Bulls battle bears over football´s financial future

The bears may be winning the battle for control of the direction of financial markets but their pessimism is not going unchallenged in the world of English football.

The last week has seen West Ham pitched into the eye of the global financial storm, helping to intensify fears that the current crisis could have far-reaching repercussions for Premier League clubs.

The meltdown of Iceland's economy left Hammers owner Bjorgolfur Gudmundsson nursing losses running into hundreds of millions of dollars and prompted league officials to seek reassurances about the state of the club's books.

West Ham provided them and have defiantly dismissed suggestions that the club's viability is in doubt. Gudmundsson will not pull the plug, they insist, although chief executive Scott Duxbury has confirmed that new manager Gianfranco Zola will have to sell players to fund any purchases in the January transfer window.

West Ham's woes have been taken by some as vindication of a warning from Paul Duffen, the chairman of EPL newcomers Hull, who predicted earlier this month that a Premier League club carrying heavy debts would go bust as a result of their bankers either refusing to extend existing credit lines or raising interest rates to levels they cannot afford.

Liverpool have already had to shelve plans for a new stadium and the sale of Newcastle appears to have been put on hold indefinitely as a result of the problems currently being encountered by anyone attempting to raise capital.

But the most pessimistic interpretations of the current situation are disputed by many of the individual clubs, by the league's chief executive, Richard Scudamore, and by independent analysts such as the specialist football finance group at accountants Deloitte.

They all argue that English football's debt-to-earnings ratios are relatively low and, given the reliability of the sport's major revenue streams — television rights, ticket sales and merchandising — sustainable, even in the more difficult conditions now prevailing.

Only time will ultimately resolve the current debate between football's bulls and bears.

But the current crisis has undeniably created an appetite among some of football's regulators for measures they believe will impose a more prudent financial culture on an industry that has grown used to one of spend, spend, spend.

UEFA general secretary David Taylor revealed last week that European football's governing body was planning changes to the way clubs are licensed with a view to introducing stricter guidelines on how they run their finances.

In comments that raised the spectre of the likes of Manchester United being excluded from the Champions League, Taylor said highly endebted clubs were gaining an unfair advantage over more careful rivals and warned: “We cannot let things stay as they are.”

Taylor's comments followed hot on the heels of a speech by the chairman of England's Football Association, David Triesman, who warned of the “very tangible dangers” posed to England's top flight clubs by combined debt of nearly three billion dollars.

Triesman suggested a concerted effort to restrain wages — which account for over 90 percent of English clubs' earnings — would be a prudent first step.

But beyond voicing alarm and urging restraint, there appears little that football's regulators can do.

There is no appetite for rugby-style salary caps and UEFA's suggestion that it could set itself up as a judge of clubs' financial viability appears fraught with potential complications, not least of which is the obscure nature of the finances of some of continental Europe's top clubs.