David Conn: Harsh reality of missing Premiership gravy train

Financial catastrophe of relegation prompts moves to narrow game's wealth gap
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The Independent Football

Discussions have been held even within the Premier League about how money can be shared more equally so that the massive financial divide with the Football League can be narrowed.

Discussions have been held even within the Premier League about how money can be shared more equally so that the massive financial divide with the Football League can be narrowed.

Pressure is building for football to share its wealth more equally after a season which left Manchester United with their eighth title in 11 years and Sunderland facing the financial catastrophe of relegation. Jon Holmes, the players' agent turned chairman of promoted Leicester City, described the Premiership this week as "the least competitive league in Europe", while the Football League chairman, Sir Brian Mawhinney, described the gap as "putting considerable strain on the fabric of our game."

Premier League sources said more clubs are waking up to the fact that relegation can mean financial ruin, and are considering how the necessary 14 clubs can be mustered to vote for a change.

Tomorrow, Bolton and West Ham, level on points, play Middlesbrough and Birmingham respectively to decide which of them will lose approximately £20m by going down to the First Division. The Bolton chief executive, Terry Duckworth, described these stakes as "the biggest prize in sport".

The huge chasm between the £1.6bn television money washing through the Premiership and the Football League's post-ITV Digital drought meant that, of the three clubs relegated last season, Ipswich and Leicester collapsed into administration while Derby struggled to avoid the same fate.

Leicester agreed a controversial settlement with creditors, including £6m in tax initially written off, although the Inland Revenue will receive more now the club has been promoted. Ipswich agreed a deal last Friday, which will see around £10m of their total £54m debts go unpaid. Unsecured creditors – local suppliers and public services – will receive only 5p in the pound.

David Sheepshanks, who has remained as Ipswich's chairman, described administration, which also involved 26 staff leaving the club, as "horribly distressing". While he took responsibility for Ipswich's decisions, he said: "The most fundamental cause of our administration, and therefore of people not being paid, was relegation, and the unsustainable gap between the Premiership and the First Division."

Of those going down this season, West Bromwich Albion spent responsibly, had the lowest wage bill in the Premiership and also have many players on "status related pay", which means their wages are reduced on relegation. This is not standard practice across football, mostly because clubs used to rely on selling players if they were relegated, until the transfer market shrank to the point of collapse last season, which did for Ipswich and Leicester.

The West Bromwich chairman, Jeremy Peace, said the club were planning to sign players in the summer, rather than cut back. "But, the huge difference between the two leagues makes it very difficult to bridge the gap, and establish a club in the Premiership without putting it in jeopardy if it is relegated."

Bolton are also likely to survive if they drop, as their manager, Sam Allardyce, has patched together his squad mainly with players loaned from other clubs and ageing stars such as Jay-Jay Okocha and Youri Djorkaeff, whose contracts can be ended if the club is relegated. "We have planned to cope with the worst while trying to compete in the Premiership," Duckworth said. "However, more clubs are now realising that the gap is too great and something must be done to bridge it."

Sunderland look to be in most financial trouble, a sad decline for the club whose Premiership status has been hugely important on a generally depressed Wearside. Last week the club announced redundancies of up to 83 staff, including those at two shops which will close. Yet so mad are football's economics that, even if the average annual wage of Sunderland's workers is £20,000, which is unlikely, the laying off of all 83 will not save the club the wages of a single top player, such as Tore Andre Flo, who is reported to be paid £2m per year.

The legacy mainly of the managerial era of Peter Reid, who was given a reported £10m to spend on Flo and the striker Marcus Stewart just weeks before he was sacked last October, Sunderland's wage bill is 70 per cent of its turnover, described by the club itself as "unacceptable". Yet, in the First Division, their turnover will be slashed immediately by £20m. The Sunderland chief executive, Hugh Roberts, who is himself leaving, said he was "as confident as possible" that the club would not be forced into administration, but this appears to rely on the club reaping major money for selling the likes of Kevin Philips, Thomas Sorensen and Claudio Reyna, in a transfer market which has this season slumped still lower.

West Ham, with a high wage bill, £33m last year, 68 per cent of their turnover, could also be in trouble if they drop, despite having young players such as Joe Cole, Michael Carrick and Jermain Defoe who will undoubtedly be fancied by other managers. Administration, in all cases, means creditors are left unpaid while "football debts" including players, have to be paid in full. The Premier League is understood to be following the Football League's lead and discussing a penalty, points deduction or relegation, for clubs which go into administration.

The savage gap between the two leagues is the natural result of the 1992 breakaway by the First Division clubs, sanctioned by the Football Association, from the more equal arrangements in the Football League. Wiser heads said then that the rich would become richer while smaller clubs would struggle; now the figures make lower division clubs' eyes water. The average Premier League club gets £25m in TV money, about the same as all 72 clubs in the Football League put together. First Division clubs receive a basic £586,000 for the season; Premiership clubs receive more than that, £597,000, merely for being televised live once by Sky.

On top of their £9.4m equal share, Premiership clubs are also rewarded according to where they finish: £503,000 for each position in the table – £10.06m to the winners. This, rewarding the already successful, skews wealth even further towards the rich, who also reap huge rewards from participating in the Champions' League. Manchester United earned £22.6m from European football's governing body, Uefa, for reaching the Champions' League semi-final last season, bringing their total TV income to £52m, exactly double the £26m currently shared by all 72 Football League clubs put together.

Sadly for romantics, footballing success tends to reflect the size of a club's wage bill, and so English football is becoming relentlessly dominated by the rich clubs. Jon Holmes, who co-ordinated the buy-out of Leicester from administration by a local consortium, said: "We used to laugh at Scotland because their league was dominated by two clubs, but the English Premiership is worse now."

Yet United are stretched in a different direction, away from more domestic sharing, to the ambition to match the massive spending of Real Madrid, whose international all-stars outplayed United in this season's Champions' League quarter-final. The other big clubs, however warm their sentiments, are also unlikely to regard administration by relegated clubs as their problem. The smaller Premiership clubs, therefore, have a battle to find the 14 required to support a rule change which the vast majority in football at large believe to be essential.

"The onus is on relegated clubs to manage their finances with the benefit of the £5m parachute payments which they get for two seasons," said a Premier League spokesman.

But, Sheepshanks said: "It is really sick that our club's staff, local suppliers and creditors, including the Inland Revenue, have suffered and lost money because of the iniquitous way football distributes wealth. The game has to show it can deal with this challenge and narrow the gap, otherwise it might leave itself open to regulation from outside."