Mind the gap: how leaving the Premier League can seriously damage your wealth
By Nick Harris
SJA Internet Sports Writer of the Year
24 May 2011
So what next for West Ham, Blackpool and Birmingham, the three teams who were removed from Survival Sunday in body bags?
To hazard a guess based on recent trends and on a hunch, I'd say that in four years:
one of them will have been in administration (and tasted League One).
one of them will have survived financially only through benefactor wealth, and might even have been back in the Premier League.
one of them will be bobbing around the Championship for a fourth straight year.
The problem is trying to identify which of those fates will befall which. I reckon Birmingham are likeliest to experience the top scenario, West Ham the likeliest to have experienced the middle one, and Blackpool be the club bobbing around.
But any of them might be experiencing any of these fates.
History give us guidelines - and being in the PL (Promised Land) then dropping out can seriously damage your (club's) health.
The reasons are simple enough, and to be crassly simplistic are as follows. You reach the PL with its TV riches, and buy expensive players who need big wages to try to stay there. But you go down anyway, having acquired habits you can't afford (those wages). And the parachute cash isn't enough to cushion the bump adequately. Cue circle of hellish decline.
The Premier League has had 44 different clubs as members in its 19 years, and the roll call is littered with financial casualties from Swindon to Portsmouth via Oldham, QPR, Barnsley, Wimbledon, Bradford, Leicester, Ipswich, Leeds, Southampton and Crystal Palace.
Those are just the clubs who've actually been in administration (some more than once) in post-PL periods. Others have merely racked up debts of up to nine figures and been kept away from the insolvency practioner's door by a benefactor's deep pockets.
All the administration cases are different. Individual screw-ups, recklessness, greed, dream-chasing, politics, stupidity and sheer bad luck have played parts in these cases. But one unifying thread was an attempt to cope with having been at The Party, then falling out the window.
Can we quantify the fate that awaits the fallen in any given year? No.
Can we quantify what's happened, broadly, over a period? Yes. The graphic below tries to do that by looking at what happened to the teams relegated in the 10 seasons prior to 2010-11.
There were 30 incidents of relegation (10 years times three teams) in that period, and we might say that 57 per cent of the teams involved haven't yet recovered. By that I mean 17 of the 30 clubs have not been back in the PL since going down, and most of those have suffered major financial meltdown, including in some cases administration.
And those 13 clubs who have been back are, in fact, not 13 clubs but only seven, with several of them going down more than once each in the 10 years before returning at some point and being part of the PL in the 2010-11 season. Those seven are Manchester City, Newcastle, West Brom, Sunderland and Wolves - plus West Ham and Birmingham, both falling again right now.
So we could say that 57 per cent haven't recovered. Or we could say that 75 per cent haven't recovered - because at the start of next season, 18 of the 24 teams relegated in the 10-year period considered will be playing outside the Premier League. Either way, it doesn't look good.
Of the teams relegated from the PL in the past 10 years alone, six have already been as low as the third tier (currently League One): Bradford, Leicester, Leeds, Southampton, Norwich and Charlton. Sheffield United will make it seven when they join that level in August.
(Manchester City also went as low as the third tier after an earlier relegation from the Premier League, while Bradford are in the fourth tier now, and will be joined there next season by Swindon).
It is a personal opinion that West Ham will re-emerge as the strongest of this season's relegated teams, after a while, not least because co-owners David Gold and David Sullivan showed at Birmingham they can make a flakey football business work. And not only do they have cash to invest if needed but have all the benefits that a new stadium (essentially free, and most probably profitable in the round) will bring.
On the subject of Birmingham, what a sorry, sorry mess that is turning out to be. They have been granted a licence to play in the Europa League next season (for now at least) but whether that remains in place remains to be seen. They needed urgent finance just to keep them going in the Premier League in 2010-11. Until recently - and possibly still - there was no plan for relegation. (As outlined here).
A ball park figure of what relegation costs is approximately £40m. That's the rough amount of money less that a club in the Championship next season will typically make against what they made in the Premier League this season. The first parachute payment next season for Birmingham (and the other two) will be £16m. That leaves the owners with a £24m hit, ish.
They can cope by injecting cash to maintain the same 'standard of living' (ie: good players on good money) in the Championship to give themselves the best chance of getting straight back up. That's what Mike Ashley did, essentially, at Newcastle in 2009-10. Or they can slash and burn, selling the most saleable players, offloading the big contracts, and rolling the dice that they will still be strong enough to get back up.
The problem for Birmingham's owner-chairman Carson Yeung is that he's showed no sign that he's got big bucks easily at hand. So he probably can't take the hit. So he's almost certainly going to have to slash and burn. Alex McLeish will be tasked with working even greater miracles than he did in 2010-11. And play in Europe at the same time, maybe.
Neither is Birmingham versus Barnsley, or Birmingham versus Doncaster - both fixtures for next season - quite the type of box office smash that is going to go down well in Shanghai or Macau. Yeung's plan to turn Red China onto the Blues has taken a meander down the swanny, or maybe the Yangtze.
It's possible, of course, that a Hong Kong casino billionairess (perhaps called Pollyanna Chu) will materialise with a sack of cash and save the day. But you'd have thought she might have come sooner if she really wanted a Premier League football club. What a roller coaster.
Speaking of which: Blackpool. Their season turned into a donkey on the final stretch of the beach. They came, they entertained, they had Jolly Ollie Holly with his amusing stream-of-consciousness banter for every occasion. And J-O-H helped to make Charlie Adam one of the most sought-after footballers in Britain, which for anyone who saw him in his dog days at Rangers will acknowledge is close to a miracle.
If there's one thing positive about Blackpool's sojourn in the PL, it will be felt in the owners pockets. They won the £95m Lottery in last season's Championship play-off final - then pocketed it.
No big transfer fees. Low wage ceiling. Ker-ching! As easy as a loan shark's profits.
The upside to this is that Blackpool will go down largely unencumbered by the weighty wage liabilities that hamper most relegated clubs. They will almost certainly cash in on Charlie Adam, and perhaps one or two others. And they will return to being the Championship club they were before their fatefully successful run into the PL at the very end of last season.
Could Blackpool be this year's Barnsley, Burnley or Swindon - one-season wonders who didn't have quite enough to stay up, and then fell back to whence they came, and stayed there?
I don't know for sure. But show me a pain-free former Premier League club, and we can all go for a pint on a unicorn.
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