Football Governance Bill [HL]

Lord Londesborough Excerpts

2nd reading
Wednesday 13th November 2024 Lords Chamber

[Lord Londesborough (CB)]

My Lords, my background is not in football beyond being a lifelong Hammers fan—the club which your Lordships might remember won England the World Cup back in 1966, with captain Bobby Moore, hat-trick hero Geoff Hurst and midfield dynamo Martin Peters, all products of the famous West Ham academy. It is a pleasure to follow the vice-chairman of my club, the Irons, the noble Baroness, Lady Brady, and, of course, the former chairman of the FA, bedecked in his splendid blazer, the noble Lord, Lord Triesman.

I am a supporter of the Bill but with several caveats. I feel, in the broadest interests of the game, that the time for regulation has come, although we must be very careful. Football’s financial sustainability is my number one concern. That is a perspective I hold first as a fan, but it is tempered by my experience as a CEO and entrepreneur and now as an investor sitting on the board of start-ups. Wearing those hats, I have not been a great fan of regulation. I am also privileged to sit on the Economic Affairs Committee, where the subject of financial sustainability, which runs through the Bill, looms large in all our inquiries, whether it is scrutiny of the Bank of England, our public finances or our £3 trillion national debt.

I declare a personal interest in that my son’s father-in-law is chairman of the upwardly mobile Worthing Football Club, currently challenging for promotion into our fifth tier, the Vanarama National League. Also, for 20 years I lived in Wimbledon and witnessed the appalling destruction of my local club, which went from winning the FA Cup to being forced to relocate to remote Milton Keynes. We must never permit that to happen again.

Some key questions hang over the Bill and the game of football itself which, let us be honest, are divisive. How do we balance promoting the Premier League as the world’s greatest league—which it is—while protecting our domestic competitions? Should we treat football as part of our social fabric and football clubs as community assets even if they are privately owned and run as limited companies? How do you balance competition with fairness? Football is inherently unfair. Do we continue to allow market forces to turn English football into a global product, resulting in fewer English players, fewer English coaches and fewer English club owners?

These are fraught and difficult questions. I have looked long and hard at a broad range of research and data. I have also talked to chairmen, board directors and supporters. The result is that I am firmly of the view that self-regulation will not deliver financial sustainability. Football’s finances are hair-raising, from the Premier League to the Championship through to Leagues One and Two and the National League.

I will start with the Premier League, which, as we know, is by some margin the richest league in the world in terms of revenues. Yet 16 of the 20 clubs generated pre-tax losses in the 2022-23 season, each club losing on average £60 million. Total debt across the Premier League has risen to £3.6 billion. It is probably over £4 billion now, with Man United and Spurs each clocking up almost £700 million. Even well-run Brighton carries £390 million of debt. West Ham, to its credit, is one of the least indebted clubs. Looking at the clubs’ trading history over the last 20 years, only three clubs look financially sustainable: Brentford, Bournemouth and Brighton. The financial reporting of Chelsea and Man City is opaque, to put it politely. They depend on the deep pockets of their owners, without which their balance sheets would implode.

In the EFL Championship, finances are even more precarious. Over 80% of the 24 clubs have negative equity. Not one of the clubs generated an operating profit outside player trading last season. Wage costs alone exceed revenues for many of the clubs, so the clubs are propped up by owner funding as they scramble for promotion to the Premier League and its parachute payments or fight to avoid financially disastrous relegation to League One. Look at what has happened to Birmingham, Bolton, Charlton, Derby and Wigan. Five of the Championship clubs, those in receipt of parachute payments, have average revenues of £66 million per annum, while the other 19 averaged £22 million. Cash flow is volatile and unpredictable, with cliff edges all around.

In League One and League Two, the majority of clubs generate losses, with increased dependency on owner funding, and not all owners are scrupulous. I learned yesterday that one club in League Two is paying 45% annual interest on its debt to the owner—financially sustainable this is not. When TV revenue falls, as one day it assuredly will, clubs could fall like dominoes.

Turning to the Bill briefly, I support introducing financial regulation to improve the financial resilience of clubs across the all-important football pyramid. In my view, to do that effectively the regulator must have a role in ensuring proportionate financial distributions between the leagues, as covered in Part 6 of the Bill, especially the level of parachute payments—I support these, but I feel the degree distorts competition. Our football ecosystem depends on this pyramid. The ongoing failure of the Premier League and EFL to reach agreement on financial distribution underlines the need for a regulator. Of course, there is devil in the detail. I will listen closely to what others have to say on what powers the regulator will have regarding mediation and last-resort resolution and how that is structured.

Time is short, so let me finish on the well-intended measures to give fans a greater say, ranging from consultation to representation at board level. As a fan I applaud this, but as a former CEO and chairman I have some concerns. We must be careful that the Bill does not overreach itself or, indeed, overregulate or overcomplicate the running of our cherished football clubs.