Inside Football - David Conn: Derby desperate to avoid parachute drop

Fear of financial chasm between Premier and Nationwide League lies behind sackings of managers at relegation-threatened clubs

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Lee joins Gregory's new-look Derby

Another week of musical chairs and one famous decision not to retire has highlighted yet again that, for all the corporate pretensions of modern football clubs, their fortunes still wholly rely on their teams, which in turn depend overwhelmingly on one man: the manager.

If Sir Alex Ferguson is being paid a reported £2.5m salary to maintain Manchester United's success, and Graham Taylor's brief is to lift Aston Villa into European competition qualifying zones, then Derby County's motivation for sacking Colin Todd after three months and appointing John Gregory is clear: to avoid relegation, which has become a financial catastrophe.

Derby's finances were hardly inspiring even when Todd was appointed last October following the departure of Jim Smith. Derby's chairman, Lionel Pickering, revealed that the Rams owed around £20m to the Co-operative Bank, which included loans for building Pride Park.

Pickering denied there was a financial crisis, but admitted there was pressure from the bank for Derby to make some payments to reduce these borrowings. "Now we have to put our faith in Colin Todd," he said. "There is no magic wand we can wave to help Colin financially. There is, however, scope for him to trade."

Immediately, Stefano Eranio left and Todd sold Seth Johnson to Leeds for £7m, then signed Pierre Ducrocq on loan, Luciano Zavagno for an undisclosed fee and François Grenet from Bordeaux for £3m. Three months later, days after a 2-1 away defeat to Gregory's Aston Villa, the board's faith in Todd ran out. Gregory has now been contracted to spirit Derby out of the bottom three.

Todd is not speaking publicly while he resolves a financial settlement with Derby, but this week John Barnwell, the chief executive of the League Managers' Association, said three months was no time in which any manager could be judged. He accused Derby of "hitting the financial panic button".

According to Barnwell, the Premier League, in which, on average, four clubs change managers every year, has generally been more stable for managers than the Nationwide League, but, increasingly, not at the bottom. "They're terrified of relegation and it shows in the turnover of managers," he said.

This season, Leicester City have parted company with Peter Taylor and are hoping Dave Bassett will keep them up, and Barnwell is particularly critical of Southampton, who only 12 matches into the season replaced Stuart Gray with Gordon Strachan.

Gregory is Derby's third manager this season and, while the club argue that his three-and-a-half year contract demonstrates their faith in him whatever happens this season, he is reported to be on a huge bonus to keep them in the Premiership.

If panic looms in the basement, it is because of the financial chasm between the Premier and Nationwide Leagues. Derby's most recent accounts, for the year to May 2001, show a pre-tax loss of £10.4m, following £4.3m the previous year. Although Pickering's figure of £20m was there for bank borrowings, the total debts were much higher: £28m due in the short term and a further £8.4m owing longer term.

Pickering, who made his money in local newspapers and is generally regarded to have served Derby well since taking over in 1991, was still, depressingly, right to assert that Derby's financial position was nevertheless "probably far better than that experienced by the vast majority of Premiership clubs". Get relegated, though, and that will change disastrously.

The Football League may be enjoying its best ever television deal: £315m over three years from ITV, the bulk of it reserved for First Division clubs. But, at around £3m per club, that is still meagre gruel compared to the banquet in the Premiership, which is feasting on a £1.7bn three-year deal struck at the height of the 2000 media bubble. Even last year, Derby were heavily reliant on TV funds: at £11.4m, it was nearly half the club's income. Relegated clubs will receive £4m in annual "parachute payments" for two years to ease the drop, but Derby do not have to look very far to see other clubs for whom that has been no salvation.

Coventry City were losing their chairman, Bryan Richardson, who was last year paid a £300,000 bonus, at the same time as Derby were reaching for Gregory. The Sky Blues, relegated last season, declared debts of £60m in their accounts. They have since off-loaded a nucleus of quality players, but are still expected to reveal debts, following a board meeting today, close to £30m.

Nottingham Forest, Derby's near neighbours, were still enjoying parachute payments last season following their 1999 relegation and responded, according to finance director John Pelling, by "gambling" with £12m from an investor, Nigel Doughty, on a return to the Premiership. That failed and now Forest are said to be losing £100,000 per week, their shares on the Alternative Investment Market are suspended because they have not filed accounts, and they are selling the youth players, such as Jermaine Jenas for £5m to Newcastle, on whom the club's future was supposed to depend.

Pickering and his co-directors will be further terrified by the plight of Sheffield Wednesday, who were chaired until shortly before their 2000 relegation by the Premier League chairman, Dave Richards. Wednesday, still receiving parachute payments, went down with a Premiership-sized wage bill, are paralysed by debts of around £16m and currently occupy one of the relegation places to the Second Division. Derby's total wage bill last year, was £19.4m, 76 per cent of turnover. This is not enormous in the Premier League, but will not be sustainable if they are relegated.

Barnwell, though, is sceptical about the familiar response to danger: "Those clubs are saying they can't afford to go down, so they sack the manager. But is that really the answer?" Nobody at Derby was available to answer these questions, partly, according to their press office, because they were "manic" yesterday with the signing of Rob Lee, who has followed Warren Barton to Derby from Newcastle.

Oliver Butler, editor of the football finance journal Soccer Investor, said: "New managers immediately bring in their own players and so invariably cost the club more, whether in transfer fees or wages. Changing managers is a gamble." Add the cost of a settlement to Jim Smith, and the one being hammered out for Todd, and the scale of the gamble is greater.

The LMA has compiled some startling figures on football's managerial merry-go-round: over the past five years, 270 managers have left their posts at the 92 professional clubs. "This," said Barnwell, "is a higher dismissal rate than any other management business in the country. It's caused by the desperate chase for success." He pointed to the system's waste: of the 270, only 38 are still managers, a further 64 have another job in football. The expertise and experience of 168, 62 per cent, have been lost to the game.

The LMA has spent two years developing a training course for prospective managers, which he hopes will help to prepare them, and also encourage clubs to apply rational selection criteria to choosing a manager. "It's all short term currently, and there is too much panic," Barnwell said.

But now that relegation, for three clubs per season, means a £15m drop in television income alone, panic, and the spectre of financial disaster, have been incorporated into English football's very structure.

davidconn@freeuk.com