Football League Clubs have 1 in 6 chance of "GOING DOWN" - Financially

Football League Clubs have 1 in 6 chance of "GOING DOWN" - Financially

The average Football League club has a 1 in 6 chance of facing the threat of "severe financial stress" in the next twelve months, according to new research by checkSURE, the online credit management service. checkSURE's analysis also reveals that clubs in the First Division are an unlucky 13 times more likely to suffer a potentially terminal financial crisis than those in the Premiership. The average Premiership club has a less than one in a hundred chance (0.75%) of suffering severe financial difficulties - the same as many FTSE 100 companies. This compares with a 1 in 10 chance for a First Division club.

checkSURE's analysis uses commercial credit scores that predict the likelihood of severe financial stress occurring in the following year - the definition of 'Financial Stress' is either Dissolution, Liquidation, Receivership, Petition for Winding-up, Resolution for Winding-up, Winding-up Order, Creditors Meeting or Administration. These scores have a very high level of predictive accuracy. For example, 6 months in advance of Worldcom revealing that its profits had been overstated - when the companies share price was still strong - checkSURE's data revealed that MCI Worldcom Ltd, the UK subsidiary, had a 2 in 5 chance of suffering a severe financial crisis.

Tom Cannon, non-executive Chairman at checkSURE, and a an expert on the financial health of football clubs, commented:"Our research suggests that football clubs' finances are, if anything, worse than previously feared. There has been concern amongst fans and investors alike about the financial health of football clubs in recent months, but so far people have tended to focus simply on club debts and wage bills. At checkSURE, we have taken a much more sophisticated and wider-ranging approach. The credit analytics and technology that checkSURE use analyse hundreds of factors to predict the football clubs' financial prospects."

Not surprisingly, First Division clubs are less at risk than clubs in the Second and Third Divisions, reflecting the fact that the First Division still gets the lions' share of television revenues. The average Second Division club has a 1 in 5 chance of suffering financial disaster, while the average Third Division club has a 2 in 11 chance.

It isn't all bad news for the lower divisions. With only a 1 in 1000 chance of facing financial problems in the next year, Crewe Alexandra has the best financial prediction of any club, despite being in the Second Division. The club is known for its excellent youth development programme, the reassuring presence of Dario Gradi (its manager since 1983) and a healthy balance sheet.

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