Dun & Bradstreet discuss the recession and it's effect on Football clubs in England.



[UKPRwire, Thu Jan 14 2010] Despite the foreign money being pumped into some of the top teams, bankruptcy in the lower leagues and late payment of players’ wages suggests cash-strapped football is in the midst of a liquidity crisis. As football management gets back to the business of tackling finances, D&B investigates the issue of trade payments and insolvency rates in the wider economy.

The economic downturn, compounded by the unprecedented liquidity crisis, has served to push football - already struggling with massive wage bills and even larger debts - to the financial brink. Staying open for business, rather than playing for points, is now the name of the game for many of the UK’s clubs.

Research published at the beginning of October by The Deloitte Sports Business Group suggests elite football clubs are faring well in today’s climate, having been less impacted by the downturn than most other industries. However, a glance further down the league tables tells a different tale - as Dan Jones, a partner in the Sports Business Group at Deloitte, comments: "We are seeing a flight to quality whereby the largest clubs perform well but for smaller clubs the challenges are greater." While broadcast monies, advertising sponsorship deals and fan loyalty have helped Premier league clubs through the recession, this is scant comfort for the hundreds of teams outside the top flight.

This year we’ve seen Southampton FC teeter on the brink of administration, while only a few weeks ago a newly refinanced Portsmouth narrowly survived, following revelations that the club had delayed paying its first-team squad and executive board members for 48 hours.

Red Card

Looking outside football and, with the absence of Russian oil magnates or Saudi Princes, we see UK plc continuing to tighten its belt as lines of credit remain closed face and those few still open remain expensive and difficult to secure. Where credit can’t be secured, increasing numbers of companies are going bust.

Statistics released by the Insolvency Service for the second quarter of 2009 revealed company bankruptcies in England and Wales were up 2.9% on the previous quarter – an increase of 39.1% on the same period a year ago.

But while administration grabs the headlines - both in football and in the wider private sector, it is those companies surviving in the current environment that face further hurdles. Across all sectors companies are actively cushioning their cash flows by delaying payments. Indeed, D&B trade data reveal delinquent payments are on the up – just 22.6% of payments made in September were prompt – with a growing number of firms pushing payment beyond 15 days late. A review of prompt payment data for September 2009 reveals some interesting sector trends.

While you can be fairly certain most of your clients will remain in business, there is little doubt they’ll be delaying payment. This has an impact all the way down the chain. You begin to pay your suppliers late in an effort to maintain cash levels, forcing your supply chain to do the same. This impacts partnerships throughout the supply chain – relationships that are vital when the economy speeds up. But you’re left with little alternative. It’s that or you stop paying your staff. And, as Portsmouth FC knows only too well, the morale, performance, legal and regulatory repercussions of such a move can be onerous.

Fourth Official

Clearly, keeping abreast of which customers and suppliers are encountering difficulties has never been more important. Visibility of payment performance is key, providing a powerful early warning system to alert you to worsening payment trends. You not only get the foresight to take proactive action well before you fall into the ‘delinquency trap’, but you also get a strong indication of just how viable potential prospects are.

So whether you’re looking at protecting your current business or sounding out growth opportunities, such insights will help inform operational strategies across your organisation, putting you in a better position to manage risk and minimise its impact on your organisation. And with economic conditions likely to remain challenging for the foreseeable future, staying ahead of the game by keeping your eye on the ball will help you win.

Company: Dun and Bradstreet Ltd
Contact Name: Ian Ayliffe
Contact Email: ayliffei@dnb.com
Contact Phone: +44 (0)1628 492706

Visit website »