England is awash with commentary around how far we can go in the World Cup 2010. Whether we perform well or poorly this time, I am sorry to say the long term picture is bleak.
I read a fascinating article last week in The Guardian International Edition. It referenced recent UEFA data linking the number of B, A and Pro badge Coaching Licence Holders (the very top football coaching qualifications) in each of the major European nations. The data is frightening. UEFA suggest that there are only 2,769 UEFA top level coaching badge holders in the UK. At the same time, Spain (many people's favourites for FIFA World Cup 2010) have 23,995, Italy 29,420, Germany 34,970 and France 17,558. This means that there is one UEFA coach for every 812 people playing the game in the UK, versus a ratio of 1:17 in Spain, 1:48 in Italy, 1:96 in France, 1:150 in Germany and even 1:135 in Greece!
Having played competitive football in the UK for a good nineteen years (and one year in Germany), I can certainly vouch for that ratio. I was lucky, in that I was coached at a good level in England by the Manager of my Under 11 to Under 18 side. He gave up countless weekends to challenge and support me and my team at equal measure...and gave the guys in our side who were good enough to chance to make the step up to semi pro level when he felt he had given us all he could. We were the only side he worked with - his ratio was 1:20 at most. We played many sides with far more talented players - and yet our team was the one with the strongest pathway to making football some sort of a career choice.
Like it or not, creating talent pathways in elite sport is in part a numbers game - both initial support and ongoing challenge have critical roles. Wayne Rooney only wears the Number 10 shirt for England because he was one of the lucky ones - not once, but twice. He was plucked out at an early age and given intensive, UEFA level support as part of Everton's system. Once he outgrew Everton, he made the timely switch to a club which could keep challenging him with Champions League Football. Again his career is not typical - there are regularly more Brazilians, French, Argentinians, Spanish, Portuguese, German and Turk players registered to play at Champions League level than English.
The data tells us that English domestic football is a mess. We might still earn the right to host the World Cup in 2018, but we are not earning the right to win it. Oh, and by the way, you can be coached in art the taking of penalties....
I enjoyed the Sunday Times article yesterday on the parlous state of the finances of Premier League football clubs. While the Sunday Times business section can regularly veer into sensationalism, the Premier League continues to reflect a truth that is stranger than any fiction.
http://business.timesonline.co.uk/tol/business/industry_sectors/leisure/article6991053.ece
The article, subtitled ‘How Manchester United became a piggy bank for its American owners’, confronted head on United’s attempts to restructure its financing (total debt of £700m). United are not alone. Liverpool are in a similar boat (net debt of £300m), with Chelsea and Manchester City’s owners having recently swapped their loans for equity stakes to stay on the right side of football’s traditionally impotent rule makers.
There is a certain irony of course that the Sunday Times is a Murdoch business – the same parent company that has funded the Premier League gravy train via Sky and some core international TV rights deals. I recall leading part of a due diligence process for Newcastle United some 12 years ago now. Even then, player salary levels were a significant, limiting concern for future value of cash flows. Now this has become a concern for current profitability.
It is widely expected that one Premier League club will default on its financials obligations this season. Hot favourite is Portsmouth. It is extraordinary to think that the England goalkeeper cannot get any games for his club in a World Cup year because that club is scared of triggering a clause in his contract which will commit them to paying another year of his salary. In particular when you think they are bottom of the Premier League and leaking goals.
The hard reality is the business model for professional football – where salary levels are typically 65% plus of total revenue and net profitability is marginal or non existent – simply cannot sustain that level of debt. It might survive it in the short term, but it cannot sustain it or thrive on it.
This brings an interesting reflection for those of us who work in professional services businesses. There are not many businesses in our sector where costs of our ‘talent’ are less than 65% of our total revenues. It is impossible for the average professional services business to make a debt versus equity swap on a week’s notice should things get a bit sticky. I know many who would envy Chelsea’s agility!
Many in our market continue to struggle. This will continue to be the case as demand remains flat, in particular if interest rates rise. It has been interesting to see the increasing number of clients who request our full company accounts when we are pitching for work – and rightly so. Several suppliers in our market have run the debt gauntlet to capitalise on early to mid noughties growth – developing their own software, buying competitors and so on. Any client would want to be sure their 2010 suppliers can continue to fulfil their obligations without needing to do the equivalent of dropping their England regulars.
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