Armageddon and social unrest. Nearly five years have passed since that infamous warning of the dire consequences of the demise of one Scottish football club, albeit a very large one. It was the cataclysm that never happened. Rangers have emerged painfully from their four-year penance, including one extra year added as a result of chaotic management on and off the field.
Scottish Football Association boss Stewart Regan admitted later that he had succumbed to his own hyperbole when he used the term Armageddon. He might have been more correct if he had amended the warning to “social media unrest”, as there has been plenty of that from all sides.
So what actually happened to Scotland’s football finances during the last five years? How have our clubs survived, in some cases almost prospered, during a period that witnessed liquidation and scandal at Rangers, but an escape from collapse for the rest of the game?
The decade prior to 2012 had witnessed many warning signs: Dundee and Livingston, both twice in administration; Motherwell, back from the brink; the near-collapses of long-established clubs such as Hearts and Dunfermline, and the risible rise and fall of Gretna, a club that could not survive its patron’s untimely death.
But first, a quick recap. Yes, yes, we know all about it, but we do have to flit through the facts in order to grasp context. That means reminding ourselves of what has been the most startling period of Scottish football history, certainly in business terms. This has been a period which set club against club, fan against fan, introduced some very unsavoury aspects and characters to the Scottish game, and involved a long, shameful and unedifying episode with far-reaching implications. Rangers were certainly victims of their own hubris, but several Scottish clubs had also over-reached, albeit without such drastic consequences.
Five years ago Sir David Murray parted company with Rangers for just one pound. The new owner, Craig Whyte, was wrestling with the finances of a club that had made an early exit from European competition, and whose fans were demanding to know when he was going to invest his much-trumpeted millions in the playing squad. If only they had known…
By early 2012, the writing on the wall was stark. Not only were Rangers involved in the so-called “big tax case”, the one that had caused Murray’s decision to sell out, but the Whyte regime had not been paying the club’s tax and national insurance. HM Revenue & Customs were chasing £9m for that alone. Whyte called in administrators, intending – apparently – to emerge debt free and still in control. Liquidation, the creation of a new club, and the start of the Charles Green nightmare that followed arrived in quick succession. It is seldom acknowledged that the actual survival of Rangers as an entity is almost entirely down to the obstinate resilience of the club’s support, whose loyalty and cash has been used – and abused – along the way. Remember also that even after liquidation, Rangers raised £21m a few months and blew the lot. The club hadn’t got as far as the second tier by the time Green had gone and the cash, too. Where it all went is still being investigated.
This is not all about Rangers, but it is fair to say that their crisis, paradoxically and in a round-about way, probably helped Scottish football get to grips with impecunious reality. Regan’s “Armageddon”, over-stated as it was, at least forced banks, clubs, proprietors, even fans to “get real” about money and debt.
Rangers collapsed because of the intense HMRC interest in its controversial “Employee Benefit Trusts”, but mainly because Murray’s bank was no longer willing or able to continue a line of credit effectively under-written by his other businesses. When the credit crunch and financial shocks of 2008/9 exposed the heavily indebted Murray group, Lloyds drew the inevitable conclusion that re-structuring and debt reduction were immediate priorities. When Whyte paid his pound, he also undertook to cover the £18m owed to the bank. As it turned out, he did so using other people’s money.
Much less publicised was the fact that several other Scottish football clubs were in similar, albeit less controversial, straits. Whereas Rangers may have turned over as much as £50m a year and carried even greater burdens, smaller concerns – Kilmarnock, Dundee United, Aberdeen for example – were sitting on debts which were enormous in comparison to their income. Much of Scottish football had been financially unsustainable, going back two decades to the creation of the Scottish Premier League and the ridiculous ambitions of businesses such as the John Boyle-era Motherwell, who spent millions aiming for third place in a league dominated by the big two. Even Celtic – by definition now the financial giant in the tiny pool – accumulated large debts during Martin O’Neill’s tenure, with several players earning wages well in excess of £1m a year and, in a few cases, more than £1.5m. Celtic had covered much of this with share issues, especially in 2001/2, but debt remained.
Rangers’ departure from the top tier gave several clubs a chance to draw breath and talk seriously to their banks. That certainly happened at Aberdeen and Dundee United, Kilmarnock and Motherwell, all of whom had previously run up millions in debt. Motherwell announced in October 2016 that the fan group ‘Well society had agreed the transfer of a majority shareholding from interim owner Les Hutchison.
Hearts, with their erstwhile owner Vladimir Romanov exiled in Russia and reputedly pursued by the courts and tax authorities in his native Lithuania, entered administration a year after Rangers went under. It may turn out to be the best thing that could happen to them, following a massively disruptive period when they were run by the Crystal champagne-swilling Romanov and carrying massive debt to a bank in which he had a significant holding.
The club’s recovery, on and off the park, has been achieved under the leadership of Ann Budge, a woman who made her fortune in IT and who appears to be taking a pragmatic approach with the ultimate aim of fan ownership. She has done this by steadying the finances, installing realistic business and sports management, and some healthy plain speaking. And across the city at Hibernian, chairman Rod Petrie and chief executive Leann Dempster have taken tentative steps towards incorporating some of those same strategies.
Then there is Celtic, a club whose board should really erect a statue to its 1990s “saviour”, the irascible Scots-Canadian Fergus McCann, who did more than save it when he rode to the rescue back in 1994. McCann left Celtic trading as a public company on the Stock Exchange, a move which sometimes has fans grumbling about its strictures and the alleged inflexibility of the “plc board”. But by putting so many shares in the hands of fans, McCann virtually ensured that no single person can easily take overall control; despite complaints about corporate elitism, the biggest shareholder Dermot Desmond has said repeatedly that his duty is to keep the structure independent.
Financially at least, Celtic have reaped the benefit: they are financially secure, and a policy of finding and selling on promising young players – Victor Wanyama, Fraser Forster, Gary Hooper et al – has worked, largely. A 2016 profit of £500,000 was due entirely to the sale of Virgil van Dijk to Southampton a year previously, covering the supposed losses attributed to the absence of Rangers, and the more obvious cost of Ronny Deila’s failure to steer the team to the Champions’ League group stages in consecutive campaigns.
Just like Murray’s ambitious Rangers, Celtic’s business model depends on regular European football. Even when they win the Scottish Premiership – and at the time of writing they will clearly complete at least six consecutive years at the top – Celtic’s income is less than half of that of whichever team comes bottom of England’s top league. Europe is the game changer. Qualification for the group stages this term guaranteed the club a minimum £26m in UEFA Champions League fees, plus performance payments, ticket and hospitality income. The home draw with Manchester City in September is reckoned to have earned Celtic more than their entire usual domestic income for the season from TV and other media.
Financially at least, Celtic have a clear path ahead. They have made a big investment in hiring manager Brendan Rodgers on a package of more than £2m a year, with a clear brief to keep winning the league and progress in Europe. This does not guarantee success but any other Scottish club would kill to have Celtic’s balance sheet. The risk is that, if they fail in Europe, it becomes more difficult to attract better players. As Rangers did during its fiercely ambitious period during the 90s, Celtic can attract talents on the way up, such as Moussa Dembele, or older players capable of maintaining a high level at the end of their careers, Kolo Toure for example. Rangers did the same with the likes of Gennaro Gattuso, Giovanni van Bronckhorst and both Frank and Ronald de Boer in happier times.
Who did well in the Scottish Premiership during Rangers’ four-year absence? Interestingly, for the first couple of seasons it was the smaller, conservatively-run clubs that enjoyed strong and creditable performances. The league may have been dominated by Celtic, but League Cups were won by St Mirren, Aberdeen and Ross County, and Scottish Cups went to St Johnstone, Inverness and even second-tier Hibernian. In a small way the football money cake was re-distributed more broadly.
There is a greater emphasis on financial and operational management, too. Hibernian’s three seasons in the Championship have been sobering, and costly, but arguably the club’s most important signing has been chief executive Dempster, who came into football at Motherwell after a 20-year career in operations management. Meanwhile, Stewart Robertson, appointed as CEO by the new regime at Rangers in 2015, is a respected chartered accountant who was involved in the turnaround at Motherwell, and who ran John Boyle’s investment company before then.
“There is a really strong sense that football has got real,” observes one former club director. “The clubs have stopped spending money they don’t have. When I was heavily involved 15 or 16 years ago, a few clubs with home attendances of 5,000- 6,000 were talking about getting into Europe, signing players on six-figure salaries, behaving like kids in a sweet shop. It was completely crazy.”
The new realism is not quite complete. Dundee United have collected several million pounds in player sales, yet are still struggling financially in 2016 – a situation made worse by their relegation. Supporters play a role, for good or ill. As United faltered, fans lost faith but they will have to be more patient if they seek new leadership, a change in ownership, fan participation perhaps, and of course a return to the top league.
The same may be true at Rangers. Now owned by a disparate group of shareholders, it is managed by a group of individuals who appear to be writing cheques to plug the financial holes, presumably in the hope that a proper fund raising can be organised later. Throughout their four years in the lower leagues, Rangers enjoyed the second-biggest player budget in Scotland, one that would have paid for every other player in the lower leagues, with more to spare. In summer 2016, they made expensive signings such as Joey Barton and Niko Kranjcar, while manager Mark Warburton and his assistant David Weir are believed to be sharing a salary pot of £1m a year. Given that the ambition for the first year in the Premiership has been a top-four place – and, they hope, qualification for the Europa League qualifiers – this seems gold plated in comparison to competing clubs.
During 2016, the Ibrox club found themselves in the bizarre position of urging fans not to buy merchandise on the grounds that most of the income did not come to the club because of frankly weird deals signed previously with Sports Direct and Puma. The result is that Rangers, even more than most clubs, must be relying on the continued support of its fans for the bulk of its day-to-day income. Without better deals and a firmer financial plan, the club would continue to rely on individual investor-directors writing cheques – and presumably gaining a stronger hold on their shareholdings as a result. This is not a long-term solution.
In October, Rangers revealed that the club had lost £3.3m during its final year in the lower leagues, 2015-16. Shareholders had to pledge a further £2.9m in cash to support the business into the current season, with a further subsidy on the way. This is not a scenario for even the medium-term – the club will be forced to raise funds either by general share issue, or by selling to new investors.
For years, Scottish football was dominated by two clubs who held all the money and dictated the commercial rules. Now we have one millionaire club, Celtic, one other very large but still dysfunctional potential rival, Rangers, and various others who are in better financial shape but still relative paupers.
“Clubs have done more to reward fans’ loyalty,” says one former club consultant. “There are chairmen and directors who seem really prepared to run their clubs sensibly, play to their strengths, reduce risk. I don’t hear people making stupid claims about ‘speculating to accumulate’ and some of the other nonsense of the past. But the real issue is no growth. For most players in the Premiership, the wages are nothing like Celtic or Rangers. They might be getting £1,000-2,000 a week. If they show promise, the club needs to move them on, and that doesn’t mean somewhere glamorous – it means Rotherham or wherever for many of them if they are lucky.
“Twenty five years ago, David Murray was competing with Spurs or Leeds or whoever to sign players from England and abroad. Now a Scottish manager is doing well to prise someone out from the bigger clubs in the English second tier. TV has distorted the market in England, and the fact so much money has gone straight to the players and agents means Scotland is nowhere near competing.
“If teams can spot and develop talent, sell players, and create that ‘perfect cycle’, it might work. It really works for Dutch and Portuguese clubs, and a few in Scandinavia, but we need to get real about the number of clubs at senior level, and about making football a really attractive option for young kids. Whenever positive things were proposed in the past, there were too many egos, too many vested interests. Perhaps there is a greater realism now, I hope there is.”
The future may not be completely gloomy for Scottish football. It is not shameful to operate a professional club sensibly, perhaps even mildly profitably. Some have far better training and development set-ups now. The national game may be coming out of the darkness a little battered but in better overall nick than during the last 15 years of debt, crises, multiple administrations, and ultimately the collapse of Rangers.
But one thing is sure: it will be a long time before any club builds up the sort of insane debt of previous years. The Scottish game will not attract Russian oligarchs or Gulf millionaires. The Sky billions won’t come north of Carlisle, and there will be no invitations south for Celtic or Rangers. For many clubs, the future lies in nurturing players and relying on the continued loyalty of
their supporters. The survivors will be those clubs who grasp quickly how to do that sustainably and with their fans on board.