Exeter City (Episode 27)

Face masks, testing, social distancing and the echo of empty stadiums. Many publications and media outlets have spent the past week morbidly claiming this as the new face of football. As Swindon Town’s financial issues were laid out at the High Court recently, the threat of administration looming, at our level, I could not help but feel that this is the new face of football. The sport we love is in trouble. Television deals will take care of the Football elite to the point where little damage will be caused, a blip perhaps, but those SKY and BT subscriptions will creep up and all will be right in their world. However, in the EFL, the argument over who goes up and who goes down may prove an insignificant footnote in the plight of lower league football.

Let me be clear, the Coronavirus lockdown is not the sole reason clubs in the EFL are in financial peril. It will be easy for Owners to claim so, but the current situation is purely the straw that broke the back of a weary camel. Poorly run, over budgeted, under resourced and barely solvent football clubs are not an anomaly, they are commonplace. The accounts for the 2017/2018 season highlighted that in League Two the average weekly loss for a club was £13,500. The average loss per club over the season a staggering £802,000. How many sectors in business would exist with those numbers? League Two sides receive an estimated £472,000 for competing, regardless of the position they finish within the league. Clubs also receive a £430,000 “solidarity payment” from the Premier League, the type of “solidarity” that allows a Premier League club to purchase a young talented Welsh player for a pittance of what they are actually worth for example. So before clubs start pencilling in the budget for a season, they have £900,000 guaranteed income to rely on. Yet, the average loss is still £802,000? Incredible.

Swindon Town’s situation was of little surprise. In their relegation from League One in 2016/2017 they were losing £34,000 a week, a deficit of £1.768 million over the year. Lee Power, an owner who is not universally liked in Wiltshire, has loaned the Club close to £6 Million in his tenure. I read one supporter mock the notion that Power was a “Sugar Daddy” owner, if throwing six million pounds at something and getting nothing in return does not qualify him for that then I am not sure what does. Power’s investment has kept the club afloat, just. By September 2019, football finance expert Kieron Maguire, devised that the club’s losses were at £11 Million and exceeded their assets. A grave situation it would seem. Fast forward to January 2020 and the “Ginger Pele” signs a lucrative deal to stay at the County Ground and ultimately secure promotion. The stupidity of it all blows my mind. It is like if Flybe had tried to resolve their financial issues by purchasing a Jumbo Jet.

Swindon Town are not alone, just the latest club off the rank. You do not need to look too far in League Two to find other red flags. Forest Green Rovers have established themselves as a competitive League Two side, yet the cost of getting the club to the Football League totalled £12 million worth of losses over a six year period. Clearly running a budget at over £2 million a season will help achieve success, but as a business model? If Dale Vince has spent this fortune building the Gloucestershire club, I dread to think what money is going into Salford. A legal loophole used by the Greater Manchester club prevents access to their wage budget through the published accounts, I wonder why they might want to keep that from public knowledge? As millions has been invested into that football club I present their average attendance for this season of 2,997 without further comment.

Newly promoted clubs are not the only guilty ones. In 2017 Colchester United published a loss of £3 Million. In 2018 they published a loss of £2.37 Million. The Essex club have now borrowed close to £25 Million from their parent company, that is a figure that feels worthy of a pause for thought. Northampton Town lost £42,000 a week in 2018, the monies they owe on borrowings are now £5.5 Million. With the knowledge that this is a club who received a £10.25 Million loan from the local council, seemingly “lost” a significant portion of it that resulted in a £3 Million public investigation into the club and it’s then owners, the fact they are still not run on budget is simply staggering. Cambridge United and Crewe Alexandra are other clubs who appear to struggle. Both have reported losses around £800,000 in the last two years of their accounts. I would like to think that if you lose close to a Million Pounds in one season then you make necessary cuts to avoid a repeat, not in football, it appears the “we go again” mentality reflects into the Boardroom.

Locally, Plymouth Argyle are a club not making money. The stadium is a magnificent venue, the redevelopment of the Mayflower Stand evolving Home Park to a level beyond the one the club plays at. However, that is a project funded by the benevolence of one man. Argyle lost £1.3 Million in their relegation season and will make further losses this season. In 2019 a portion of the clubs losses were converted into shares, a procedure that had already been carried out in 2016. Coupled with his purchase of the club from James Brent, Simon Hallett has now put as much as £11 Million into Plymouth Argyle football club in his two year involvement. When you look a short way up the M5 to Bristol Rovers, they are a club that owe £16 Million in loans to a parent company in Jersey. Madness everywhere.

The question posed to all football clubs should be a simple one. If the owner of your club cannot provide additional funding, is your business sustainable? If it is a No, you have a problem, and it is a No, in a LOT of cases. We live in a time of uncertainty, if, as anticipated, events of the past few months result in a difficult financial climate and owners have to stop investing and tighten their own outgoings, what happens to those expensive toys they play with?

So how do we govern football better? The EFL get a lot of blame, rightly so in many cases, but I do have a slight issue with some of the vitriol. I work in retail, if I run my business incorrectly and fail to budget accordingly, then it would not be the National Retail Association’s fault if I went bust, it would be my own. Where the EFL needs to step in is to make certain that clubs who run losses receive punishment and, perhaps more importantly, help to address their issues. Look at Cambridge and Crewe, if those £800,000 losses continue season after season where does it end? As fans we also have a duty and this can be the hard bit. We just want to watch a successful team, a love of football rarely includes a love for economics. When Swindon Town are not buying players and being relegated, yet the owner has pumped in £6 Million, that is a red flag. It appears that after criticism Power did not cut their budget to erode the losses, he budgeted to try and spend their way out of trouble. A mindset that clearly underlines that the loss of Bury and how it came about resonated in no way with other Football Clubs. Ultimately, for many Clubs to meet a budget they would have to significantly cut outgoings, this would feasibly lead to poor on field results and criticism from supporters, so, rather than face that, the running up of considerable losses continues. If Bury had played their Academy players for the 2017/21018 season then they may well have been relegated out of the Football League, however, those supporters may still have had a club to support and rebuild. Running losses to the point of no return is the way football has been heading for too long and perhaps the events of 2020 may save football from itself? Bury going out of business was sad, but did owners fight the EFL for rule changes? Few acted because it did not effect them. The Coronavirus lockdown effects everyone and perhaps that will bring about needed change. As an example, Cambridge United may be a club that are fearful of cutting costs as it will effect their ability to compete, if all clubs are also cutting their outgoings then perhaps it will alleviate that fear and bring a healthier future? You can only hope so.

For Exeter City, this could have come at a worse time. We have some cash resources and though it was hoped they could increase the base budget for another season sadly that may no longer be the case. The club have lost out on approximately 30,000 paying customers from the remaining home games alongside the extra capital of those attending a play off campaign. You cannot recover that cash, it is gone. Had this happened in the summer of 2015 when the PFA were asked to provide the club with a loan, our future could have been a lot bleaker. The now realistic possibility of the next crop of Academy players forming a significant part of the first team squad is an exciting prospect, the Leasing Trophy Semi Final highlighted just how talented these players are. Cuts will undoubtedly be made, but I would anticipate them being manageable ones as appose to severe ones.

With a decision now due on the seasons completion, it appears we will lose out on promotion to one club on the brink of administration and who’s debts exceed their assets, one who has lost considerable amounts of money in recent seasons and one who is largely propped up by the generosity of one man. We will share the play offs with two clubs whose collective debt is greater than £30 Million. I hear the words “Financial Fair Play” often, clearly not working is it? Being well run means next to nothing, surely it should count for more?

Whatever happens from here, most lower league clubs face an uncertain summer. We are Lucky though. No one will walk away from SJP. A likely recession will not affect the amount to which an owner can prop up our business, just how we map out our future. Many clubs have been walking a financial tight rope for some time and I genuinely fear that we may not start the season with the same clubs that we premutruely finished it with. Fortunately, and due to some considerable hard work over many years, whilst this will not be an easy time, Exeter City will not be one of those clubs that fights for it’s survival.