Written by: Keith Tully
There has been a sharp rise in the number of English Football League (EFL) clubs showing early signs of financial distress as of May 2021 and compared with the same point in 2020.
Although no clubs are showing significant signs of financial distress, evidence suggests that there could be some challenging months ahead for football clubs in the three leagues below the Premier League as they aim to recover their cashflows.
According to the latest Football Distress Survey, carried out by corporate insolvency experts at Begbies Traynor, there was a 94 per cent increase in the number of EFL clubs showing early warning signs of financial distress.
That reflects an increase from 17 clubs showing early signs of distress to 33 clubs being in that position between May 2020 and the same month this year.
Begbies Traynor’s analysis of the dynamics within football clubs in England currently is that they have been shielded from the worst potential impacts of the pandemic through financial support from government and from their generally much richer counterparts in the Premier League.
However, the feeling is also that a good deal more financial pressure might soon come to bear on football clubs across the country as soon as courts can more normally process cases relating to the pursuit of business debts.
“What we can see is that the Covid‐relief packages from the government, as well as the money that came down from the Premier League, have gone some way to easing the pain of clubs in the EFL during 2020,” explained Gerald Krasner, a football finance expert from Begbies Traynor.
Mr Krasner has also said that football clubs have increasingly been relying on “a whole raft of fundraising or actions to relieve cash flow,” which would not necessarily impact on balance sheets for another 12 months.
“Rights issues by shareholders have injected capital in some cases where owners have the means to step in, and in other cases bank debt and deferred payments to creditors including players and senior managers have helped,” he said.
“However, although these measures have been successful in securing the short‐term survival of clubs and pushed the threat of administration further down the road, the cumulative effect is to build up a wall of debt that will have to be serviced and ultimately paid off.”
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