Football Clubs in England: Financial Sustainability

Kevin Foster Excerpts

Monday 7th November 2022 Commons Chamber

[Shabana Mahmood]

I thank the hon. Member for his invitation. I will certainly try to make time to get to his debate—I feel that there is a quid pro quo going on here; we are certainly keeping the Minister busy. He raises an important point that goes to the ethics with which football clubs are run. Fans turn up because they love their football club, and nothing should be promoted to them that results in their being duped by financial practices that might ultimately be found wanting. They should not be put in a position where they trust their football owners and their football leaderships and then end up losing money. Fans should not be taken advantage of, and everybody who is involved in football should be able to sign up to that.

In addition to financial uncertainty, Blues fans are contending with a home stadium that is in a dilapidated and sorry state. The Kop and Tilton Road stands have been closed for two years because their steelwork is badly corroded, meaning that significant works are needed to make them safe again. That would cost upwards of £2.5 million to complete. Despite being repeatedly assured that the stands would be fully operational again by the start of this year’s season, the works remain incomplete. The latest update from the club states that work will resume during the World Cup break in November and December, with an aim to finally complete all works in the summer of 2023. In the meantime, stadium capacity remains significantly reduced, slashing the number of tickets that can be sold and further depressing the club’s revenue.

The saga of the stadium gets worse. Following the club’s points deductions for recording excessive losses, Birmingham Sports Holdings sold its 75% stake in St Andrew’s stadium, the home of the Blues football club, to a British Virgin Islands-based company called Achiever Global in June 2021 to try to improve its accounts. The deal generated £10.8 million, but a news report at the time stated that most of that would be used to repay external Birmingham Sports Holdings debts, leaving a working capital of only £2 million.

According to the Football Supporters’ Association, more than 60 clubs have lost ownership of their stadium, their training ground or other property in the last 25 years. Clubs that lose ownership of their ground have also often been forced to relocate away from their home town, which was a serious concern for Blues fans when they learned of their stadium sale. In Birmingham City’s case, it complicates the offshore ownership structure further, making accountability about stadium repairs even harder to assign.

[Kevin Foster (Torbay) (Con)]

The hon. Lady is giving a quite interesting talk, and I will intervene on the Minister in relation to Torquay United at some point. She will appreciate the slight irony in talking about St Andrew’s, because that is where, due to stadium dispute, Coventry City football club ended up playing for a number of seasons. That was a real wrench for many fans, and it just shows why there is a desperate need to reform the system of football regulation.

[Shabana Mahmood]

The hon. Member is absolutely right. I well remember having to mediate between the competing views of the different fans as well as the residents in the area who suddenly had more traffic to content with and so on. This speaks to the point that football is at the heart of our communities. It is part of the fabric of our national life and it is very much tied to the places in which those clubs were born, where they have grown, and where they are part of the history and the heritage. You cannot just pick a football club up and move it somewhere else and retain the same thing you had to begin with, and matters relating to stadiums make fans fearful about what might happen to the places they call home. I would be devastated if anything happened to St Andrew’s or Villa Park, because they are so much a part of the fabric of our great city and our region.

In the normal run of things, when these sorts of problems arise, the football club would sit down with the owners—the ultimate source of the money—and work out how to resolve them, but working out who is the ultimate owner is a huge task in itself. To say that it is complicated is an understatement. Within Birmingham City’s ownership structure, Birmingham Sports Holdings Ltd has a 75% stake in the club, but BSHL itself is owned by a total of five other companies, all with shares ranging from 2% to 28%. This structure of shell companies creates murkiness, confusion and a complete lack of transparency, and makes it impossible to track down the ultimate owner and to establish who bears responsibility for resolving problems at the club.

That came to a head earlier this year when it emerged that an individual who Birmingham City had not declared to the English Football League was actually the beneficial owner of a company called Dragon Villa—one of the companies that owns 17% of Birmingham Sports Holdings and therefore 12% of the football club. That individual goes by the name of Wang Yaohui but is also, according to press reports, known as Mr King.

Wang is a Chinese-Cambodian national who has served as an adviser to the Cambodian Prime Minister and as a diplomat in Cambodia’s embassy in Singapore. He was previously detained by the Chinese Communist party’s anti-corruption watchdog on allegations of bribery and money laundering regarding a state-owned Chinese bank. Although he went uncharged, his associate was hit with corruption charges and sentenced to life imprisonment.

It appears that Wang has gone to great lengths to conceal his undeclared commercial footprint. Documents uncovered by Radio Free Asia show that Wang was the beneficial owner of Dragon Villa and concealed from the Hong Kong stock exchange and the English Football League his substantial stake in Birmingham City football club. That is a potentially criminal offence, punishable by up to two years in prison.

The EFL is now investigating these claims. It told me that it is a complex matter and that it has made applications for the disclosure of documents, from not only the club but individuals linked to the club. It confirmed that an investigation is taking place but told me on the eve of this debate that, as the investigation remains ongoing, it is unable to comment further.

The fact that the club failed to declare Wang as an owner demonstrates how easy it is for individuals to avoid scrutiny and bypass the current owners’ and directors’ test, which in my view—a view that I know is shared by hon. Members on both sides of the House—is completely unfit for purpose. Takeovers of the Birmingham City football club have previously been mooted and come to nothing, but it is now subject to an ongoing takeover.

A consortium led by Maxi López and Paul Richardson is looking to acquire a 21.64% stake in the club after paying a £1.5 million deposit. That takeover went to the English Football League for approval in July 2022, and as part of the process the EFL is now investigating whether the club breached its rules after it emerged that it has been receiving funding from the prospective owners without EFL approval. I must say that I truly sympathise with the Blues fans—whenever they have a little bit of hope, it is quickly dashed with yet more regulatory and governance concerns.

If Maxi López and Paul Richardson are as they say they are, and wish to acquire the club and run it in the way that such things should be run, of course I wish them well and hope that they are transparent and open about their funding source and what they intend to do with the club. Although I am keen not to prejudge the outcome of that process—we all wish to see Birmingham City thrive—I would have more confidence in the English Football League’s investigations and approvals process if its tests were up to scratch.

Regardless of where we stand on potential takeovers of the club, or any other club in a similar position, we can all agree on the absolute need for transparency. When someone is looking to buy such an important community asset, they should not be hiding their financial sources or income streams. They should be open and transparent about them, so that we can be sure that our football clubs will be protected. As one Blues fan told me:

“hidden in the dark, these owners need to understand they’re guardians/guests of the club. 147 years of history, it isn’t just a pop up throw away company”.

I could not have put it better myself.

I pay tribute to the Blues fans, who have shown such commitment and dedication to their club. As much as I love to hear from them, I also dread it, because they get in touch with yet more problems at the club. I despair that unless and until we have an independent regulator of English football, we will not be able to solve the problems that we see at Birmingham City football club.

As we have heard in some of the interventions, the issues at Blues are not unique; they are happening in stadiums and clubs across our country, and in proud towns and cities such as Derby, Oldham, Bury, Wigan and many more. All of those fantastic clubs—all those amazing heritage and cultural assets—could face ruin unless we see decisive action and a regulatory overhaul from the Government, exactly as we were promised earlier this year.

Will the Minister, in his response, explain what he thinks about the predicament of the Blues fans, and what he would say to fans across the country about club ownership structures and stadium difficulties? We all know that there is no overnight solution to the problems at the Blues, but the long-term future of the club and many others like it can be secured only if the Government implement the recommendations of the fan-led review in full. They have long promised a White Paper, which would pave the way for legislation to create an independent regulator for English football.

The time for delay is over. The Government agree that there is a problem, and the fan-led review has given us the solution. The Government say that they agree with that solution, and I say to the Minister that this is literally an open goal.

[The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Stuart Andrew)]

I am pleased to respond to this debate and I am grateful to the hon. Member for Birmingham, Ladywood (Shabana Mahmood) for securing it. She opened her speech by discussing the challenge of representing two football clubs, and I imagine that that is quite a tightrope to walk. She rightly highlighted the long history of concerns that many of the fans she represents have expressed. I, too, want to pay tribute to their commitment. It must be incredibly difficult for them at times. She rightly pointed out, too, many of the complexities of the structures of some of those football clubs.

The interest and passion shown in this evening’s debate—and, in fact, since I took on this role only a few weeks ago—is testament to the huge importance that the House attaches to securing the long-term sustainability and governance of English football. I, too, want to pay tribute to my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) for the amazing amount of work that she did, along with many other fans, in delivering that report.

Football clubs have an enduring importance in the lives of the people of this country. Many Members have spoken in this debate, and to me personally, of historic and local clubs woven into the fabric of their communities that have simply ceased to exist or have been relegated because of reckless decisions made by owners and appalling financial mismanagement.

We have heard—I have heard about this endlessly in recent weeks—of the poor or non-existent governance practices in some of our clubs, with fans locked out of key decisions that affect them, which threatens clubs’ long-term health and sustainability. Others have spoken of the clear need for a fundamental change in how money is distributed throughout the football pyramid to ensure the long-term health and competitiveness of our national game.

We have heard how English football clubs make significant contributions to all the local communities in which they are based. They are at the heart of local communities, but they also provide many jobs and support for local businesses that rely on them. Fans are the lifeblood of those clubs: they bear the brunt of the fallout of bad ownership decisions; they see where the structures are not working for the good of the game; and they can articulate most clearly how to set that right.

One of my urgent priorities when I became Minister for sport was to hear first hand from fans—I wanted to hear from them first—about where the problems lay in our national game and how we could address them, to ensure a sustainable and thriving future for football in this country.

[Kevin Foster]

I agree with the tribute that the Minister paid to fans. Certainly Torquay United Supporters Trust has made clear its views to me over a long period, and it engaged directly in the fan-led review. Can my right hon. Friend give us an update on when the Government will respond?

[Stuart Andrew]

I will certainly come to that in a moment; I am sure that is the bit everybody is waiting for—do not hold your breath. [Laughter.]

As I said, one of the first things I wanted to do was to meet the fans. They are the ones who are most invested in their clubs and who go and support them day in, day out, whatever the results, the weather or their fortunes. Without them, football in this country would simply not be the fantastic game that it is.