Finance expert on Leeds United wage deferral and bleak picture for 'precarious' Championship clubs

Leeds United’s salary deferral should see them through the choppy financial waters that other Championship clubs are struggling to navigate, according to football finance expert Kieran Maguire.
CHAMPIONSHIP: Leeds United and West Brom are contenders to escape the division, where big spending has left clubs in 'precarious' position. Pic: GettyCHAMPIONSHIP: Leeds United and West Brom are contenders to escape the division, where big spending has left clubs in 'precarious' position. Pic: Getty
CHAMPIONSHIP: Leeds United and West Brom are contenders to escape the division, where big spending has left clubs in 'precarious' position. Pic: Getty

But the lecturer warns that while the gesture from Leeds’ players, first team staff and senior management has helped the club in the short term, the longer football’s coronavirus suspension drags on the more problems may arise.

The financial landscape looks ‘bleak’ in the Championship without a resumption of action, says Maguire, echoing the words of Luton chief executive Gary Sweet who has said clubs across the EFL are ‘at risk’ without substantial support from the game’s authorities.

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Maguire says the Championship’s attitude to spending has not been ideal preparation for the extraordinary circumstances they now find themselves in due to the COVID-19 crisis.

“I think clubs in the Championship have been living beyond their means for years,” he said.

“Wages have been exceeding income overall in that division for the last six or seven years, which means you are extremely poorly prepared for something like what we’re going through at present.

“It has massive economic consequences. Championship clubs are now going to be reliant on their owners but it could be that the owners themselves have financial problems because if their regular business isn’t generating income, how can they go and subsidise a football club?

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“Clubs are in a precarious position. Most of them are trophy assets in the sense that they are an indulgence by a rich person. If that rich person runs out of money or has other businesses then their focus is going to be elsewhere. Also how can you justify making people redundant in business A when you’re keeping people employed in football, ultimately an entertainment industry.

“I agree with Gary Street’s broad sentiments that things are looking pretty bleak until we have some sort of resumption.”

The EFL and PFA confirmed earlier this week that a number of other Championship clubs had reached agreements over salaries with their players, something Leeds United managed to do back in March.

By deferring their salaries for the ‘foreseeable future’ will have helped with any cashflow issues Leeds – who stand to lose £2.5m from the five home games that have not taken place during the suspension – would have had.

But it can only be a short term fix, believes Maguire.

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If football was not to return for six months, he says clubs will have ‘big problems’ but also points out that such a scenario would have far greater rammifications for the UK.

“What will have happened is Mr Radrizzani, pictured above, will have been through his spreadsheet with his finance director, they will have worked out the monthly wage bill and everything at present is to do with cash flow,” said Maguire.

“Profit, financial fair play, it’s all nonsense, just ignore it. Can we physically afford to pay the wages and the other commited costs? That’s what they’ll have done and that’s why they’ll have approached the players and said we don’t physically have the cash to do so and also we would like to be able to pay the other members of staff, who are on clearly far lower levels of income than the players.

“Fair play to the players themselves who said yes we want to, it’s a case of everyone pitching in together and they’ve helped out with that cashflow crisis.

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“If you and I are having this conversation in six months’ time, we’ve got big problems. But if we’re having this conversation in six months’ time, frankly, football is not important.

“It’s not important now and it’ll be far less important in another few months if there’s no form of resumption, because that will be indicative that the pandemic is far more serious than even our worst case scenarios.”

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