Stephen Halliday: Cost of Champions League failure laid bare by accounts

WHEN Celtic's debt peaked at £29.62 million in 2001, it was of little concern to the club's supporters as they savoured the annexation of the domestic 'treble' in the first season of Martin O'Neill's managerial reign.

That season also saw Celtic record a loss of 8.1 million, figures which make the 2.13 million deficit and 5.85 million debt announced in yesterday's annual accounts appear relatively insignificant.

But by tracing the club's financial history back to O'Neill's first year at the helm, it is startling to see just how significant participation in the group stage of the Champions League has become for clubs of Celtic's size.

O'Neill followed up his maiden SPL title win by guiding Celtic into the group stage of Uefa's elite tournament for the first time in their history.

Five subsequent appearances in the Champions League followed, under O'Neill and then Gordon Strachan, in the next seven years. It was a period which saw Celtic's debt reduced to a neglible 1.51 million while posting record turnover figures in excess of 70 million on three occasions.

It is why last season's failure to reach the Champions League group stage had such a telling effect on this year's accounts and why the elimination from the tournament earlier this month at the hands of Braga will do so again when the figures are collated in 12 months' time.

Celtic, who raked in 10.6 million in Uefa prize money alone from their last Champions League appearance two seasons ago, know even a lengthy run in the Europa League would not seriously compensate for the loss of that kind of revenue. If they defeat Dutch club Utrecht to reach the group stage of the secondary tournament this season, they are guaranteed a basic Uefa participation fee of just 750,000. Compare that to the 6 million each club in the Champions League group stage can bank on even before a ball is kicked.

Reaching the group stage of the Champions League is set to become even more difficult for whoever wins the SPL, as Scotland's crumbling co-efficient ranking next season closes off the automatic route Rangers enjoy this year.

Celtic will continue to balance their investment in new players, which has allowed Neil Lennon to make eight signings so far this summer, with cashing in on prize assets as they have done with the sale of Aiden McGeady to Spartak Moscow for a reported fee of 9.5 million.

There will certainly be further departures before the transfer window closes as Celtic look to keep a firm grip on a wage bill which last season dropped to 36.48 million compared to 38.75 million the previous year.Andreas Hinkel and Marc Crosas, neither registered in Celtic's European squad, are among the higher profile players likely to depart before the end of the month.

Peter Lawwell, the Celtic chief executive, admitted yesterday that testing times lie ahead for the club if failure to make a serious impact in Europe continues.

"Once again, the biggest challenge facing the board is the management of salary and transfer costs whilst achieving playing success in order to yield satisfactory financial results," observed Lawwell. "Clearly, European progression remains key in enabling the club to achieve its financial objectives.

"Trading conditions have been and continue to be extremely difficult. Results on the pitch continue to be the major influence on trading performance. Our failure to recapture the Scottish Premier League title last year and its impact on European qualification had a detrimental effect on our profit performance in 2009-10. Sensible cost management and effective financial controls, in addition to the gains reported from player trading, mitigated the negative impact.

"Revenues generated by progress in European competitions remain of major significance and provide greater flexibility when considering player investment.

"It is imperative that we re-establish domestic success and compete successfully, particularly in the SPL. The gap with major European nations widens and the cost of attracting quality new players is a significant factor.

"Although better placed in financial terms than many clubs, careful and patient use of our financial resources must characterise our efforts to strengthen the first team squad."

While the Champions League continues to be the tournament no club with high aspirations can afford to miss out on,Lawwell believes the financial challenges reflected in Celtic's accounts are also part of a wider economic trend which will manifest itself in bigger leagues than the SPL over thecoming years.

"The football sector continues to be challenged financially," he said.

"Many clubs are heavily in debt, have seen revenues shrinking and are incurring ongoing losses. Lucrative television contracts in the English Premier League have resulted in wage and transfer fee inflation in the UK and also around Europe that is clearly becoming unsustainable.