Published: 12:00, 22 May 2020
| Updated: 12:07, 22 May 2020
A Kent MP has warned that up to 10 Football League clubs could go bust without government support.
Folkestone and Hythe MP Damian Collins has helped to write an open letter warning of the dire financial crisis that is facing clubs in the lower divisions.
He has set out a blueprint to tackle the crisis, along with the co-owner of League 1 side Sunderland, Charlie Methven. The Gills are among those clubs currently facing financial hardship because of the coronavirus pandemic.
Titled ‘A Way Forward For Football’, Mr Collins asks the government to come to the financial aid of those clubs and has called for reform in the game.
Speaking to Sky Sport News today (Friday), he warned that: “In the next few weeks we could face between five and 10 EFL clubs going into administration.”
He believes that without urgent government intervention many clubs could fold, following on from Bury's demise at the start of this season. Government money would be used to stabilise clubs.
The letter said: “The reason the situation is so urgent is because clubs in the English Football League are almost entirely dependent on the money they make from playing matches in front of paying fans.
“As things stand, no-one knows how long it will be before we see even a half-full stadium.
“The financial burden this brings falls most heavily on the clubs with the smallest resources. For the giants of the Premier League, more than eighty percent of their income comes from the money they make from the television companies who broadcast their games to a worldwide audience.
“However, for clubs in Leagues 1 and 2 revenue from broadcasting is often less than ten percent of what they earn in a year. This means they are almost entirely reliant on income from ticket sales, sponsors and advertisers, merchandise and hospitality, all of which are inextricably linked to football as a live mass attendance event.
“Since the lockdown and the suspension of matches, Football League clubs have had to cope with losing match day income whilst still having to pay their players, though, things are going to get worse.
“In early June the money clubs would usually receive from advance season ticket sales - which is what keeps them going during the summer months - will dry up without the realistic prospect of spectators being allowed back into football grounds in August and September.
“It is that loss of a large chunk of forecasted income, rather than the small number of matches lost at the end of this season, which will push some clubs over the edge.
“The consequences will not just be felt by club owners and supporters. At the end of June, we will see 1,400 players who are out of contract released, not because they lack ability but because clubs won’t be able to afford their wages in a world with no foreseeable matchday income.
“Some clubs who cannot pay their bills will go into administration, but under the League’s Football Creditors rule they are required to settle in full all their football debts, including outstanding player salaries. These costs are by far the largest bills that the clubs have to pay, and those that cannot find the funds to do this face insolvency and expulsion from the league, just like Bury.
“The Football Creditors rule is itself long overdue reform as it places the greatest financial burden on other community businesses that support clubs when they go into administration. They often get pennies in the pound for the money they are owed whilst football bills are honoured in full.
"So, the short-term problem is clear to see. With no clarity over the future of live matchday attendance likely anytime soon, clubs will go bust unless they are bailed out somehow."
The letter acknowledges that finances were a problem in football before the coronavirus pandemic and that “the majority of EFL clubs have been run unsustainably (and often irresponsibly) for decades.”
The letter sets out a six-point plan to rescue football, which includes the setting up of a ‘Football Finance Authority’ (FFA) scheme, “created by the Football Association - but working with and backed financially by the government - to provide financial assistance to EFL clubs.”
They add: “Funds should be provided by the FFA to allow clubs to meet their short-term liabilities and provide them enough breathing space to restructure their finances, but couldn’t be used to invest in recruiting new players or improving the club’s infrastructure."
In conclusion they said: “Without the reforms of the governance of football finances, any bailout for clubs will be a short term fix.
"Once the pressure is off, the rules – whatever they are – will be bent and challenged by the owners of clubs intent on short-term success, at the cost of medium-term sustainability.
“To solve the problem, we have to diagnose first what it really is – in this case, a governing body which is simply not constituted to perform the task allotted to it in an age where all too many owners – far from the responsible custodians of aeons past – are often all too ready to gamble a club’s future on short-term glory.”