Soccer Clubs Threatened With Bankruptcy on High Salaries, Consultant Says

Soccer clubs in Europe may be facing bankruptcy unless changes including stricter financial controls are put in place, according to an A.T. Kearney study that looked at teams in England, Spain, Germany, France and Italy.

“Running as normal companies, the leagues in Spain, England, and Italy would be bankrupt within two years,” Kearney’s Munich-based vice president Juergen Rothenbuecher and colleagues wrote in a report called Football Sustainability Study. Some clubs, even bigger ones, may disappear through bankruptcy in the next few years, the consultants wrote.

Financial statistics in some leagues are “shocking” because of players’ “enormous salaries,” the key reason for the situation, the management consultant company said. The clubs in the five leagues also spend more on players than they take in from selling others.

Cristiano Ronaldo left Manchester United last year for Real Madrid in a world-record 80 million-pound ($124 million) transaction. Ronaldo signed a six-year contract with Real that made him the world’s highest-paid soccer player with an annual salary of 13 million euros ($17 million), according to Spanish newspaper Marca. Manchester City in September 2008 spent 32.5 million pounds to sign Brazil forward Robinho from Real Madrid, a British-record transfer fee.

The current economic system “encourages overinvestment and extreme risk-taking” in order to win games, “far beyond economic sense,” the authors wrote. The study ranks the five largest European leagues according to sports results, economic, social, and environmental performance.

Bundesliga Top

Germany’s Bundesliga tops the overall ranking, with the English Premier League second, followed by France’s Ligue 1, Spain’s Primera Division, and Italy’s Serie A.

Club owners seeking trophy glory, political capital, or the fulfillment of childhood dreams endanger clubs and leagues, the consultants said. Since acquiring Chelsea in 2003, Roman Abramovich invested more than $1 billion to turn the club into one of the world’s best-known teams. Abu Dhabi United Group for Development and Investment has invested millions in buying players since taking over Manchester City in 2008.

Portsmouth in February became the first Premier League soccer club to seek protection from creditors. The club was close to being liquidated because of an unpaid 12.1 million- pound tax bill, and was docked nine points by the league on March 17 for entering administration, a form of bankruptcy. In 2002, Italy’s Fiorentina Calcio was declared bankrupt.

Leagues need to adopt common financial control measures at national and European levels, while some leagues must upgrade stadiums, create academies for young talent and get more media- rights revenue to avoid failure of a league that could result in a systemic crisis, the consultants wrote.

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net.

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