Spanish football debt mounting as recession looms

Wednesday 19 November 2008 16:00

Spain may boast the world's top-ranked national team and richest club but the soccer obsessed nation is sliding towards its first recession in 15 years with many small and mid-sized teams tumbling into the red.

Dwindling revenue from advertising and sponsorship, declining stadium attendances and a slowdown in consumer spending are threatening to tip more clubs into administration as they struggle to meet soaring transfer fees and wage bills.

Real Madrid and Barcelona, the wealthiest and third richest clubs in the world with television and sponsorship deals worth hundreds of millions of euros, are largely insulated from the financial crisis, analysts and officials say.

But lower down the league at least six clubs including second-tier sides Real Sociedad, Celta Vigo and Levante, are in administration and more may follow as the recession takes hold.

"The financial situation of many of the clubs is critical," said Angel Barajas, an expert on the finances of Spanish soccer clubs at the University of Vigo.

"I am really afraid about football because the situation is not sustainable in the medium term."

The figures make grim reading.

Spain's professional soccer clubs have a combined debt of 607 million euros ($766.3 million) to the tax authorities alone, the government said in July.

On top of that comes cash owed to the social security system as well as other debts to the public purse, the volume of which the government said it was not allowed to divulge.

According to an estimate in the Spanish media, the combined debt of Spanish clubs is about 3 billion euros ($3.8 billion), compared with some 3 billion pounds ($4.51 billion) in the English Premier League.

Very worried

Javier Tebas, a vice president of the Spanish football league (LFP), declined to put a figure on the total debt of Spanish clubs but said he was "very worried" about the financial situation, especially in the second division.

Tebas predicted income from advertising and sponsorship would be most affected by the recession and estimated a drop in revenue of 10-15 percent.

"The situation is worse than last year. It's more difficult to find sponsors and much more difficult to find companies who will advertise on TV," he said in an interview.

"The ones most at risk from the crisis are the small and mid-sized clubs," he added.

"Their income is going to be significantly reduced. I don't see the big clubs being affected so much as there are always important companies that want to use them to drive their advertising campaigns."

Some clubs have tried to generate cash by selling real estate but the collapse of Spain's housing market and the woes of the construction sector are choking off that source of funding, according to Barajas at Vigo University.

He also noted that rules on voluntary insolvency can be quite convenient for soccer clubs as officials are able to retain control as long as they present a business plan acceptable to court-appointed administrators.

However, the government has been irritated by the actions of some club officials, who it accuses of abusing insolvency legislation by failing to rein in spending.

Jaime Lissavetzky, Spain's secretary of state for sport, said at the weekend soccer clubs were going through a difficult period and the increase in the debt was "a worrying issue".

"If debts continue to mount even after having been wiped out, if (insolvency rules) continue to be abused as a stop-gap measure and expenses are not brought under control, you could call it a complicated moment," he said at an event in Madrid.

Greater stability

Falling stadium attendances have also become an issue in Spain this season. Barcelona has already cut the price of tickets for some matches, notably a King's Cup tie this month against third-tier side Benidorm.

"Attendance at the stadium is down compared with last year due to the global financial crisis," Barca President Joan Laporta said last week.

Tebas at the LFP said it was important for Spain to retain its financial credibility so that clubs were able to compete in the global transfer market.

Spending by Primera Liga and Serie A clubs combined in the close season was about half the 500 million pounds splurged by English Premier League clubs, consultancy firm Deloitte estimates.

"If we are not careful, it will be more difficult to attract top players from other leagues because there will be doubts over the payment of wages," Tebas said.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments