08 October 2008

The credit crises bleeds over to international football

What started out as my personal joke - putting the letters "USA" over the "AIG" which adorns Manchester United's shirts - has now turned in to a newly piqued interest in the business of soccer.

Fresh on the heals of the AIG collapse last month (among others), financial markets the world over have been losing enormous volumes of value and the impact of the global credit crunch is starting to show itself in the FA.

Yesterday, the Football Association's Lord David Triesman warned of the "very tangible dangers" faced by English Premier League clubs, whose combined debt he put at three billion pounds.

But to follow that up, an article in The Independent has Professor Tom Cannon, a football finance expert from the University of Liverpool, warning that the capital bubble funded by deep debt will soon burst unless drastic action is taken.

"I don't think there's an immediate crisis," he said, but continued "there is a deep and profoundly worrying issue across the board.

"Lord Triesman is right to point out the level of debt which, if anything, I think he's under-estimated - it wouldn't surprise me if it was more like £3.5billion," he continued.

So what does that mean to how football clubs in England operate? Professor Cannon goes on to explain the central looming problem:

"The likely interest charges are probably at least £70-120m a year, possibly up to £150m, and that exceeds the profitability of the English Premiership.

"They owe more than they're worth and the interest payments alone exceed their profits - that position is just not sustainable."

Stay tuned for more.

No comments: