Written evidence submitted by Bees United,
the Brentford FC Supporters Trust
1. Summary
— Bees
United, (the Brentford Supporters' Trust) is the majority shareholder
in Brentford Football Club.
— The
financial model currently adopted by the majority of professional
football clubs is unsustainable and unless there are changes to
the regulatory regime, financial problems including insolvencies
will remain commonplace.
— Current
regulation is backward looking (ie imposing penalties for financial
mismanagement). This approach should change to become forward
looking aimed at prevention.
— The
need to preserve the integrity of sporting competition and the
key role football clubs have in their local communities mean they
should be treated differently to pure commercial businesses. Financial
and social responsibility should be incentivised through a new
licensing regime.
— Debt
levels are excessive at too many clubs and limits should be applied
to encourage a longer term, sustainable approach.
— Supporters'
Trusts can assist in adopting this sustainable approach combined
with greater transparency and stronger community links. However
their financial resources are limited and they require encouragement
and support.
— Government
intervention is justified as a catalyst to facilitate the introduction
of new regulation focused on reducing debt levels and encouraging
longer term financial prudence combined with greater supporter
involvement and transparency.
2. Background
2.1 Bees United is the trading name of Brentford
Football Community Society Limited, an Industrial and Provident
Society for community benefit, which is the supporters' trust
for Brentford Football Club. Bees United has been the majority
shareholder in Brentford FC since January 2006, when it acquired
a 60% shareholding from previous owners, Altonwood Limited.
3. The Situation at Brentford FC
3.1 Brentford FC owns the freehold of its stadium,
Griffin Park, where it has played for over 100 years. Griffin
Park lacks modern facilities for spectators and for non-football
revenue generation. The club finds it virtually impossible to
generate sufficient revenue to break even with a playing budget
that enables it to compete successfully at its current level in
League 1.
3.2 As the stadium is in a residential area,
hemmed in by housing, it is not a suitable site for developing
a modern stadium with sufficient capacity and associated commercial
revenue generating facilities to enable the club to compete on
the pitch and break even.
3.3 This is typical of many clubs and in common
with many others the shortfall between revenue and expenditure
has traditionally been met either by cash injections from dominant
owners or increasing levels of debt, owed to banks, shareholders
or wealthy supporters. Prior to the Bees United takeover in 2006
the club had run up a bank overdraft in the order of £5 million,
secured against the stadium freehold and guaranteed by the previous
majority shareholder. Bees United have refinanced this debt twice
with the help of a generous wealthy supporter (Matthew Benham)
and in 2010 concluded an agreement with that supporter to provide
substantial equity funding for a five year period in order to
stabilise the club until a new stadium could be developed.
3.4 In spite of the club's financial challenges
over the past 25 years it has developed a fantastic range of community
based activities which have won it widespread recognition as a
national role model for a community club. This includes Football
League Community Club of the Year awards in 2006 and 2009 and
Business in the Community's Community Mark.
3.5 The community activities, in sport, education
and social inclusion reach around 30,000 young people in four
London boroughs and are highly valued by the local authorities
and the people they serve.
4. So what's the problem?
4.1 The financial situation at Brentford, which
is typical of many other clubs, is not sustainable.
4.2 When Bees United took control of the club,
the trust's strategy and business plan were focused on responsible
financial management and developing a new stadium at a nearby
site in Brentford to achieve long term sustainability.
4.3 The economic crisis, associated credit crunch
and housing market downturn have rendered the new stadium project
unviable. The club has to find ways to survive with limited income
whilst trying to compete in a League with clubs who are pursuing
unsustainable strategies, which are not in the long term interests
of the clubs, their supporters or their local communities.
4.4 The economic and regulatory environments
in which we operate make it difficult for clubs that want to behave
in a financially and socially responsible way to survive and compete
with clubs that choose to take a traditional, high risk, short-term,
"sugar daddy" approach.
4.5 The current regulatory regime provides little
incentive to break even and/or limit debts to realistically serviceable
levels. To compete, we are forced to live beyond our means or
suffer potentially terminal decline for adopting a responsible
approach. The resulting instability and uncertainty is evidenced
by the number of clubs failing to pay their taxes, entering administration,
and generally attracting adverse publicity.
4.6 The existing governance regime does not aim
to prevent clubs from getting into difficulties. Instead it relies
on imposing penalties after the event. The token points-deduction
for entering Administration is shutting the gate after the horse
has bolted.
4.7 These risks do not just damage the clubs
themselves but also impact on the communities they serve and their
ability to achieve the positive social impact that is a feature
of the best examples, such as Brentford FC with its Community
Sports Trust and Griffin Park Learning Zone. Football has the
power to change lives and contribute to the delivery of public
services and social policies. Clubs should be encouraged to grasp
such opportunities to contribute to the big society.
5. So what's the solution?
5.1 The only hope for clubs like Brentford to
prosper in the long term is to incentivise financial responsibility,
level the playing field and reduce barriers to community stakeholders
by developing a regulatory regime, including the licensing of
all professional clubs, that balances sporting, commercial and
social objectives.
5.2 The new licensing regime must have the aim
of preventing clubs from getting into difficulties rather than
relying on retrospective penalties. Prevention is better than
punishment.
5.3 Our aim is a set of professional football
leagues with more stable, structured regulation, including financial
moderation that prevents excessive debt funding, and therefore
ensures financial stability for clubs which are stable community
assets that produce economic and social benefits, and where Supporters
Trusts can compete on a level playing field.
6. Should football clubs in the UK be treated
differently from other commercial organisations?
6.1 The answer will depend on one's vision for
the professional football industry, which at each end of a spectrum
could be characterized as either of the following:
A. A strictly commercial business which
attracts new money, and suffers the same pressures and is treated
no differently from any other entertainment business, ie let clubs
go bankrupt without support, accept that clubs come and go.
or
B. A "community asset"—a
core element of British society which benefits the country, the
clubs and players, as well as society, communities, local interest
groups etc, in which case it must be treated differently, must
be governed for continuity and stability, and the flip side of
that coin is that it must be restrained from undertaking more
severe financial risks.
6.2 As a supporters' trust, Bees United believes
in aiming towards the community asset model.
6.3 Football clubs should be treated as any other
enterprise in respect of general statutory requirements, company
law, fiscal regimes etc.
6.4 There is a need, however, to recognise their
differences from other types of organisation in respect of the
specific sporting and community aspects of their
activities. These special dimensions should be regulated via a
licensing regime that will ensure a level playing field for responsibly
run clubs in terms of sporting competition. The proposed UEFA
licence for European clubs wanting to play in the Champions League
and Europa League competitions in future seasons is an example
of how such a scheme might work.
6.5 Financial responsibility should be
incentivised by the imposition of sporting sanctions for breach
of clear and appropriate financial benchmarks as in the UEFA proposals.
To avoid anomalies when clubs move by relegation and promotion
between league competitions, the licensing regime must enable
a coherent system of sporting sanctions across the industry.
6.6 A fundamental difference between sporting
clubs and any other business is that most businesses try to kill
the competition—to end up as a monopoly is a good objective
in their eyes. In sporting clubs if you put the competition out
of business you have no-one to play and your own business fails.
The integrity of the competition is as important as the success
of the club.
6.7 Social responsibility could be encouraged
by requiring each club to appoint a member of the club board with
responsibility for community relations, with defined objectives.
This could be similar to the UEFA requirement for each club to
appoint a Supporter Liaison Officer. The proposed licence for
all English professional clubs could broaden the concept of a
supporter liaison officer to embrace wider community values and
social responsibility.
7. Are football governance rules in England
and Wales, and the governing bodies which set and apply them,
fit for purpose?
7.1 The short answer is no, as evidenced by recent
and in some cases continuing chaos at so many clubs from large
to small that have been subject to controversial ownership issues,
winding up orders, administration and general lack of confidence
in their ethics.
7.2 Governing bodies?—no, there is no independence—they
are all self-interest groups in one form or other, and often with
limited power and/or archaic governance/leadership.
7.3 Is the governance fit-for-purpose?—no,
but in which direction depends on your vision. There is little
or no governance that supports stable delivery of football as
a core element of society, whereas there is plenty of opportunity
to maintain mismanaged clubs in their unwarranted league positions
(ie it's not a true commercial model either).
7.4 In addition to clubs with crises that become
public knowledge there are numerous clubs that perennially teeter
on the brink of financial disaster. Over sixty clubs have entered
administration since 1992. An industry suffering so much adverse
publicity and actual or potential crises should be subject to
greater public scrutiny.
8. Is there too much debt in the professional
game?
8.1 Pursuing a "community asset" model
the answer is clearly yes, as the inability to repay debt is the
single biggest threat to the stability of clubs and competitions.
8.2 There is too much unsustainable debt. Brentford
is typical of others, where historic debt has been accumulated
to fund losses incurred in pursuit of short term sporting success.
However, the business fundamentals of expenditure exceeding income
in all but exceptional years determine that there is little prospect
of this debt being repaid.
8.3 Interest bearing debt should be limited to
a level at which it can be serviced from normal operating income
in all but exceptionally poor years of business performance.
8.4 In many cases debt is owed to club shareholders
and/or directors on interest free or soft terms and conditions,
which can be just as dangerous. Often this cash is put into the
club to cover short-term cashflow problems arising from a risky
and over optimistic approach taken with an inflated playing budget
in order to pursue short term success.
8.5 The danger for the club arises when the owner
or directors concerned lose their enthusiasm or their capacity
to maintain funding and want their debt repaid. This debt is usually
secured against the freehold of the stadium as the club's only
major fixed asset. Repayment can therefore only be achieved by
selling the stadium or the owners selling their shareholding in
the club to the next willing "sugar daddy" who refinances
the loans and promises to inject fresh capital. If there are no
willing buyers for the club the potential sale of the ground (or,
if the club does not own its stadium, the lack of a realisable
asset) puts the continuing existence of the club in jeopardy.
8.6 This was the situation at Brentford prior
to Bees United's acquisition of the club. The trust was able to
assemble a £5 million funding package to re-finance the club's
bank overdraft and relieve the previous owners of their bank guarantee.
Prior to this the previous owners were planning to sell the Griffin
Park stadium for housing and groundshare at a non-league stadium
(Woking or Kingstonian) in an area well outside the club's traditional
community and catchment area. In order to avoid a future owner
of Brentford being able to asset strip the club, Bees United has
subsequently negotiated a golden share with rights which prevent
a stadium sale under certain circumstances.
8.7 To reduce such risks, the proposed regulatory
regime should impose limits (via the professional club licence
conditions) on the level of debt that can be carried on a club's
balance sheet. To ensure transparency the measurement of debt
should be clearly defined in terms of information required to
be provided in published audited accounts.
9. What are the pros and cons of the Supporter
Trust share-holding model?
9.1 Pros: The biggest strength of the
trust model is a true, long-term interest in the sustainability
and success of the club. Pros include:
— Less
short-termism: Supporters' trusts, conscious
of the risks of short-term pursuit of glory, take a longer view
as they care about the club's ability to continue for the benefit
of their children and future generations. This contrasts with
wealthy individuals, whose time horizon is usually measured in
a short few years.
— Responsible
stewardship: As trusts' access to financial
resources is limited, they naturally focus on delivering a sustainable
business plan based on realistic objectives, responsible financial
management and sensible stewardship of assets. In contrast, wealthy
individuals can be driven by short term pursuit of glory to take
reckless risks funding unsustainable playing budgets. Trust ownership
ensures alignment between the interests of the club and the owners.
— Transparency
and accountability: The democratic nature
of supporters' trusts as Industrial and Provident Societies encourages
an open approach to information sharing whilst still maintaining
necessary commercial confidentiality. At Brentford, the financial
and corporate structure, details of debts and full annual accounts
for the football club are all published and open to debate. There
is no mystery about who owns the club, how it's funded or what
major deals are done. A golden share held by Bees United, means
it will not be possible for any future majority shareholder to
sell the club's stadium without the agreement of the trust members
that the sale is reasonable. At the very least this will enable
an open debate about the merits of any proposal to sell the club's
major asset.
— Strong
relationships: The community ethos of
the trust facilitates good relationships with communities and
public bodies, particularly local authorities. At Brentford, the
club and the trust have excellent relationships with London Borough
of Hounslow, which provided an interest-bearing loan of £0.5
million to help facilitate the trust's acquisition of the club
in 2006. The loan is conditional on the trust remaining the majority
shareholder in the club.
— Social
value: Whilst many clubs, regardless of
ownership, have community-based activities, the specific objectives
of supporters' trusts ensure that where a trust is involved at
board/shareholder level, community work is seen as "must
do" rather than "nice to do". Local communities
can gain substantial social value from the work promoted in association
with football clubs (see the Social and Community Value of Football
report dated June 2010 published by Substance on behalf of Supporters'
Direct.). The continuation of such valuable work will be less
vulnerable to waning support from the club if its supporters'
trust is actively involved in the club's governance.
— Strategic
continuity: Continuing ownership by a
trust should ensure that a high-level strategy of responsible
management and sustainability is consistently maintained over
the long term, regardless of changes in the individuals involved.
This contrasts with the uncertainty introduced every time new
owners take over a club and impose their personal objectives and
preferences. Continuity is provided by the trust as a responsible
democratic organisation rather than being dependent on individuals.
— Broad
resource pool: At Brentford the
trust can draw on a wide range of skills and experience among
its membership base. This has given the club access to highly
valuable business expertise on a voluntary basis.
9.2 Cons:
— Limited
financial resources: Unless all clubs
are incentivised to operate within their means as sustainable
businesses, trust-owned clubs will always be at a competitive
disadvantage when playing in a league against clubs that have
access to high-risk speculative funding when such access is unrelated
to the club's ability to sustain such funding. Responsible trusts
cannot compete with reckless sugar daddies.
— Uncertainty
of expertise: The democratic nature of
a supporters' trust means the individuals leading it will change
periodically. Its effectiveness as an organization will depend
on the types and levels of expertise possessed by those leaders,
and their presence in the trust's wider membership. To provide
some mitigation it is highly desirable to have a strong centre
of excellence in Supporters' Direct to support trust development
and share good practice.
10. Is Government intervention justified and,
if so, what form should it take?
10.1 If you believe in a "community asset"
model then absolutely—it is critical before the future of
the game is jeopardized. The intervention should govern the financing
of football clubs such that they do not take on debt that cannot
be serviced, even if the club is relegated from its current division.
10.2 Government should act as a catalyst to force
the industry to get its house in order by facilitating the development
of an appropriate regulatory regime that balances sporting, commercial
and social objectives.
10.3 Government should adopt a policy of introducing
enabling legislation to establish a licensing regime with a suitable
body to regulate the industry. Detailed proposals should be developed
in consultation with experts, including Supporters' Direct.
11. Are there lessons to be learned from football
governance models across the UK and abroad, and from governance
models in other sports?
11.1 Yes. The Bundesliga model has made German
football stable, sustainable and successful. Bundesliga clubs
have to be owned over 50% by members and fans can watch top teams
for as little as €12/€13 (£10/£11).
January 2011
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