Community interest company (CIC) structures could be the answer to financially distressed football clubs, a new report has found.
The Begbies Traynor Red Flag Alert Football Distress Report, which monitors financial distress levels in football clubs every six months, found that a total of six clubs (one in twelve) in the Championship and Leagues One and Two are facing ‘critical’ financial pressure at the end of October 2013.
The report also highlights the “barely rising average attendances and season ticket revenues across the three divisions” contributing to rising running costs.
Gearld Krasner, partner at Begbies Traynor and past administrator of AFC Bournemouth and Port Vale Football Club, said: “The relative fortunes of those at the very top and those at the foot of the league are getting further and further apart.
“The weaker clubs that are just staggering through the season are now locked into an inevitable downward spiral, and most clubs won’t attract a foreign billionaire to bankroll them out of their financial mess.”
“Darling, Eastboure and Stenhousemuir in Scotland have all looked towards a CIC format to put down a stable, long-term ownership and funding structure. The best example of fan-owned clubs is Barcelona, which has proved that a more mutual approach can still bring big spending and success.”
The six clubs in financial distress includes Coventry City, which entered liquidation on 2 August.
Krasner said: “If these clubs are cash strapped now, then they are likely to be in more trouble after the next transfer window, when the bank balances are at their lowest, unless directors show prudence and continue to curb the spending and manage costs sensibly.
“The number of clubs that are propped up by generous and often increasing director loans, and inter-company transactions is masking a lot of the problems.
“Aside from finding an overseas benefactor, community ownership is the only viable long-term solution for many clubs that want to press the ‘reset’ button and put finances in order, and we are seeing more and more interest in these structures that have some support at present with government and HMRC incentives.”