Wednesday, February 10, 2010

Cup finalists face fight for their lives

Just 21 months ago Portsmouth and Cardiff City faced each other in front of a packed Wembley Stadium and worldwide television audience in the FA Cup Final.

Today, in a cruel twist of fate they will both appear before the same court just minutes apart in a battle far more important to their thousands of fans than victory on that Saturday in May 2008.
Defeat on this occasion could lead to one or even both clubs to fall into administration, and in a worst case scenario, to be wound up altogether.

The opponent this time is none other than Her Majesty, or rather Her Majesty’s Revenue and Customs, who are trying to recoup millions of pounds in unpaid taxes from the two clubs.

It’s estimated that more than 100 million people around the world watched Portsmouth lift the famous trophy after a 1-0 win, but since that highlight, fortunes have turned for the worse.

The south coast club faces estimated debts of £60m, is already on their fourth owner of a season that has barely passed its mid-point, and lies bottom of the Premier League staring at the near certainty of relegation to the Championship.

Meanwhile Cardiff, who currently lie a very respectable fourth place in that Championship, are thought to owe around £30m, with HMRC targeting £2.7m of that total debt today.

While both clubs can put much of their ills down to poor ownership decisions that some may call downright financial mismanagement at boardroom level, this is a trend that is fast becoming alarming in its frequency.

Already this season, Crystal Palace, one of the Welsh club’s Championship rivals, have been placed into administration, while League One Southend United will also face a winding-up petition.

There have been 53 professional club administrations since 1992, and that date is more than a coincidence.

It marks the year football entered its new era with the breakaway of the country’s top division and subsequent formation of the Premier League.

With this new league came new money from massive television and sponsorship contracts that brought more matches into more homes, and even to a global audience.

However, this new found wealth has meant that many clubs are living off vast amounts of borrowed cash, paying vastly inflated transfer fees and wages for players in a bid to reach the Premier League promised land where the sport is paved with gold.

Unfortunately, as Dick Whittington discovered on his arrival in London, this is often not the case.

Few teams manage to reach the giddy heights, and even one season of failure can lead to the club’s financial ruin.

So common has this occurrence now become, the sports’ powers have had to introduce football related penalties in an attempt to ensure clubs live within their means.

Crystal Palace have already suffered a ten-point penalty alongside the uncertainty of finding new owners, while previous Premier League regulars Southampton began this campaign in League One with a similar deduction following their troubles last term.

HMRC has begun taking a harder line with football clubs that fall into debt after losing vast sums in overdue tax revenue thanks to this rapid increase in administrations.

A clause of the administration process determines that players must be paid first and in full from any monies available, often meaning that other creditors are left high and dry, receiving only a few pennies from each pound owed.

This has resulted in a big hole often being left in the tax purse, and so the agency has decided to start taking preemptive action in an attempt to recoup all it is owed, rather than wait for the remaining crumbs.

It seems Southend and Cardiff may have some chance of meeting Her Majesty’s demands as eleventh hour bids for cash are pulled together, but for Portsmouth the signs are bleaker, and the club’s survival may come down to the court granting a stay of execution.

No comments: