November 8, 2012 4:11 pm

Plight of Scottish football clubs worsens

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The financial plight of Scottish football clubs is worsening just as the health of their counterparts in England is showing signs of improvement, according to a survey by football restructuring specialists.

Heart of Midlothian this week became the latest Scottish club imperilled by financial crisis, asking fans to help it pay off a tax bill of £450,000 to stave off liquidation.

The club faces a tax tribunal over a separate bill of £1.75m over players loaned from a Lithuanian club previously run by Hearts’ owner Vladimir Romanov.

Scottish football is struggling to adjust to the fall from grace of Rangers, now playing in the country’s fourth tier after coming out of administration in June.

Research from Begbies Traynor found that six of the 32 clubs in Scotland’s top three tiers are in financial distress, two more than were reporting acute problems six months ago.

Ken Pattullo of Begbies Traynor said that “the plain fact is that if a club is in trouble at this stage, it looks very bleak for the prospects of financial survival when cash flows are really put under pressure in the spring and early summer”.

He attributed part of Scottish football’s problems to Rangers’ relegation, but said lower attendances and reduced television income were also adding to clubs’ financial problems.

The Hearts board took the drastic step of publishing an open letter on its website, pleading with fans to buy into a share issue and tickets for its next three home games.

Rangers is also looking to fans for its long-term survival, last month launching a £20m flotation.

In contrast, English clubs are looking financially healthier than in recent years, with only two out of the 72 clubs surveyed in the three tiers below the Premier League reporting severe difficulties, compared with 13 in April. One of these is Portsmouth, which remains in administration.

However, the latest survey of clubs was carried out at a time of the year when clubs have just banked income from season tickets, TV and sponsorship.

Gerald Krasner of Begbies Traynor said: “When we get to March and April, the numbers [of distressed clubs] will go up again, but not necessarily drastically. A lot of clubs are a bit more savvy about what they are doing.”

English football clubs have in recent years found Revenue & Customs taking a hardline approach to outstanding tax debts, resulting in a slate of clubs facing winding-up petitions.

Mr Pattullo said it would appear HMRC has now exported this hardline policy north of the border. “I can see no reason why it shouldn’t do that. It would be bizarre if it didn’t do that for Scottish clubs,” he said.

The Football League has responded by introducing measures requiring clubs to prove they are financially self-sufficient.

Mr Krasner added that a number of takeovers of Championship clubs by foreign buyers, such as Cardiff City, Derby County, Nottingham Forest and Leicester City, had changed their financial outlook.

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