Scottish football club insolvencies ‘probably inevitable’

Financial implications of the coronavirus pandemic could prove ‘fatal’, claims report

The gates have been shut at Scottish football grounds since mid-March.

The financial implications of the coronavirus pandemic could prove ‘fatal’ for some Scottish football clubs with insolvencies ‘probably inevitable’, according to the latest annual Football Distress Report.

The cruel timing of the sport’s current suspension from a Scottish perspective is underlined by the revelation that club finances had reached an unprecedented level of stability in March with none of the 42 SPFL members showing signs of severe financial distress.

But the report, from corporate insolvency specialists Begbies Traynor, claims that the majority of clubs in Scotland could now face ‘financial peril’ without government support if fixtures cannot return in front of spectators for the 2020-21 season.

Ken Pattullo, managing partner at Begbies Traynor.

The SPFL this week stated their aim to try and begin the new campaign on schedule in July, when their new £160 million five-year TV deals with Premier Sports and Sky Sports are due to begin. But it remains doubtful if that is a realistic prospect, even behind closed doors, while the SPFL is also without a title sponsor after Ladbrokes opted not to extend their five-year agreement which was worth around £1.5 million a season.

“It’s the mid-size clubs without wealthy backers or lucrative television or sponsorship deals that are in the most perilous position,” warned Ken Pattullo, a managing partner at Begbies Traynor who have produced the Football Distress Report since 2012 when as many as six Scottish clubs were in severe financial distress.

“Unfortunately, the double whammy of significant wage bills and sizeable fan bases that make them heavily reliant on match-day gate receipts could prove fatal in this unprecedented situation.

“While I don’t believe we are looking at a doomsday scenario and most Scottish clubs will survive, I’m afraid that some insolvencies are probably inevitable among the hardest hit clubs.

“There are real concerns that cash strapped clubs may be pushed to the brink of insolvency. Finances are already stretched and every match that isn’t played means income from matchday ticket sales and hospitality is lost.

“With several matches that were still left to play across all Scottish leagues (in the 2019-20 season), that represents hundreds of thousands of pounds of lost income, which clubs operating on small budgets can ill afford to lose.

“Some clarity from the Scottish Government would be helpful now because, while in England the Premier League is in discussions about Project Restart, to resume playing televised matches behind closed doors, Scotland’s top-tier clubs seem to be nowhere near having a road map towards the resumption of any form of play, and meanwhile they remain in financially corrosive limbo.”

While many of Scotland’s lower division clubs have already launched fund-raising initiatives in a bid to survive the Covid-19 crisis, it is those in the top flight who could be most at risk.

The most recent Uefa club licensing report revealed that Scottish Premiership clubs earn 43 percent of their annual revenue from ticket sales, more than any of the other top 15 leagues in Europe.

“Our Scottish Premiership clubs are the most reliant on ticket sales of all the top-flight European clubs,” said Pattullo.

“(That) also makes them extremely vulnerable to escalating financial problems, especially if it is decreed that the remainder of the season is to be played behind closed doors.

“It also means they lack the financial clout of the English Premier League, and the cost to clubs of completing the outstanding games, when clubs have little or no income, could be devastating.”

There now appears to be next to no chance, however, of the SPFL still attempting to conclude the 2019-20 Premiership season on the pitch. It is anticipated the SPFL board will ‘call’ the league imminently, with Celtic declared champions and Hearts relegated on a points-per-game basis as the table stood when football was suspended two months ago.