The nPower Debt League

On Monday, I was lucky enough to take part in the BBC Radio Derby Sportscene Talk-in with Colin Bloomfield and Roger Davies.  One of the most surreal elements of the experience was finding myself sitting in the studio while Bloomers read out the news bulletins, leaving me free to shoot the shit with one of the most storied strikers in Derby County’s history.

Roger is very affable and it was interesting to get his take on the current situation at Pride Park.  If anything, it was nice to know that he’s as much of a fan as the rest of us and is desperate to see Derby County get promoted to the Premier League.  One thing he did say was that it’s a shame that these days, all the chat in football is ‘about money, not what happens on the grass’.

I agree with him on that, but most of the callers that night wanted to talk about money in some way and here I am, writing yet another financial blog post.

Since Monday night, a couple of interesting articles have appeared online.  Firstly, The Independent reported that the much-trumpeted Financial Fair Play regulations may not now be introduced for next season, despite Tom Glick’s recent assertions to the contrary as he sought to explain the continuing policy of wage restraint at Derby County.

West Ham United, according to The Telegraph, were prepared to go to the lengths of seeking a judicial review to prevent the introduction of FFP this season and it’s highly probable that the financially incontinent likes of Leicester City, who are desperate to debt-finance their way into the promised land, will also be opposed to its implementation.

Elsewhere, a Leeds United blog, the Scratching Shed, produced some very useful research comparing debt levels, turnover and wage bills across the division.  Unfortunately, the post itself is laden with the kind of pompous hubris we’ve long associated with Leeds fans (blah blah ‘major force’ blah blah ‘sleeping colossus’ blah blah ‘dormant power’…), but if you can get past that – and the fact that the author appears to describe Leeds owner Ken Bates as ‘responsible and intelligent’* – it’s a valuable source of information and provided the numbers for the following league table of indebtedness, based on last year’s figures (2010/11 season):-

Nottingham Forest 75m
Ipswich Town 66.7m
QPR 56.1m (Promoted)
Cardiff City 55.5m
Portsmouth 50m
Leicester City 43.8m
Hull City 40.4m
Reading 39m
Bristol City 38m
Sheffield United 32m (Relegated)
Coventry City 30m
Middlesbrough 27.8m
Watford 17.5m
Millwall 16.7m
Norwich City 4.1m (Promoted)

(No debt figures are provided for Swansea City (P), Leeds, Burnley, Barnsley, Crystal Palace, Doncaster Rovers, Preston North End (R) or Scunthorpe United (R)).

Of course, we know that pretty much all the clubs above who are still in the Championship next year will report higher debt levels (on the Scratching Shed’s reckoning, only Leeds turned a profit last time), including Derby, whose debt will climb to over £30m, thanks to a further injection of interest-free loan capital from GSE.  Off the top of my head, Leicester will go into the red by a further £25m – the extra money has been loaned to the club by owner Vichai Raksriaksorn at an interest rate of 8% – hurtling towards a total debt of £70m.

Here is the table for operating profit (+) / losses (-) in the 2010/11 season:-

Leeds United + 0.93m
Millwall – 0.6m
Scunthorpe United (R) – 1m
Norwich City (P) – 4m
Watford – 4m
Burnley – 4.5m
Crystal Palace – 5.29m
Swansea City (P) – 8.4m
Cardiff City – 10.4m
Ipswich Town – 10.7m
Nottingham Forest – 10.8m
Reading – 10.9m
Bristol City – 11.5m
Sheffield United (R) – 13.6m
Middlesbrough – 14m
Leicester City – 15.2m
Hull City – 20.4m
QPR (P) – 25.7m

(No figures for Portsmouth, Barnsley, Coventry, Doncaster or Preston (R))

So it’s clear that Derby are a long way from being the worst-run club in the division.  However, there are no bonus points for being financially prudent and, more to the point, it now seems that no specific penalties are to be introduced for reckless spending yet, unless a club’s house of credit cards collapses and they go into administration.

If it’s true that FFP will not be introduced next season, there will be no obligation for the likes of Leicester, Ipswich and Hull to start getting their house in order – so they won’t.  As long as clubs refuse to sign up to the idea of regulating wage levels, the QPR / Leicester approach to chasing promotion will continue to be an option and the fate of Portsmouth could be replicated elsewhere, sooner rather than later.

The fact that Derby are pretty much the only club to have prepared for the dawn of FFP by reducing their wagebill to less than 70% of turnover will not give them any sort of advantage for next season if the overspenders have their way and prevent the regulations from being introduced.

So the question is – are we happy to try to play a different, less risky game to the gamblers who are going all-in as they chase the Holy Grail of promotion?

*The Leeds United Supporters Trust would certainly take issue with the Scratching Shed’s assessment of Bates’ custodianship of the club – and for having done so publicly, key spokespeople for the group have been barred by Leeds from buying tickets for away games.

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