English football clubs owe more than three billion pounds (3.8 billion euro), and many of them are starting to feel the implications of the financial meltdown. Many will suffer, some may even go into administration. The banking crisis and the shattered real estate sector in America, which has had a devastating impact on banking institutions and finance companies all across America and Western Europe, could also hit the Premier League hard.
Merseyside giants Liverpool FC already have stalled the planned construction of its new ground, whose costs are estimated at 350 million pounds (442.8 million euro). Rick Parry, the LFC chief executive, has said that the project has been put on hold indefinitely, due to the severe financial crisis and the freezing of capital. If his statement at the weekend was not good news for the club's supporters, they still can consider themselves the lucky ones, at least for now.
Premier League executive Richard Scudamore is predicting a grim future of unprecedented proportions for many football teams in the top flight of English football, but the financial stagnation for teams in the lower echelons of Englsih football might even be worse.
"Football is obviously carrying a pretty large volume of debt. People will be making business judgements about whether it is sustainable or not, but it is carrying quite a large volume of debt," Scudamore told broadcaster Sky Sports. "Those debts will either have to be paid or there will have to be a re-financing deal, and re-financing deals inevitably mean that you package up debt in smaller blocks as people try to minimise the risk”.
A number of big financial institutions that have been hit hard by the Wall Street collapse and that is expected to have a tremendous effect upon football teams in England. Two of them - US insurer AIG and British lender Northern Rock, which have both been nationalised by their governments - are the shirt sponsors for major clubs, Manchester United and Newcastle United, respectively. So far, the nationalisation has had no impact on either club.
With spiraling prices, astronomical wages and incoming recession, the FA believes it has to act immediately if the situation is to be stabilised, at least partially. It is considering drastic salary caps, but Scudamore, whose Premier League is in many respects a direct competitor to the FA, at least as far broadcast contracts are concerned, does not think there is any reason to worry.
"The last figures I saw was that indebtedness in professional football in his country was running at about 2.5-2.6 billion pounds, which is about where current annual revenues are in football. So our ratio is about one-to-one," he said. "The FA themselves know about all these things because they are one of the most indebted organisations in the world. Their Wembley debt is about 350 million pounds and they have a turnover of about 300 million," he said.
Three teams account for almost one third of the debt - Liverpool, Chelsea and Manchester United – but they are also some of the league's most commercially successful.
Less so West Ham United, although the club has strongly denied that recent developments would have a major impact on its books. Still reeling from the loss of its shirt sponsor, British leisure group XL, which filed for bankruptcy in September, it was hit again earlier this week, when Iceland nationalised Landsbanki, its second biggest lender, in which club chairperson Bjorgolfur Gudmundsson was the largest shareholder.
"As of today, there is no need for him to sell West Ham. He has already put 30 million pounds into the club since he bought it. He is not going to take any money out of the club," West Ham vice-chairperson Ausgeir Fridgeirsson told BBC Sport.
