Administration could be just around the corner for Scottish football clubs

Administration could be just around the corner for Scottish football clubs

Sports clubs have had their fair share of financial troubles this year, with Portsmouth FC and Rugby's London Waspsjust two of the teams to have battled with administration in 2012.

But recent research has revealed that there could be more problems to come for the sports industry and football teams in particular. The study, conducted by Begbies Traynor, looked at the state of football clubs in Scotland and England and found that a notable number of clubs north of the border are in trouble.

The Red Flat Alert Football Distress Survey showed that 19 per cent of clubs in Scotland's top three divisions are showing signs of financial distress. This is two per cent more than showed up when the survey was first conducted in April 2012.

Among the Scottish clubs in distress is Hearts, which was issued with a winding-up petition over an unpaid HM Revenue & Customs tax bill this week. The news that Hearts and others are showing a distressed business picture is particularly worrying at this time of year because the majority of clubs will just have received television and ticket incomes, boosting their profits.

Ken Patullo from the accountancy group commented: “Distress has actually risen since the peak of last season's problems, and the plain fact is that if a club is in trouble at this stage, it looks very bleak for the prospects of financial survival when cash flows are really put under pressure in the spring and early summer.”

He added that lower attendances and falling revenues, particularly from television advertising and broadcasting contracts, are responsible for the rise in the number of distressed clubs.

“Unfortunately, with the recent upheaval in Scottish football’s structure, following Rangers’ relegation to the third division, it appears that we have considerably more pain to go through before we see the improvements that have started to be seen south of the border,” he concluded.

Indeed, the situation in England is slowly starting to look up. The Begbies Traynor report showed that of the 68 per cent of English clubs playing in the top three divisions below the Premier League, just two clubs (three per cent) are showing signs of corporate distress and one of these is Portsmouth which has already entered administration.

This marks a significant improvement from the previous study conducted six months go, in which it was found that 19 per cent of English clubs were displaying signs of financial distress, suggesting that things south of the border are starting to become a little more secure. But there could well be a some potential investments on the Scottish market for those considering how to buy a football club.

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