It’s been a busy start to the season for Argyle fans. Between the League and Carabao Cup, by the end of August Argyle will have played eight matches. With five of those at Home Park and an away game at Newport within relatively easy reach, we’ve been spoilt.

So spare a thought for Bury fans. Thanks to their ongoing financial woes, they’ve seen no football so far this season, with six games postponed as we write. With the manager, several staff members and five players fleeing the sinking Bury ship over the summer to move to Home Park, we’re naturally watching events at Gigg Lane with interest.

Every football supporter must be aware that all is not well in EFL-land, where financial pressures that have been brewing for decades are rising to dangerous levels. The most obvious manifestation of which is that Bury and Bolton Wanderers have both started life in League One with 12-point deductions after entering administration. Unlike Bury, at least Bolton have been able to kick a ball in anger.

Sadly, Bury’s situation is starting to look terminal. At the end of 2018, new owner Steve Dale took over from Stewart Day, a man who made the bullish statement in the last set of accounts that, “I will continue to support the club for as long as it takes to become successful…both on and off the pitch.” Less than six months later, he bailed out, leaving around £8m of debt.

After facing a winding-up petition last spring, the new owner agreed a rescue plan (a CVA) whereby creditors would receive a percentage of money owed. The EFL have demanded that Dale shows he has the money to pay off even the reduced debt and to fund Bury’s League One campaign this season. After many postponements and much bluster from the owner, Friday 23rd August looks to be a real line in the sand, with a ‘hard exit’ from the EFL awaiting the club if Dale fails to come up with that proof.

The outpouring of sympathy for Bury supporters from fans of other clubs is understandable, since many have seen their own teams teeter on the brink of oblivion in recent years. But the hand-wringing and calls for somebody to ‘do something’ to rescue the club are not particularly helpful if we really want to understand how Bury got into this situation and how other clubs can avoid a similar fate.

Blame for the current problems at Bury, Bolton and other clubs has been laid at various doors. The EFL for failing to monitor the clubs under their remit, reckless owners who endanger clubs for reasons of personal ego or financial gain, TV companies who funnel cash only to the elite at the top of the pyramid, greedy Premier League clubs hoarding football’s riches, the list goes on and on.

Neither fit nor proper

The EFL certainly has a case to answer, frequently failing to enforce its own rules. The big one in the case of Bury is the ‘fit and proper’ test. Football is a magnet for dodgy chancers, seeking to profit from a club in some way, and also the well intentioned but deluded whose ambitions are hopelessly financially unrealistic. The EFL’s job is to protect them from both by investigating whether a prospective buyer is “fit and proper” under its owners’ and directors’ test, and has sufficient funds from a legitimate source to fund the club. It has the power to block a takeover if it is not satisfied.

In Bury’s case, not only did the current owner take control last December without undergoing any of the tests, eight months later he still has not complied with the requirements. Meanwhile, the club stumbles towards extinction.

It’s easy to heap blame on the EFL but their failure to enforce the fit and proper test hides a deeper issue. Namely that as it operates today, the business model of lower league football is busted. The potential to boost revenues is limited while costs, particularly wages, continue to spiral upwards, meaning there’s no queue of well-funded, legitimate businessmen eager to pour money into League One and Two clubs. That might explain why the EFL seems less choosy about who it allows into the football owners club these days.

Promotion roulette

Reckless owners also have to take a share of the blame. At Bury, it’s an all-too familiar case of unsustainable spending. The seeds of the current problems were sown under the previous owner. In 2013, Stewart Day unveiled a five-year plan to win promotion to the Championship. At which point the usual scenario – spending money to acquire a highly paid squad – started to unfold. But instead of promotion, the high-priced side was relegated back to the fourth tier in 2018.

The result is that despite bouncing back to the third tier, the club was left with £7m of debt repayments due within the following 12 months. Perhaps the most egregious example of financial mismanagement at Bury was the revelation that Stewart Day had recently borrowed an additional £3.7m, £1m of which was secured on the Gigg Lane ground with an eye-watering 138% annual interest rate.

There’s a whiff of regulatory neglect here as well. Under the EFL’s Salary Cost Management Protocol, only 60% of League One and 55% of a League Two club’s income can be spent on player wages. Whether that was enforced in the case of Bury seems highly questionable and, in any case there are plenty of workarounds. Transfer fees, for example, are not included in that capped amount.

And painful though it might be to acknowledge, supporters also have to take some responsibility. Constant calls for more ‘investment’, particularly on the playing side, and joy when an owner rocks up with big ambitions and what looks like an open chequebook, suggest that prudent financial management is a pretty low priority for the fan base. Wanting the best for your club is something all football fans share, but we sometimes need to take a long look in the mirror. We’re happy to call for higher expenditure but less keen to take responsibility when the wheels come off.

Here again, it’s down to the EFL to take the hard decisions that the fans are not in a position to do so. Even if that comes down to basically protecting them from themselves.

Blame it on Sky

A common refrain is that the TV companies have distorted football’s finances, to the detriment of the lower league clubs. When Sky paid a record £5.2bn for Premier League rights in 2015, it did indeed seem as if the rich were going to continue to get richer. So is it ‘wrong’ that TV revenues are hoarded by a relatively small group of clubs at the top of the game? It certainly makes me feel very uncomfortable, but the cold reality is that the TV companies are only doing what any businesses’ shareholders would demand, namely maximising their income. If that means showing the same small number of Premier League clubs repeatedly, that’s what they are obliged (by their owners) to do.

You could argue that when rights to show football in this country are auctioned, there should be a proviso that the winning bidder has to show a proper spread of games outside the top division. If that means that the rights go for a lower sum, depriving some of the top Premier League clubs of some revenue, then so be it. I for one think that would be a price well worth paying to funnel some cash to the lower divisions. But until that day comes, it would be futile to expect the TV companies to act against their own commercial interests.

Should the big clubs come to the rescue?

The other familiar argument is that the big boys – in the case of Bury, presumably Manchester United and Manchester City – should step in to save the club. Lovely though it sounds, this is another total non-starter.

For one thing, there are strict limits on clubs buying stakes in other Football League clubs. So that leaves a ‘donation’. But does anybody seriously expect the American owners of United or the Middle Eastern backers of City to put their hands in their pockets to rescue Bury? And would it be a one-off injection of funds or an ongoing commitment to keep the club alive? It’s a financial and ethical quagmire that no large club is going to step into.

Another question is where does the duty to save local clubs start and finish. If they save Bury, what about Bolton? Then what happens when Oldham or Rochdale or Wigan get into financial difficulties? Do Premier League clubs have an obligation to rescue lower league clubs within a certain radius of their ground? Thirty seconds thought is all that is needed to show that the whole big club rescue idea is a non-starter

As an aside, one irony of the Bury situation is that the main stand at Gigg Lane is named after Neville Neville, the father of Gary and Phil. That would be the same Gary and Phil Neville currently helping to bankroll our friends at Salford City. Why didn’t they choose to back their father’s club rather than the (then) little non-league club down the road from Old Trafford? Suddenly, this whole ‘they should do this or that’ thing starts to get very complicated, doesn’t it?

Bury could be only the first of many

If, as seems likely, Bury do face extinction in the very near future, they may not be the last. The basic economics facing EFL clubs are bleak.

The potential to increase revenues is very limited. Attendances, particularly in Leagues One and Two, are unlikely to rise meaningfully, regardless of individual club initiatives. English Football gates peaked in 1948 in a post-war Britain that didn’t exactly offer a feast of alternative recreational opportunities. In 2019, a myriad of other attractions compete for the public’s leisure time and money. Commercial revenues also have a ceiling on them. For example, just as newspapers have suffered from the rise of online advertising, so football clubs attracting only a few thousand fans will struggle to sell stadium, programme and shirt advertising to businesses that have so many alternatives.

If the upside for revenues is minimal, the only solution is to bring costs under control. That means putting the genie of wage inflation back in the bottle and, since individual clubs are powerless to change wage structures, that would require a concerted top-down effort by the EFL and Premier League. I’m not holding my breath.

History says clubs are living on borrowed time

What’s remarkable is not that some clubs will go under, it’s that many more have not done so already. Football clubs are extremely unusual animals in the overall business landscape. Many of them have been around for well over 100 years – Bury is 134 years old. Very few organisations in other business sectors have survived that long. How many companies from the 1880s are still in business today? Of the 100 UK companies in the FTSE stock market index as recently as 1984, only 24 were still alive in 2012.

Many football clubs are living on borrowed time. If they were ordinary businesses, a huge number would be extinct by now. They’re lucky that wealthy people who adopt a very hardheaded approach to their other businesses have, until now, taken a different attitude towards football clubs. They fund them and indulge a business model that they wouldn’t tolerate for their other ‘normal’ operations. How much longer that will continue is anyone’s guess.

To return to the Bury example, there are eight league clubs within 20-odd miles of Gigg Lane; Manchester United, Manchester City, Burnley, Blackburn, Bolton, Rochdale, Salford and Oldham. In business jargon, it’s a very crowded market, and in most other industries would be completely unsustainable.

The bottom line is that football clubs don’t have some divine right to exist, they don’t live in some parallel world where the normal laws of economics don’t apply, even though plenty behave as if they do and some have paid the price.

What can be done?

If nothing is done to address the underlying issues facing EFL clubs, Bury’s demise might be only the first of a tsunami of failures in the coming months. Unfortunately, action can only be taken at a national level, by the game’s governing bodies and even the government themselves.

There is a strong case to be made that football is a unique national ‘treasure’ and is such a part of our communal life and cultural landscape that it deserves special treatment. It is in many cases the only social glue that holds communities together, particularly in some of the poorer parts of the country. On that basis, some form of top-down intervention to restructure the game could certainly be justified. Without that, I’m afraid many clubs are facing a bleak future.