English clubs are putting their survival at risk by spending heavily to try to win a place in the lucrative Premier League, a report from accountancy firm PKF said yesterday.
Television deals have turned English football into a tale of “the haves and have nots” where it was becoming harder to avoid losing money if you were outside the Premier League, said Charles Barnett, head of PKF’s Football Industry Group.
“Many clubs outside of the Premier League elite are balanced precariously on the knife edge between survival and insolvency,” Barnett opined.
“This tension is particularly evident in the Championship (second division), where many clubs gamble with their very survival for a shot at entry to the promised land of the Premier League.”
Two-thirds of clubs did not expect to make a profit in their next accounting period if payments for player transfers were not included, according to PKF which surveyed the finance directors of 62 clubs in England and the Scottish Premier League.
PKF have first-hand experience of dealing with the fall-out from the failure of a club.
Administrators from the firm have been running debt-laden Portsmouth since February.
Portsmouth were relegated from the Championship at the end of last season and are still negotiating with two potential buyers.
Mega deal
The gap between the Premier League and the rest will yawn even wider next season when a new domestic television rights deal worth one billion pounds ($1.6 billion) a season begins for the top flight, 70 per cent up on the current contract.
Bigger Championship clubs are attracting the interest of foreign investors eyeing the riches of the Premier League.
A group of Kuwaiti investors bought former European champions Nottingham Forest earlier this year and Leeds United have been in takeover talks with Dubai-based investment firm GFH Capital.
“There is the opportunity to buy into Premier League revenues at a discounted price,” Barnett said, commenting on the benefits for investors in successful Champion-ship teams.
Clubs below the Premier League have adopted rules to cut losses modelled on Financial Fair Play measures being introduced for top European clubs.
Eighty-five per cent of clubs surveyed said they expected to comply with domestic or European financial rules in the current 2012-13 season.