Crunch time for English clubs

The dominance of debt-laden Premier League clubs in Europe will soon come to an end as the global financial crisis takes hold, according to a leading football finance expert.

West Ham became the first major victims of the credit crunch yesterday when their chairman Bjorgolfur Gudmundsson saw his major stockholding in Landsbanki wiped out when the troubled Icelandic bank was nationalised.

It came on the same day as Football Association chairman Lord Triesman warned of the £3billion debt timebomb that could explode in English clubs' faces as economies around the world continue to struggle.

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And Uefa revealed this afternoon that they plan to investigate ways to punish clubs who spend way beyond their means.

The Hammers hierarchy have moved to allay fears of financial meltdown at Upton Park, and Premier League chief executive Richard Scudamore yesterday played down suggestions that the debt burden on English clubs could cripple them in the years ahead.

But Professor Tom Cannon, a football finance expert from the University of Liverpool, has warned that the bubble will soon burst unless drastic action is taken.

"I don't think there's an immediate crisis. There is a deep and profoundly worrying issue across the board," he told PA Sport.

"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.

"Mr Scudamore's comments were bordering on the complacent because the total market value of the Premiership is probably around that amount of money - so they owe as much as they're worth.

"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."

Professor Cannon believes big clubs have too often neglected turning themselves into viable businesses and relied on quick-fix solutions to their financial problems.

"In football we've had a series of magic solutions over the past few years - putting clubs on the stock market, securitisation of debt and billionaire owners - which have meant there's been no restraint," he said.

"Magic solutions are what they sound - they don't stick.

"I don't think the sugar daddies are there any more, you're seeing that at Newcastle.

"Where they are there, and do come, they will be negotiating much tougher deals than were negotiated a few years ago when Gudmundsson bought West Ham."

He added: "Almost every aspect of Premier League football needs to exercise restraint if they're going to get this debt position resolved in the medium term. There are no short-term fixes."

Thanks in part to vast television deals, foreign investment and, often, borrowing, cash-rich Premier League clubs have been able to establish themselves as the dominant force in European football.

But as financial reality takes hold, Professor Cannon predicts that status will change over the coming seasons.

He said: "No other league is as indebted at the Premier League and I would be surprised if the dominance that we now see was sustainable beyond the next season or two."

Uefa president Michel Platini and Fifa counterpart Sepp Blatter have been vocal critics of the level of debt in the English game, and Professor Cannon believes the game's governing bodies could come down hard on Premier League clubs if they allow the situation to spiral out of control further.

"If the problems got really serious, I would guess that Uefa, through Michel Platini, or Sepp Blatter would probably look to some fairly draconian measures," he said.

"They would argue that the English Premier League has bought its way to dominance in European competition on bad debt.

"They could, for example, question the number of English clubs in the Champions League or Uefa Cup - they (Uefa) define the rules of their competition.

"They're not very warm towards the Premier League and do think it's been profligate, and you wouldn't rule out actions that would not make happy reading for English football fans."

With many clubs buckling under the weight of their debts and revenue streams drying up by the day, Professor Cannon believes the immediate outlook for the English game is grim.

"We've already seen severe problems with sponsorship deals, with West Ham and Manchester United, and I think you're going to see a situation in which the revenue sources for Premier League clubs are down fundamentally to two - gate income and television. The clubs will be much more dependent on those," he claimed.

"Merchandising and sponsorship have declined sharply, it wouldn't surprise me if a lot of executive boxes were empty next season, or at least sold at a heavy discount.

"I am not optimistic that the current financial basis of the Premier League is sustainable in the long term."

He added: "A major club getting into serious difficulty is most likely to be the the situation (which prompts change).

"Which one? I wouldn't like to predict at the moment. You could probably choose from six or seven."