required their money back. When that happens, clubs begin to fail.
Bury were run in exactly the same way as all of these teams. They were nothing out of the ordinary. They consistently spent grossly more than they made, year on year, until ex-chairman Day ran out of money and needed to pay his debts to his creditors. Any of the other clubs mentioned above could face the exact same fate if any of their owners are unfortunate enough to run out of money in this turbulent financial era.
That liquidity crisis is what triggered the carnage at Bury. Now, their manager has departed and the majority of their team is probably going to depart. If they can survive liquidation, they are likely to fall into administration and a 12-point penalty. They almost certainly won’t survive relegation and could gather the same momentum that saw Chesterfield fall out of the Football League. Should the club survive liquidation now, it may not in 24 months, should the worst-case scenario play out.
At the start of last season, Bury were no different to the likes of Scunthorpe, Southend or Fleetwood. Any number of clubs could face the exact same problems in the next year. Now, their future – both short-term and long-term – has been irrevocably altered. Pause and think about what would happen to your club if its big-spending owner decided – or was forced – to pull the plug.
Football’s financial facade
Yet, the Championship is the EFL’s worst offender. Combined, the League posted losses of over £500m last season. Half a billion pounds. Let that number sink in as you contemplate the relatively chump-change that threatened the existence of Gateshead and continues to cast a shadow over the likes of Bury.
However, while virtually every Championship club is even more indebted, they are safer than teams like Bury, Northampton and Bristol Rovers. These clubs have average attendances anywhere between 15000 and 35000, better stadiums and more resources to draw on. They have a natural place in the upper echelons of the Football League, financially speaking.
When a side like Bolton faces extinction, there is a good reason to save them in spite of their financial baggage. They are a club with a fan-base big enough to help sustain a place in the Championship in the long-term, and a stadium that is relatively modern. With a significant investment, a prospective owner could reasonably hope to make a return without having to break the bank. Hence, Bolton are currently in discussion over a takeover that could propel them back to the Championship within a couple of years, despite having been forced into administration last month.
Meanwhile, why would an investor save Bury? Seriously. They would have to spend millions to purchase the club, clear a significant sum of debt and get the club in order. Then, they’d have to commit to losing money every year if they were to retain the team’s position as a club that sees itself as wanting to be mid-table in League One. Why would you do it?
Even if you would be happy to run the club in a sustainably, you’d still have to spend a significant sum to turn the club around in the short term before being accused of a lack of ambition and possibly even asset stripping in the long-term.
Just take James Brent: he saved Plymouth Argyle from liquidation, made a huge short-term loss (c. £5m) to steer the club towards mid-table in League Two and then ran it within its means as best he could, eventually achieving promotion. Despite this, he was repeatedly accused of either pocketing money or lacking ambition as fans could not understand how a club with the third biggest attendances in League Two could have a budget outside the top 10.
The legacy of Shaun Harvey and the EFL
In the past decade, the word money has been far more synonymous with football than any of the slogans that are endlessly repeated on TV, with the Championship becoming a microcosm of the Premier League. So much so, that clubs have threatened to repeat the Premier League’s antics of spitting away from the EFL to form a breakaway league so they can make even more money!
One man who’s hands are particularly dirty in all this is that of Shaun Harvey, the man who led the EFL during a period when debts have accumulated at an unprecedented rate and owners from the shadiest of backgrounds have been allowed to take over clubs with impunity.
EFL net profit/(losses) per division as Shaun Harvey leaves with the game in great health. Championship £316 million overall loss League One £63 million overall loss League Two £8 million overall loss. #SHAT pic.twitter.com/LYoIs12t5u
— PriceOfFootball (@KieranMaguire) May 31, 2019
Quite frankly, the FA and EFL sometimes make themselves look as though they are not working in favour of football clubs. You can’t help but get that nagging feeling in the back of your mind that they are in a similar state to that of FIFA before the corruption scandal emerged in 2015. Speaking of whom, the paragons of football are having year another terrible day after it was revealed that former UEFA president and French legend Michel Platini has today been taken into custody on suspicion of corruption in relation to Qatar’s successful 2022 World Cup bid.
When you look at some of the takeovers the FA and EFL have sanctioned, and some of the changes they have implemented – such as the introduction of b-teams into the EFL trophy – you can’t help but be suspicious of what’s going on behind the scenes. For a starter, the fit and proper test for prospective owners is a joke.
How many teams have suffered as a result of the inability of the footballing authorities to prevent bad owners from taking over a club? As recently as April, Laurence Bassini was gunning to take over Bolton. He had previously been banned from owning football clubs following his disastrous period with Watford during which he was found ‘guilty of dishonesty and deception‘.
In the end, what stopped his takeover wasn’t the fit and proper test, but the fact that he was unable to provide the money he claimed he had, which I’m sure came as a total shock to everyone. In fact, for an artists depiction of what the “test” entails, see the video below:
Whatever the current fit and proper test looks like, they could certainly do with adding a “draft a press release” test. That ought to weed out a few disasters waiting to happen. It would certainly have raised a red flag early enough to save Leyton Orient, whose Chief Executive one wrote this masterpiece. And of course we’ve seen many other excellent attempts over the past few years, notably from Bury’s Dale and a superb effort indeed by Bolton’s ex-owner Ken Anderson.
Then we come to the financial fair play rules. To quote a popular movie from the previous decade, “the code is more actual guidelines than rules”. For the most part, clubs are free to break them as they please. The rules are meant to prevent unsustainable levels of debt growing at clubs by limiting spending, but as long as the EFL feel assured that the owner will cover the deficit they turn a blind eye. Hence why Bury and Notts find themselves as they currently are.
Yet, none of this stopped Harvey from declaring his confidence in the collective finances of the EFL. As recently as last year, he declared:
“We remain confident that, as a collective, EFL clubs are financially stable, in many cases as a direct result of shareholders’ ongoing financial support.
“The EFL will never be complacent in managing what is a complex and challenging area but we are confident that our current approach promotes a culture of protecting the longevity of clubs while not limiting ambition.”
Half a billion pounds lost by the Championship in a single season. Clubs from every division facing the prospect of administration and liquidation if their owners were to suffer an unforeseen cash-flow crisis. Financially stable. Protecting the longevity of clubs. Yep, that all ads up.
The end of football
A reckoning is coming. Every year it grows nearer. The financial gods of football can only postpone it for so long.
The speculative bubble that began with the dawn of the Premier League seemingly inches ever closer to popping. The inflationary effect of Premier League finances spurred ever bigger investors to flock to the Championship. Some of these clubs are now making such huge losses chasing the riches of the top division that they wouldn’t even recoup their money within a season or two. That assumes they will even reach the promised land before the money runs out.
The growing wealth of the Championship allowed these clubs to hoard more players and made the division more attractive to overseas television viewers. The effect this had on clubs in Leagues One and Two was twofold. First, it drove an increase in average wages, thus increasing the net-spend required to compete for promotion. Second, it turned the Championship into a promised land of its own. If Argyle had won promotion in 2018, the club’s income would have nearly doubled because of the Championship’s television deal.
The main difference is that, while Championship clubs are worth saving to investors, lower league clubs are only community assets. Selling their stadiums, training grounds and players will not cover the losses that can rack up within a few seasons of speculative spending. This is what Bury are currently finding out.
This is a product of the EFL and the FA. For too long they’ve allowed this reckless level of spending to spiral out of control. The fit and proper test is not fit and proper. To be honest, the EFL and FA aren’t fit and proper themselves. They are the great enablers in all this mess. If they worked harder to prevent small clubs from running large deficits year on year, Bury would not be in this mess.
Should they not be saved, they might start a chain reaction of insolvencies across the Football League. When, in another year or so, another club faces the exact same problems, they might yet provide the ignition to start the fire. With every passing season, as the debt grows, the worst case scenario grows ever more likely.
And let’s not forget the biggest losers in all this. Not the fans, not the players or the owners. The real losers are those whose lives are ruined. The staff who go months without pay when they cannot afford it. The small companies that lose their money because the club can no longer pay it back.
Take Argyle, for example. Let’s be honest: we weaseled our way out of liquidation by ripping off everybody. We paid less than a penny for every pound we owed. Why is it fair that we should be allowed to continue on by simply writing the debt off? Clubs should not be allowed to get to this state to begin with.
Yes, a club like Bury deserves to be saved, for the sake of its thousands of fans, role in the community and more than a century of history. But it should not be allowed to continue on like this. Change is desperately needed.
Otherwise, the kindling is stacked, it just requires a spark to set it all off. And then, who knows what will happen? For many clubs and communities, finance shall prove to be the end of football.