English Premier League resumes, but smaller soccer clubs face financial crisis

Click to play video: 'Kicked in the assets: Smaller professional soccer teams face financial crisis'
Kicked in the assets: Smaller professional soccer teams face financial crisis
WATCH: After a three-month hiatus, the English Premier League is back in action, meaning it'll start making money again. But as Redmond Shannon explains, there are big fears that smaller leagues will be sidelined permanently due to the COVID-19 pandemic – Jun 17, 2020

Dave Giffard first went to a Bury F.C. soccer match as a seven-year-old kid in 1958.

He rarely missed a home game after that, until 2019, when the debt-laden club was kicked out of the English Football League system due to its mounting financial troubles.

Since then, the chairman of Forever Bury supporters’ society has been looking for a new buyer for the club.

“It’s been a nightmare for the town,” said the 69-year-old, whose grandfather attended the first-ever Bury game in 1885.

“What people don’t realize is the football club is the biggest community asset in any town.”

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Towns and regions across England, and Europe, could soon face the same nightmare, as the coronavirus pandemic threatens the already-shaky business models of smaller teams.

As the super-rich English Premier League (EPL) resumes with games in empty stadiums, most of the lower leagues have ended their seasons early.

Final placings have been based on the performance of teams up until the start of the COVID-19 lockdown.

The plucky challengers of English football just couldn’t afford to resume the season without fans.

“Lower-league football clubs are very dependent upon match-day income — ticket sales, merchandise sales, catering sales, little bits of hospitality work — far more than the bigger clubs, because they don’t have the benefits of a very lucrative TV deal,” said Kieran Maguire, the U.K.’s leading soccer finance expert and co-host of the Price of Football podcast.

“When football does return, and the government assistance is turned off, then clubs are going to find it a real struggle.”

Betting on promotion

England men’s national soccer team captain Harry Kane has sponsored his former club Leyton Orient F.C. for the upcoming 2020-2021 season. The deal also supports three charities, including British health-care workers. Harry Kane

European soccer clubs are particularly vulnerable to any financial shock because of the ladder system of promotion and relegation.

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The allure of getting into a richer division means owners often operate at a loss, betting on brighter days ahead.

Maguire says 50 of the 71 fully professional clubs below the EPL are currently losing money, with the biggest losses in the division immediately below the EPL, the Championship.

“The 24 teams in the Championship collectively lost around about 650 million pounds ($1.1 billion) last year,” said Maguire.

“That’s difficult to sustain in a normal economic environment. You go into a COVID world and those problems become magnified.”

The chairman of Championship team Huddersfield Town A.F.C. says unless players take pay cuts, the consequences could be enormous.

Click to play video: 'Keeping sports teams together in self-isolation'
Keeping sports teams together in self-isolation

“If this isn’t solved, you could be looking at 40, 50, 60 of the 92 clubs (in the top four English divisions) ceasing to trade within six to 12 months,” said Phil Hodgkinson.

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The director of Croatian side Lokomotiva Zagreb, Dennis Gudasic, has warned that 100 to 200 European clubs could go bankrupt by the fall.

Croatia — whose men’s national team finished second in the 2018 FIFA World Cup — is one of a number of countries where clubs rely on income from selling players on to big leagues in Italy, Spain and England.

“It only takes one club in one country to go bankrupt, become insolvent, and therefore fail to pay for some players it signed,” said Maguire.

“Then we could have a domino effect across the whole of Europe.”

Difficult decisions

Leyton Orient F.C.’s Breyer Group Stadium in London, England. In the 2019-2020 season, the team competed in League Two; the fourth tier of English soccer. Redmond Shannon / Global News

Leyton Orient F.C. in England’s League Two played its last game on March 7, before the league was suspended.

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Chief executive Danny Macklin says the teams in League Two had little option but to declare the season finished.

“The reality is the financial cost of the testing, the un-furloughing of players and associated staff would have been an astronomical amount for every club, especially in League Two,” he said.

“We expect, at the moment, COVID-19 to have an impact of around about 1.5 million pounds ($2.6 million) of additional cash funding that we will need that we wouldn’t have had needed if the COVID-19 hadn’t come.”

The East London club has had to lay off two people and has not renewed the contract of another two staff members.

Macklin doesn’t know if or when next season will start, but with a COVID-19 vaccine still a long way off, he knows few fans, if any, will be allowed into the stadium for games.

“We’ll be making sure that our streaming services are as good as it gets. We’ll be enhancing what we’ve offered previously and we want to make sure that the next best thing to being at Breyer Group Stadium is watching from the comfort and safety of your sofa with your friends and family.”

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Click to play video: 'Coronavirus: How professional sports plans to return in the COVID-19 era'
Coronavirus: How professional sports plans to return in the COVID-19 era

Macklin says the league and the players’ union are discussing a “standardized approach” to reducing the salaries of contracted players.

He’s confident the Orient can weather the storm, partly thanks to a significant gesture from former player Harry Kane.

The Tottenham Hotspur and England striker is sponsoring the club’s shirts for next season, with money also going to three charities, which include COVID-19 health-care workers.

“It gives fantastic exposure to those three causes, and has helped generate unprecedented shirt sales for us, just when we needed it,” said Macklin.

Like Giffard, Macklin stresses the importance of small teams to communities across England.

“Football is a really important ingredient in life for some people. That’s literally what they live for,” he said.

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“They live for that engagement. For some people, that might be their only social interaction they have for the week.”

Leyton Orient is due to celebrate its 140th year in 2021.

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