2008 bore witness to prosperous times for football: - a magnanimous Euro 2008, and enthralling Champions League, and League competitions to name just a few achievements. From Ronaldo’s virtuoso accumulation of 42 goals in all competitions from midfield to an untouchable Euro 2008 performance from Spain, football, as a sport, should feel proud to look back on the year’s events and smile. However, while we can look at the footballing events of the past year under a sporting light and feel comforted, we cannot stretch such a compliment to the business occurrences in football during the last year; for in any country, the events of 2008 were simply a tautology of peril...
Yes, football as a business looked to crumple under the deteriorating state of the global financial markets, it was only a matter of time before underlying turmoil finally surfaced within football.
In the years leading up to 2008, banks in general held excess amounts of money. They became desperate to lend it out in any way possible, and so targeted people who hadn’t owned property before, in the form of mortgages. Banks then traded these mortgages, as well as cash itself between one another – (which was all ‘good and proper’ while the ‘grass is green’ but when times changed, it proved a recipe for disaster). The widespread mortgage distribution coincided with an interest rate rise and a subsequent house-price fall. People couldn’t pay them back! - Banks suddenly hit the ‘red-button’ and stopped both lending out to customers and each other, they wanted to hoard their cash... the CREDIT CRUNCH BEGAN–Football first felt the pinch in a peripheral sense – sponsors primarily, none more famous than the nationalisation of Northern Rock, Newcastle United sponsors. This company provides the primary shirt sponsorship for the football team, to the value of around £25m over a five-year-period. However, this loss didn’t hit football as hard as those to come did. Staying on the sponsorship front the most evident ramification of the crisis, was the September collapse of XL Leisure Group. They had previously sponsored West Ham United, until impending liquidation forced the company to pull the plug on their sponsorship agreement, which was later visualised by the removal of the company’s name from the West Ham shirt. This blow was almost sequentially followed by the near liquidation of Manchester United sponsors AIG, had it not been for a US Federal Reserve bailout. These collapses were the preamble before the real meat of the credit crunch affected football -
The football sugar-daddies to many of our Premier League Clubs felt the ‘pinch’ like no other. Many of whom amassed their great wealth through businesses that have since been crippled by the disease of the credit crisis. Hence, many of their fortunes have been decimated by the global economy slump. 2008 witnessed such an affect in many of our most cherished clubs, none-more evident, than with West Ham United owner, Bjorgolfur Gudmundsson:
In 2006, an Icelandic consortium headed by Eggert Magnusson and funded by Bjorgolfur Gudmundsson, wrestled ownership of West Ham from Terry Brown for £105m. Times then looked rosy for West Ham, with a man who was described as “...one of the wealthiest men in a very wealthy country” by Keith Harris (a banker famous for sealing football club buyouts, including Chelsea in 2003, for Roman Abramovich). But matters took a turn for the worst when in October Gudmundsson’s bank – ‘Landbanki’, was nationalised, at an initial loss to its principal shareholder of about £250m. This immediately plunged the future of his other investments, inc. West Ham United, into uncertainty. Uncertainty which still exists today, with reports suggesting that West Ham have to fuel January expenditure through sales, and even stronger suggestions that the Icelandic owner is looking for the ejector button.
Another direct hit from 2008 and the financial turmoil it brought, was the postponement of Liverpool’s Stanley Park Stadium development. There are now serious doubts over whether the two American owners, George Gillette and Tom Hicks, will raise the necessary finance for a project that is estimated to cost £350 million. This, from the club who currently owe £350m to two banks - Royal Bank of Scotland and Wachovia - who themselves have suffered severely in the downturn. The money is due to be repaid later this month, although Liverpool have an option to extend the loan until July. After that, however, they will find it difficult to extend or refinance the loan. This could spell the start of severe trouble for Liverpool Football club later this year.
Furthermore, it is rumoured that clubs such as Arsenal & Liverpool have been set stringent transfer budget caps, and restrictions due to the negative affects the credit crunch had, in 2008, on the accounts of both clubs. This sentiment even stretches, in some ways to Chelsea, where it is reported that Roman Abramovich is £3bn worse-off due to the credit crunch tumour, and thus looking to stem the outflow of his fortunes, notably in the transfer market. It seems to reflect badly on 2008 when talk of transfer restrictions, (because of cash flow worries), surrounds three of England’s biggest and most wealthy clubs...... Equally, it would be unfair to say that 2008 brought no business positives for the sport. In late August, the football takeover of the Century took place with Manchester City embracing the fortunes of the Abu Dhabi Royal Family, and Dr Sulaiman Al-Fahim’s (who heads the Abu Dhabi Investment Group) estimated disposable income of £350bn. The oil-funded money of the middle-east, so far has proved the single ‘safe-house’ in the current financial market. Times ahead, in this sense seem golden, with the January transfer window now open and these vast amounts of un-stringed cash waiting in the wings!... – who will it be Kaka? Villa? Toure? Owen? Santa Cruz? – Maybe football fans will have a certain degree of rest-bite in the coming month?...
But small scale positives cannot overshadow a year that wasn’t too kind to the business in football, to say the least. Clubs; like the banks, companies and countries they operate in conjunction with, suffered from the events of 2008, and now operate more conservatively having seen how quickly ‘greats’ can fall from grace, - take Woolworths for example. Business now operates on a basis of fear; such fear may even become evident as the transfer window takes hold, with clubs being forced to sell due economic demands, as is reported with G. Zola’s situation at West Ham United. It isn’t a case of ‘goodbye to the peril of 2008, hello to the positives of the new year’ because the current crisis has induced a recession... and it is widely believed that this recession is here to stay...
Hasten not to accept this pessimistic prediction and we should thank 2008 regardless. But let’s hope we can galvanise football’s alter-ego (BUSINESS); and amend the wrongs of the past year... Needless to say, let it be a ‘Happy New Year’ –
By Joshua Oware
Business and Current Affairs CorrespondentBookmark with:
