The number of English football clubs suffering from financial difficulties has doubled in a year, according to a new study by insolvency firm Begbies Traynor.
Although soaring revenues and a stricter regulatory environment has curtailed the number of clubs living beyond their means in the Premier League and Championship, four teams in the bottom two tiers of the Football League have been identified as in financial distress.
That includes three clubs in League One where attendances are at their highest levels since 2012, but the average club is estimated to earn just over £1m a season from TV contracts, compared to £6.3m in the Championship and well over £100m in the Premier League.
“When you get to the lower divisions money is tight and there isn’t such a big income from TV rights,” partner Gerald Krasner told City A.M.
“Clubs can’t simply spend £1m to get results. Coming out of the Championship into League One is horrendous [for a club’s finances].”
Despite the increase in clubs in financial distress from two to four, English football is still on a trend towards greater financial health thanks to financial fair play rules which impose a maximum loss over a three-year period on Championship clubs.
Premier League teams are subject to short-term cost controls limiting the amount they can increase their wage bill each season, while League One and League Two clubs can only spend a respective 60 per cent and 55 per cent of turnover on player wages.
“Overall we’re seeing fewer administrations,” said Krasner.
“If clubs are in trouble they often get sold to a new owner who will inject money rather than going bust.
“The financial fair play rules have made a difference. We’re seeing a more realistic approach in the game.”