Happy days – the recession is over?!

August 24, 2009

The good news is that the recession here in the UK is over – well according to The Institute of Chartered Accountants’ anyway. According to the number-crunchers institute the UK economy is due to grow 0.5% in the third quarter, which off the back of a 0.8% fall last quarter, is quite a turnaround.

The basis for their prediction appears to be a survey of 1,000 members who overwhelmingly shared that their confidence in their respective businesses is on the up. This is indeed good news as expectations are a key driver of economic conditions, so if the bean counters think that the future is bright it could well turn out that way.

I’ve been pondering whether any of this glass half full optimism might extend to the football transfer market as it draws to a close at the end of the month? Can we expect to see the chairman’s purse strings loosen as they prepare to have one optimistic flutter on a big money signing?

My rather dull prediction is probably not. The financial plight of both Liverpool and Man U remain on a knife’s edge and the following pack will probably remain conservative rather than go gung ho. I think there might be one or two exceptions though. I’d back Chelsea to pull a rabbit out the bag and rival Man City for a big name signing and I also reckon someone might seize the day and take Newcastle off Mike Ashley’s hands.

Harry, don’t worry about Man City or football economics, worry about your players wage demands first

July 7, 2009

Last week Harry Redknapp commented on Man City’s appetite for top-class players, hitting out that they’ve completely changed football’s economics. But to suggest that Man City are solely responsible for sending football economics off course, is to totally miss what’s been happening in football since the formation of the Premier League.

Since 1992/93 there’s been a huge injection of income, principally through TV rights, that have driven ever soaring wage and transfer inflation. Sure, Roman Abramovich changed things further when he entered the fray, paying top dollar for top stars, but the inflationary spiral had already started way before he settled in at Stamford Bridge.

The current Man City phenomena (and Real Madrid too) is not so much a shifting of football’s economics but a clear picture of the way in which modern football operates. To be a football chairman it’s no longer possible to be a benevolent millionaire, you now need to be a super rich billionaire to be able to make any impact on the football economy with its rapidly increasing player prices.

But, if the football economy has not changed, that doesn’t mean that Harry doesn’t have anything to worry about either. For clubs like Spurs, who don’t have a wealthy sugar daddy, the real problem is not their inability to attract new players, but the inflationary pressure that Man City’s behaviour places on their existing player wages. Put simply, once players see other players increasing their salaries they’ll want a piece of the action too. Add into this a new tax regime that’s going to see player’s salaries hit hard and club’s like Spurs have the potential for player revolt on their hands.

So if I can offer Harry a little advice, don’t pitch for the players who are motivated by the riches of Eastlands, make sure you invest in players who want to wear the shirt whatever the wages.

Setanta’s demise should have been predicted – will we forgive the SPL and The FA if our clubs fail too?

June 26, 2009

This week saw the passing of one of entertainments big spendaholics. No, not Michael Jackson, but Setanta, the Irish broadcaster, whose acquisition of high profile sports broadcasting properties, such as the English Premier League, ultimately led to its downfall in the UK. Its final slide into the administrators arms did not come as a shock to most business commentators, but it is a dangerous result for Britain’s football fans and their clubs, many of whom rely heavily on the income from these broadcasting deals.

But did the fate of so many of our league clubs, and even England’s national team, need to be put in jeopardy in this way?

The rights holders will maintain that selling their properties to Setanta was a way of generating the most revenue for their stakeholders. Yet I’d argue that only the English Premier League can be absolved of blame and that The FA and Scottish Premier League should be held to account. The reason is one of simple economics.

Setanta’s business model set out to emulate the success of Sky, using high profile football rights to drive rapid expansion of its subscriber base. Commentators have argued over the wisdom of such a move which, without the monopoly that Sky’s model enjoyed, was always high-risk. However, I would argue that it was not the lack of monopoly that proved Setanta’s downfall but a lack of timing. In this Setanta themselves might not be held entirely to account but The FA and SPL certainly should.

Sky’s football foray began in 1992 and its monopoly was broken in 2007. These bookends, 1992 – 2007, represent the longest period of sustained growth the British economy has seen in 150 years. And Sky took advantage to build a solid, robust business. However, seen in these terms, launching in 2007 only weeks before Northern Rock first approached the Bank of England for a little help, Setanta didn’t stand a chance. Its need to secure sky-high subscriber numbers to meet its payment terms, at the precise time consumers were tightening their belts, was always going to be a Herculean task.

By late 2007 of course the £392m Premiership deal was already underway but in Summer 2008, when Setanta purchased additional broadcast rights from The FA and SPL, the alarm bells really should have been ringing. Both The FA and the Scottish Premier League would argue that it was a bad business plan that ultimately led to Setanta’s demise. But the responsibility both must shoulder is that they should never have sold the rights to a company, who’s future fortunes were so precarious, in the first place. The SPL do seem to have taken this responsibility seriously, providing £3m from its own funds to each of its clubs, it remains to be seen how The FA will follow suit.

Ronaldo’s sale means a £10m kitty for Sir Alex – so sign Antonio Valencia or hold on to Carlos Tevez?

June 26, 2009

On April 9th I posted my prediction that Man U would be forced to sell Ronaldo because of their spiralling debt burden. Standing at £649.5m, and with crippling interest rates, offloading their top asset was a simple solution. And so it turned out – for a staggering £80m – thanks to the deep pockets of Florentino Perez, the charismatic president of Real Madrid.

One of the key questions following the announcement of the move was whether or not any of the proceeds of Ronaldo’s sale would be handed to Alex Ferguson to find a suitable replacement. I would imagine the first time Sir Alex asked, possibly back in April when the rumours started, the answer would be a straight forward no. However, since then a big economic factor has come into play which could make the club, Ferguson and the fans all potential winners.

Since April the Dollar-Pound exchange rate has shifted by approximately 13% from an April low of $1.44 to a June high today of $1.65 for a pound. The impact of this on Manchester United is significant, as the debt they need to service is in dollars. In fact, working on the premise of an £80m fee, the amount the Man U accountants would have expected back in April would have been $115m but the total they’ll actually receive is $132m. What I would expect is that the difference of $17m – or roughly £10m – is the amount the management will give to Sir Alex to bolster his squad.

So what could £10m buy? Well, Antonio Valencia of Wigan for one (even if the Latics are asking more). Or, perhaps more intriguingly, the money could be spent holding on to Carlos Tevez who’s eye watering  £130,000 per week wages might still save the Red Devils money in the long run.

Spain to win World Cup, Barca to win Champions League (again)

May 31, 2009

Barcelona were the worthy winners of the Champions League this week. With their incredible blend of flair and imagination they were simply too good for Man U and added the top domestic honour to their trophy cabinet. It was their third trophy of a tremendous season and follows on from the incredible performance of the national team, winning last seasons European Championship.

With Spain and Barca in such fine form I started to ponder whether we should expect the resurgence of Spanish football to continue or whether, after Wednesday night, the bubble’s about to burst.

Last quarter Spain’s economy contracted by a whopping 50% – the steepest fall in 50 years. And whilst many European nations have seen growth fall, Spain’s is bigger than most prompting the European Commission to warn that Spain were likely to be the last to emerge from recession.

It’s the construction industry that’s at the heart of Spain’s woes and it’s demise is prompting large-scale unemployment and an inevitable slow down in spending. On a regional basis I would anticipate this having an impact on the club game with most clubs being effected. The exception to this is likely to be Barcelona – who’s very existence is based on bucking the influence of the state – and who will no doubt see it as further fuel for defiance, ultimately driving success.

As for the national team, next year’s World Cup is likely to prove an opportunity to refocus the country away from their economic troubles and to come together to celebrate the success of the nation. Don’t be surprised to see Puyol and Casillas lifting trophies again next season.

Mervyn’s the King of lower league football

May 9, 2009

For me at least the 08/09 football season is over. As the Championship drew to a close last weekend, together with other lower league supporters, all I have to look forward to now is a summer of crossing my fingers that my club doesn’t run out of cash before the season kicks off again in August.

And thanks to the Bank of England this week, the chances of clubs going out of business this summer just might have eased.

Having brought interest rates down to historic lows, Mervyn King has sharpened his focus on Quantitative Easing. Better explained as ‘printing more money’, Mervyn intends to pump an additional £50bn into the banking system, buying up more government debt. The intended outcome of this being to encourage banks to further loan money to each other – and to us.

It does seem as if this strategy just might have an impact. Mervyn has already ringfenced £75bn to be spent by mid-June and commentators are tentatively suggesting it could be a significant factor behind some of the recent good economic news we’ve been hearing.

If QE does encourage banks to be more open with their lending, it can only be good news for football. If we’re to avoid seeing other clubs fall into trouble, just like Southampton and Luton Town did this year, we’re going to need supportive banks with a willingness to provide credit.

60% poorer than this time last year – will Mittal walk out on QPR?

April 26, 2009

After this weeks budget and the revelation of a 50% tax rate, this year’s Sunday Times Rich List offers no glimmer of sunshine for the UK’s super-rich. According to the annual survey the top 1000 richest individuals are about £155bn worse off than this time last year. And at the number one spot Lakshmi Mittal, who owns about 20% of QPR, has been the hardest hit, losing about 61% of his wealth over the past 12 months.

But QPR won’t be worrying too much, after all Bernie Ecclestone and Flavio Briatore are also heavy investors in the club. Of course neither of them have been immune to the recession either, with Ecclestone reportedly seeing his wealth tumble to £1.46bn about £1bn less than the year before.

So what should QPR supporters make of these annual losses? Well to begin with their club is still the second richest club in the UK (Man City being the wealthiest) so they’re in no danger of following Southampton down the tubes this season. But the biggest concern for QPR fans must be that their owners simply lose the desire to pump their pocket money into the club and choose to refocus it on earning back some of those lost millions.

There already seems to be signs that the super rich triumvirate are short on patience, 3 mangers in one season is testament to that, and I don’t think anyone can claim their masterplan has been a success to date as the club languishes mid table in the Championship.

I believe we’ll see the owners stick with it for one more season and if we see the economy contract by the 4.1% the IMF are predicting, the further losses the trio will likely incur will see them walk away signalling unhappy times ahead for the club.  The one exception to this will be if the club can produce success on the pitch, but should they deliver another year of goalless draws at Loftus Road the club could be up for sale in 12 months time.

This year’s budget is bad news for Premiership stars – so long Ronaldo

April 22, 2009

Eating my cornflakes this morning I must confess I feared a bland budget from the Chancellor today. Darling would be damned if he did, and damned if he didn’t and with an election looming  his best chance was to try to please everybody. And, on the surface, it appears that’s what he’s tried to do.

There’s a little something for pensioners, a little something for businesses and a little something to help school leavers and those who find themselves out of work for over a year. All of which is commendable, although perhaps not sufficient enough to make a genuine difference.

But it seems the Chancellor did have one joker to play, one he hopes will unite the public behind him. After months of baiting the city bankers he’s finally gone on the offensive increasing income tax to 50% for those earning more than £150,000. And why not, we’re forever being told they’re to blame for the mess we’re in, so for good measure, Darling also reduced their pension tax relief too – probably thinking of exacting revenge on Sir Fred as he did so.

But the thing that interests me is the impact this tax hike will have on football. With almost all of our Premier League stars, and a lot from the Championship and beyond too, earning in excess of £150,000 every year there’s a lot of players who will be affected by the rise.

Now I’m sure Wayne Rooney is not too worried the effect today’s budget will have on his pension, but as of April 2010 his weekly takehome is going to fall by something in the region of £10,000 every week, which is a lot of money in anyone’s world. I’m sure Wayne won’t spend too long focusing on his loss, but the stars currently playing abroad, thinking of moving to the UK, just might.

For big stars the pull of the Premiership will surely be dimmed a little when they can no longer earn as much here as they could. Why leave the safety of the Camp Nou to settle in Manchester if the pay off just isn’t there? Whilst players like Kaka appear not to be motivated by money the same can’t be said of the majority of footballers.

For us football fans this could deprive us of some of those exciting big money summer moves to the UK we look forward to. Although don’t expect it to be all quiet, the loss in earnings could well see the likes of Ronaldo and Tevez on their way to Spain in the summer. And if this does mark a mass exodus of stars, I shouldn’t think Darling will get the public plaudits he’s looking for.

A helping hand for Steve Bruce

April 16, 2009

I couldn’t help but think of Steve Bruce yesterday, when I spotted that the pound had hit a three month high against the dollar. Touching the dizzy heights of $1.50 yesterday morning it’s a big rise from the gloomy $1.35  you’d get for your pound back in mid-January.

And, ofcourse, a rising pound is great for those of us here in the UK that like to go shopping abroad – like Wigan Athletics manager. Bruce has shown a keen eye for discovering talent from around the world and, sitting 10th in the Premier League, it’s clear that his global transfer policy is working.

By his own admission the ex Man U player would like to find a few more local lads to add to his squad, but the inflated transfer fees commanded by home grown players are preventing him from operating in the domestic market. And so, as UK transfer fees are yet to show any signs of deflating, Bruce looks set to continue his search for stars abroad and yesterdays strong pound will be a big help on that journey.

Wolves, Birmingham and Hull to be relegated next season

April 14, 2009

The 2008/09 season has yet to draw to a close but I’m predicting that the two West Midlands clubs from the Championship, Wolves and Birmingham, and Hull FC will be the teams to drop out of the top flight next season.

It’s not a crystal ball I’m looking at to make this prediction, but a report published today by the Office of National Statistics (ONS) outlining unemployment around the UK. The report makes uncomfortable reading and highlights a number of cities, most of which are dominated by traditional manufacturing and heavy industry, who are shouldering the burden of recession.

In the report, two cities stand out for me, Hull and Birmingham, with the ONS highlighting that they’ve the highest percentage of their workforce out of work, at 8% and 7.3% respectively. Unemployment is a frightening thing for those faced with the prospect of being out of work, and in cities with rising unemployment, the ability for those out of work to get back into the workforce becomes increasingly difficult. The mixture of the reality and fear of unemployment leads to a tightening of purse strings and a fall in non-essential activities.

The impact on football clubs in the area will be acutely felt. Fans will think long and hard before renewing their season tickets, taking their kids to a match or even buying a pie and a pint at half time. The net effect is that club revenues will fall, fast. And the clubs at which this can least afford to happen are the newly promoted and smaller clubs in the league. This all spells bad news for Wolves, Birmingham and Hull.

Hull in particular look vulnerable. Local supporters have already enjoyed a season watching the big guns at the KC Stadium and are more likely than the newly promoted fans to stay away. But as Wolves and Birmingham income falls, they’ll doubtless struggle to bring more quality to their squads, leaving their league status in jeopardy.

This may all sound fanciful – neither Championship club has achieved promotion yet and Hull are still not safe from this year’s drop – but with unemployment on the rise in both cities, the impact on local football is not too far away.


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