Go No More a Wandering?

The close season started with dire predictions for clubs getting into financial troubles, with some commentators promising a domino effect of clubs going into administration or even liquidation and then those holding the debts of the others getting into a panic.

While this has not happened, there have been a number of scares; in the league Darlington and Stockport County went into administration at the end of last season, losing 10 points then, while Southampton will have their deduction at the start of the new season following their prolonged troubles. Farsley Celtic in the Conference also start on -10, having survived a move to have them removed from the league for going into administration after the league’s AGM. We have lost a few clubs from non-League football, to be replaced by new clubs in lower divisions, Gresley Rovers, Southern League champions in 1997 (when runners-up Cheltenham were promoted) dropped out of the Northern Premier League, to be replaced by Gresley FC in the East Midlands Counties League; Fisher Athletic have become Fisher FC in the Kent League, while possibly the worst felt of all is Darwen – once a league club and one of the first professional clubs in the country, who are replaced by AFC Darwen in the West Lancashire League. All of these, at least appear to have kept their old grounds and continue to exist in a new way. Team Bath, Newcastle Blue Star, Prudhoe Town, Sunderland Nissan and Oldbury United all appear to have been wiped off the football map this summer.

As bad as this cull may be, it is far from the apocalypse that I had seen predicted in some quarters. There is a massive amount of debt held by football clubs at league and senior non-League level, but on the whole those that hold the debt are not about to call it in, knowing that few clubs have assets to pay off all their debt, and so any attempt to claim it back at the moment will end in some monies being lost. The biggest threats to the running of football come from the tax authorities, who are beginning to blanche at the fact that many clubs feel that a late (or non-)payment of VAT or employees NI is a way around cash flow problems, or individuals who may once have appeared to be the knights in shining armour to a troubled club, but later reveal themselves as a more frightening manifestation than the one they vanquished.

Many come in as saviours, putting in much needed finance to stave off a crisis, and at the time agree with the ideals of the fans, such as having trust representative’s on the board; then over a period of time they get more and more involved, adding a loan here, or increasing their investment into the club, building up their stock. But, if the truth is to be told, there are few true benefactors in this world, who are willing to pump millions into a football club with no chance of ever seeing a return. Everyone has a bottom line – some realise that they cannot continue to finance a club that will continue to be a money pit, and make a gracious and generous exit, like Max Griggs at Rushden & Diamonds; some sell off the club and try to recover their loan notes in that way and others have a vision for how the club can be turned into a profitable enterprise, and run with that dream regardless of how their ideas are thought of by the club’s fans. The movement of Wimbledon FC to Milton Keynes can be seen in this light – the opinions of the Wimbledon fans could be completely ignored, because once the club had moved, it was looking for a new customer base, well removed from its original fan base.

The original move of Wimbledon was a failure, of course – it was supposed to be the saving of the club, but in fact they went into administration soon afterwards, writing off most of the debts of the old club, (the same happened at their Scottish equivalent, Livingston, soon after they gave up being Meadowbank and left Edinburgh). Since coming out of CVA, though, MK Dons have been quietly building up a local fan base and threatening to get promoted to the Championship. The real, and as yet unreached milestone would be to post an annual profit.

For clubs that do not make the headlines, the assumption is that there is good governance behind the scenes, and that even if they make losses, the figures are manageable, and the club is not at risk. This is really not the case, as most often the situation at a club is hidden until the crisis occurs. It has also been suggested that clubs ran by fans, through Football Trusts might be an answer, and two football league clubs, (Notts County and Exeter) are under supporters control – but the experiment has failed elsewhere, with AFC Bournemouth, Brentford and Rushden all dropping this to allow in outside investment.

But, until 2004 one club did not need a Supporters Trust to obtain supporters control, as one club was still controlled by its supporters, with the directors answerable to them. This club was Wycombe Wanderers. As a supporters’ run club, Wycombe progressed from cramped ground in the town centre, with a notorious 11 foot slope, and average crowds in the Isthmian League of around 600, to a League-1 club playing in a new stadium, with a turnover approaching £5 million a year, and reaching the FA Cup semi-final. But things were not as smooth as may be thought – the money from the FA Cup run was spent wisely, on the training ground and improvements at Adams Park, but even with the supporters overseeing the club, debts were beginning to become sizable. By the end of 2002-3, the club was £2.2 million in debt, although 20% of this was interest free, mainly from the directors. For a club that owns its own stadium, and has some very good social facilities, this type of debt is not a major problem, so long as some action can be taken to stop the £½ million a year in losses. Of course, stopping losses is not easy – prices may go up, playing budgets down, and costs need to be cut in other areas – all of which would prove unpopular with the fans. These debts, of course, were being incurred despite the additional income to the club from sharing the pitch with the Wasps Rugby Union club since 2002.

In 2004, a new structure was pushed through, despite the unease of many fans. The club became a limited company, but no individual would have the right to own more than 25% of the shares. Two members of the newly formed supporters trust would serve on the board, and the “founders” group of 500 supporters would have a degree of control – no change could be made to this constitution, nor could the ground by sold, or the club relocated without a majority vote by this group, (in order to get the 2004 changes passed, the group had to vote 75% in favour). Entering the frame at this point is Steve Hayes, former co-owner of an internet loans company, who bought 25% of the shares for £250,000, and became the new club chairman. Hayes later took control of the tenants, Wasps in two sweeps, buying 11.6% of the shares in 2007, and then taking over the whole club in 2008.

Last summer, the story moved on a stage further, with plans revealed to move out of Adams Park (aka Causeway Stadium), and to build a new ground – the preferred site being the current Wycombe Air Park where the lease runs out in 2014. From a Wycombe Wanderers point of view, this is not a fantastic option – a new stadium holding up to 20,000 is too large for a club that could only once get close to its 10,000 capacity in a promotion stadium (the second biggest league crowd was 6300). But for Wasps, it is a priority with the Rugby authorities likely to demand a 15,000 minimum size in future.

Now, this summer, comes the real blow to supporters control at Wycombe. They should have seen it coming. Since coming to the club, it turns out that Steve Hayes has put in £6.93 million in loans – representing a loss of around £1 million per season over the last five years. As far as I know, this is all or most of the debt currently at the club, but it still shows a serious lack of constraint by the club’s directors and in particular the chairman himself. It appears that few clubs in the lower divisions of the football league trade at a profit, but losses of around £1 million per season appear to be exceptional, especially when one considers, that as a result of the fact they share their stadium with Wasps, Wycombe are picking up a reported £600,000 per annum in rent and other benefits, (more than double, for example, the amount that Cheltenham were hoping to get by loaning their stadium to Bristol Rovers for a season).

The supporters’ representatives on the board may have protested against the losses, but they have not been able to change it. Hayes, meanwhile may have been financing the club, but most (or all) the money he put in was in the forms of loans, not gifts, and therefore would at some stage come up for repayment.

Now that the repayment is due, the club, and in particularly the supporter representatives on the board, find themselves with the choice of submitting the club wholesale to the man responsible for creating the mess, or going into administration, (and possibly liquidation). Hayes made it clear that he was not going to finance the club further if he did not get his way, and although some of the support still voted to rid themselves of the man; that option seems more like a suicide pact than anything else. Under the old regime, the supporters had a veto over the selling of Adams Park and relocating, but surely this veto would be null and void had the club found its way to administration, with the main creditor almost certainly being the person making the best offer for the ground itself. If the positions were reversed, and Wycombe if found themselves having to pay rent to play on their ground in addition to a lack of continued financial indulgence from Mr. Hayes, it would be very difficult to maintain the club at this level.

That Mr. Hayes made some small concessions to the supporters’ organisation may show that he is not completely the ogre some portray him as, and that he does still support the club – within the constraints of his own vision. In exchange for taking on the other 75% of club shares, Hayes has written off around £3 million of the debt, (curiously, I see no mention of the owner of the shares he has just obtained, gaining any recompense themselves). He agreed the trust would have first option if he ever came to sell the shares, (but of course, not specifying the price), and more generously – but quite likely unenforceable – he has promised a £1.5 million donation to the trust to restart the club should he take it into liquidation. Finally he has agreed that Wycombe stay at Adams Park until a new ground within a five mile radius can be found. The Air Park, is of course within that radius. On the negative side, he may claim back the remaining £4 of loans, (and any others added in the future), and walk away if the new ground has not been agreed by 2014.

In all, despite these promises, the club is now completely in the hands of Mr. Hayes and its future, including funding and the new stadium depends on his vision. The last vestiges of supporter control have gone. But one has to ask oneself, if Wycombe Wanderers with all its advantages – ownership of the stadium, income from the Rugby club, good social facilities, and attendance that are better than many of their close rivals – fall so far short of balancing their books, then what chance do their league rivals have. While the FA and the Football League still stand by, practically inviting clubs to build up debt and then take the hit of going into administration, (except under this seasons new rule, not too much debt to the taxman please, as he is threatening to spoil the party), there is little chance of sanity hitting Football League finances; it is certain that more clubs will go into administration, and surely soon, League clubs will fold.