English football's used car lot

These are tough times for many people; share prices are plummeting, industrial output is stagnating and the talk of recession is all pervasive. While plenty around the world are concerned about their livelihoods, one area of activity has remained buoyant throughout: the sale and acquisition of English football clubs. Lots of businesses are currently trading in conditions that are akin to a harsh Arctic winter, but English football has by comparison seemed like a brisk, sunny Saturday morning at a local used car lot.

Amongst the models currently for sale on the garage forecourt of England’s greatest ever used club sale are Newcastle United, Everton, Charlton Athletic and, possibly, Arsenal too. The sale has been going well so far, with Manchester United, Liverpool, Chelsea and Manchester City all having been bought in recent times by eager investors with lots of money. Even some of the seemingly less attractive models on display have been selling; for instance, Queens Park Rangers (West London’s second, if not third, team behind Chelsea and Fulham) was bought last year by a mega-bucks triumvirate of steel magnate Lakshmi Mittal, Formula 1 motor racing supremo Bernie Ecclestone, and Benetton F1 owner Flavio Briatore.

What do these people know that we don’t? The performance figures for some of these newly acquired models are worrying. Indeed, if I was faced with the choice of buying a car with the same level of performance, I think I would actually now be riding a bicycle to work. Consider some of the headline figures for the model range: £3 billion of accumulated debt; 56 clubs (out of 92 clubs in the professional leagues) in the last 20 years have been in administration; and in any given year, typically less than ten clubs will make an operating profit. Then take an individual club, such as Chelsea. Ah yes, Chelsea: in the financial mire when Roman Abramovich bought the club in 2003, with reported debts of around £100 million. Now, following the golden dawn of new ownership, Chelsea is........even deeper in the financial mire than they were before. Some people say they are £300 million in debt, but others believe it is more like £500 million.

So, at a time of financial hardship, football clubs would hardly appear to be a sound financial investment. The implied question therefore remains: why would anyone buy a used English football club that has poor performance and whose owners seem desperate to sell to anyone prepared to buy? Ask Abramovich, and while you are there ask George Gillett, Tom Hicks, Sheik Mohammed bin Rashid al Maktoum, Alexandre Gaydemak et al. The official explanations would probably all be very similar: great club, long history, proud traditions, passionate fans and massive potential. Unofficially however, it is likely that their answers would be very different.

In the case of Abramovich, six years ago if you had asked anyone outside Siberia who he was, few would have known him. Now, everyone knows him. People routinely identify the guy as a Russian oligarch, one of the world’s richest men, and owner of a London-based, incredibly glamorous, English football club. His ownership of Chelsea has been the ultimate form of conspicuous consumption, and a way of building his social, commercial and political networks. Abu Dhabi’s al Maktoum has no doubt drawn inspiration from Abramovich, his recent acquisition of Manchester City having raised his profile from anonymous Middle-Eastern oil billionaire to owner of the world’s now richest football club. Good for his image, but good also for the image of his home emirate and a major statement of brand positioning and intent by the oil-rich state. Whether or not al Maktoum’s grand vision of City becoming a major global multi-product leisure brand, in the same vein as Richard Branson’s Virgin brand, will ever come to pass is a moot point. But for the time being at least, everyone knows him and his country.

While Abramovich and al Maktoum bask in the adulation of two grateful sets of fans, Gillett and Hicks at Liverpool, and now admittedly to a much lesser extent the Glazers at Manchester United, are sweating out the nightmare of having bought a used model that requires a level of ongoing care which they seem to have underestimated. Owning a second-hand Ferrari might look good on paper, but as anyone who has owned one will know, the after-care can be much more burdensome than the actual purchase. Gillett and Hicks no doubt saw the potential of owning Liverpool – they are experienced sports entrepreneurs – and possibly still do. However, they have had a rough ride at the hands of fans, the media and, apparently, some financial institutions. Their reasons for purchasing ‘the Reds’ would seem to have been more overtly and directly commercial than others, acquiring a legendary club with a worldwide fan base that is keen to buy a piece of history and glamour. But it has been a tough test for them thus far, controversies around Liverpool’s new stadium being indicative of the muddle the club has got into under its new owners.

As for Portsmouth’s Gaydemak, reports persist that it is his father, Arcadi, who is the real owner of the club, not him. The story many people tell is that Alexandre’s father might be involved in something illegal and could be using Portsmouth as a way of avoiding the consequences of it. If this is true, that makes Portsmouth analogous to a get-away car from the scene of a crime, rather than a beloved old model held in affection by its current owners. It will be interesting to see who buys Portsmouth when Gaydemak decides to sell (one of the current rumours) because the club may well require the new owner to carry out a full garage service to put the club right once again.

Whatever the reasons why overseas are clamouring to buy English football clubs (remarkably, English billionaires and millionaires are not), these are interesting times. We are rapidly heading towards a situation that will make the Premier League’s clubs look distinctly like Britain’s major car manufacturers: entirely foreign owned! A multitude of challenges await, not least that at Premier League board meetings overseas investors may soon hold sway in voting on major decisions for the League. In which case, brisk Saturday morning trade at a local used car lot may then become an understatement. Watch out for a corporate juggernaut coming your way!