Tuesday, 4 October 2011

Football Finance is a Funny Old Game

Steve McClaren
Sunday, 2nd October 2011
Nottingham Forest 1 - Birmingham City 3

One hour after the game finished, the Nottingham Forest Manager, Steve McClaren had resigned (after 112 days in charge), and the Chairman, Nigel Doughty said he would resign at the end of the season. Nigel Doughty incidentally is also the club's owner. Fan's protests before and after the game were asking for resignations. They've had their wish granted, but will anything change?

Supporters often see Forest as a 'massive club', and needs to be back where it belongs. Unfortunately, facts do not back up this view. Undoubtedly, the heyday of the Club was under the managership of Brian Clough and Peter Taylor, when they were European Champions in 1979 and 1980.

However, since the formation of the Premier League in 1992, there have been 19 seasons, not counting the current one. During that time Forest were in the top tier on 5 occasions; the 2nd tier on 11 occasions, and the third tier on 3 occasions. They were actually one of the 22 teams who were in the first Premier League (this was reduced to 20 teams in 1995). Although finishing 3rd in the Premier League at the end of the 1994-1995 season, they were also £11.3 million in debt, and placed in the hands of auditors, Price Waterhouse. This is symptomatic of the situation over at least the last twenty years (and a lot longer if truth be known); the story of a club living beyond its means, and moaning about its lack of success.

Sanity and reality are not big in football. Dreams, whatever the cost are. Too many readily forget that if it hadn't been for Nigel Doughty, Forest would not be in existence today. He joined the Board in 1999, and invested £12 million in the club. He became owner and Chairman in 2002, promising another £5 million to cover the reported losses of around £100,000 a week. When he took control of the club, his stated aim and ambition "was to make the club self-sufficient and to achieve and retain Premiership status". Since then, seven managers have come and gone, each one being blamed for furthering the decline of the club. Ten years later, neither of the Chairman's aims are remotely near being realised, and although the debts to external sources have been cleared, the club has seen the debt to the Chairman rise to what some say is anything between £50 million and £100 million. It's hard to argue with one Forest supporter who said, "For such a high level of investment, it's turned to nothing less than a spectacular level of failure".

I've often felt that one of the reasons for supporter unrest is the lack of communication between the Board and the supporters. There are many reasonable and intelligent supporters, and one such runs a Forest supporters web site. He speaks for many I'm sure when he outlines his criticisms of the Chairperson. These are:
  1. Forest's continued policy of chasing unrealistic targets
  2. Pulling the wool over the eyes of supporters
  3. Pretending to be one of the division's big hitters when it comes to signing players.
A fourth reason could well be not being open with supporters about the true financial position of the club. This has now been addressed. In an interview on the clubs' official web site, the Finance Director, John Pelling clearly outlined the current financial state of the club. It does not make for good reading. He said that last year, the club had income of £15 million, but had made a loss of £12 million. The shortfall was made up by Nigel Doughty, who pumped money in to balance the books. Already this season the club has effectively run out of money, and that Nigel Doughty is "writing monthly cheques to keep the club afloat and pay the bills". The crude message is that there will be no more money spent on players this year. One of the drivers in dealing with this debt scenario is undoubtedly UEFA's Financial Fair Play policy which will come into force.

This means that in 5 or 6 years time (phased in over that period), all professional football clubs in Europe will have to break even, and so live within their means. There is so much technical detail involved in what break even means, that clubs with expensive lawyers and accountants will be scrutinising every detail for possible loopholes, but that will be against the spirit of the policy, and I'm sure that the majority will comply. And for me, it is a good thing that every club has to live within their means. When this happens, certainly in lower leagues, it becomes more of a level playing field. "Sugar-daddies" will not be relied upon to bail out clubs, and perhaps more clubs will have strategies that are longer than a season.

"They say that I'm a dreamer, but I'm not the only one". Living within their means should see transfer fees come down; excessive wages reduced and perhaps more serious attention given to using home grown talent. When Steve McClaren left the City Ground on Sunday, he said that the "Club does not match my ambition". I'm not sure that's true. The club may match it, but they just can't afford it. That's the harsh reality, and it will remain so for many years to come. The future for Forest is one of prudence and further cost cutting. The supporters will have to accept that this strategy will not quickly get them to the promised land of the Premier League.

Some are calling on Nigel Doughty to sell the club to someone who can provide more investment (rather insulting I think to someone who has put in so much), but leaving aside the prospect of finding someone who is currently willing to put in about £1 million a month to cover losses, what difference will it make under new UEFA Financial Fair Play rules? Whoever is the owner, the club will still have to live within its means. Perhaps sanity will return to football, and I may fall in love with the professional game again.

We do well in all walks of life to remember the words of Mr Micawber in Charles Dickens', David Copperfield.

"Annual income, twenty pounds; annual expenditure, nineteen pounds, nineteen shillings and sixpence - result happiness.

Annual income, twenty pounds; annual expenditure, twenty pounds, 0 shillings and sixpence - result misery".

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