Debt rises by £41m but SPL on the mend

Published on Tuesday 18 January 2005 00:40

SCOTTISH football’s debt burden has increased by another £41 million, but there are grounds for cautious optimism after clubs reduced their total losses for the first time since 1998.

The annual financial review of Scottish football conducted by PricewaterhouseCoopers reveals that the total debt of the 12 clubs in the Bank of Scotland Premierleague stood at 186million at the end of season 2002/03, a rise of 28 per cent. However the SPL clubs cut their pre-tax losses from 62.8m in 2002 to 53.4m in 2003. Rangers remained the biggest losers with an overall loss of 29m - the SPL total was 53m - although that marked a significant drop of 16 per cent on the previous year. At the end of the 2002/03 season, the Ibrox club accounted for 37 per cent of the total SPL debt, a figure which will have fallen drastically following the club’s 51.4m rights issue at the end of last year.

Not one SPL club made a profit, Hibernian coming the closest with a loss of just 278,000. Motherwell lost 351,000 while in administration.

Six of the SPL’s 12 clubs were technically insolvent - Dunfermline Athletic, Hearts, Hibernian, Dundee, Dundee United and Motherwell. And there is a grave warning for any of the SPL clubs who claim they would gladly see the back of the Old Firm and send them off to England: the departure of Celtic and Rangers would reduce the turnover of the other clubs by up to 22 per cent.

On the positive side, only 4m net was spent on transfer fees compared with 12m the previous year. Five clubs cut their losses - Aberdeen, Celtic, Dundee United, Dunfermline and Kilmarnock - and the combined wage bill fell by 8m. For once the Old Firm did not dominate this achievement, with Dundee and Hibs cutting wage bills by around 20 per cent.

Nevertheless, the ratio of wages to turnover outwith the Old Firm remained alarmingly high at 86 per cent, down from a ludicrous 94 per cent. Dundee, Dundee United and Dunfermline all spent more on wages than they generate in total turnover, an unsustainable position which saw Dundee go into administration and required Dunfermline to make serious cuts to salaries.

David Glen, the report author, calculates that another 16m has to be cut from the wage bill to attain a sustainable 60 per cent ratio. Glen said that while "one season does not make a trend," he remains "cautiously optimistic" that a downward trend is being reversed. He believes a trend is continuing, with preliminary figures for last season showing further reduced losses, smaller wages bills, and improved wage-turnover ratios.

Total SPL turnover rose four per cent to 154m, with the Old Firm’s contribution rising from 69 per cent to 71 per cent - indicating that the gap between the Old Firm and the rest of the SPL continues to grow. Celtic posted a seven per cent rise in turnover on the back of their run to the UEFA Cup final in Seville, their overall figure of 60m a massive 20 times greater than that of Dundee United on 3.1m.

Disappointingly for Aberdeen, the club’s centenary year did not have an enormous impact on the Pittodrie club’s finances, with a lowly finish in the SPL resulting in a seven per cent drop in turnover.

"Most SPL clubs appear to have turned the corner and are heading in the right direction," said PWC partner Glen, who also detected light at the end of the tunnel in last year’s report. "While there might still be some pain to endure, I’m hopeful the worst might now be in the past.

"But I don’t want to exaggerate. When asked were clubs doing enough in 2003, the answer is clearly ‘no’. That’s why we saw the likes of Dundee and Livingston go into administration.

"There is a great deal of further work to be done to get the SPL to anywhere near a financial even keel. But after an extremely difficult couple of seasons, it looks like the clubs have understood what they need to do. The Scottish game, if it is to survive long term, must find its level."

Glen points to a reduction in squad sizes, player wages and transfer fees as the path to financial stability, and believes supporters have to learn to be patient with their clubs as they continue to go through a period of pain caused by past excesses.

"Perhaps part of the problem is the geographical proximity of the English Premiership, which is one of the few leagues performing well," said Glen. "Fans want Celtic and Rangers to be competing with Chelsea and Arsenal - but they can’t. Reading a set of accounts is difficult enough for the best of us. I would like to see clubs sitting down with their fans and talking them through the situation. That is the best way - in my opinion - for any recovery to be maintained."

To put the gulf between the Premier League and the SPL in context, each Old Firm club receives about 1.5m in television revenue per season. A mid-table Premiership side, such as Blackburn Rovers or Aston Villa, rakes in 15m.

Making matters worse, the meagre income received from television in Scotland had a negative knock-on effect. Live coverage on terrestrial television is cited as a factor in the reported three per cent drop in average attendances over the season, with most of the damage suffered by Aberdeen, Hibernian and Livingston.