Scottish football clubs on brink of cash crisis

Hearts face a  fight for survival. Picture: Phil Wilkinson
Hearts face a fight for survival. Picture: Phil Wilkinson
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SCOTTISH football is facing a period of “unprecedented financial distress”, according to a leading business rescue firm, which says the books of half a dozen clubs are in a perilous state.

Its grave report comes a day after Heart of Midlothian FC admitted it was fighting to stay in business, with the troubled Edinburgh club saying next week’s match against St Mirren could be its last.

Earlier this year, Rangers went into administration after it emerged the club’s tax bill had not been paid. It was demoted to the fourth tier of Scottish football after being forced to set up a new company following liquidation.

The financial health of several of the nation’s clubs has deteriorated over the past six months, and a football finance expert has warned that, after the difficulties suffered by Hearts and Rangers, “the problems go further”.

Hearts supporters began to worry about their club’s future after it issued a plea for “emergency action”, warning that its 138-year history could come to an ignominious end this month after being served with a court order over an unpaid £450,000 tax bill.

The new report, from corporate rescue and recovery specialist Begbies Traynor, makes clear that clubs other than Hearts and Rangers are enduring extremely difficult financial situations that are likely to worsen in the coming months.

Ken Pattullo, a partner at the firm, said that for those clubs having a torrid time at this stage of the season, the forecast was “very bleak” for next summer, when cash flows will come under increasing pressure due to the lack of matches.

His firm’s Red Flag Alert Football Distress Survey found that, as of last month, six clubs in the top three divisions of the game were showing signs of financial distress – defined as a situation where a company cannot meet, or has difficulty meeting, financial obligations to its creditors.

That is two more than when the survey was first carried out in April. The survey is anonymous, and the clubs highlighted have not been named, but it is understood they include Hearts and Dunfermline, who were relegated from the SPL this year.

Describing the rise as “worrying”, the firm said it came at a time when most clubs should be on their strongest financial footing, having banked the majority of revenue from season-ticket sales and sponsorship deals.

Mr Pattullo said: “Distress has actually risen since the peak of last year’s problems, and the problems go further than the widely reported issues at Hearts.

“The plain fact is that if a club is in trouble at this stage of the season, it looks very bleak for the prospects of financial survival when the cash flows are really put under pressure in the spring and early summer.”

Business distress signals, as measured in the survey, include facing serious court actions, including winding up petitions and high court writs; being issued with striking-off notices for late filing of accounts; having court judgments against them, and having serious negative balances on their balance sheets.

The figures show that while an average of 2 per cent of UK businesses show such symptoms of distress, one in five of the 32 football clubs surveyed in Scotland show the same degree of financial ill health – three times higher than the average across English league clubs.

“The survey shows that the relegation of Rangers has had some impact, but lower attendances and falling revenues, and in particular reducing TV money, has given rise to the distress that is spread across the SPL and divisions one and two,” Mr Pattullo said.

“In England, the FA’s Financial Fair Play guidelines appear to have already started to assist with the sensible management of clubs, although it is possible that other recent failures such as Port Vale and Portsmouth have acted as the cautionary tales that were needed to bring around realistic financial management.”

Mr Pattullo warned it was unlikely the game in Scotland had reached its lowest point, suggesting further pain for clubs to bear in the coming months and years.

He said: “Unfortunately, with the recent upheaval in Scottish football structure following Rangers’ relegation, it appears that we have considerably more pain to go through before we see the improvements that have started to be seen south of the Border.”

Paul Goodwin, head of Supporters Direct Scotland, which looks to promote sustainable clubs based on supporters’ involvement and community ownership, said: “We are aware of several clubs who are in a state of financial distress. Obviously, Hearts is one, but there are some others, and we are working with some of the fans’ groups behind the scenes.

“What we don’t want to happen with some of these unnamed clubs experiencing difficulties is to wait until the Armageddon scenario happens. We encourage these clubs to come and talk to us to see if there is a way we can help.”