AT Kearney: Glasgow is the Lehman of football market

20 February 2012

Glasgow Rangers, one of Europe’s biggest football institutions, was forced to ask for a deferred payment last week. The Scottish champion is in deep financial trouble and is threatened with an additional levy of the tax administration of €60 to €90 million, including late payments from 2001 onwards and fines. According to consulting firm A.T. Kearney, the bankruptcy of the Rangers is the football equivalent of the Lehman Brothers scandal that rocked the financial markets. In other words, the financial demise of the British club could spark the beginning of a European footballing crisis.

According to Emmanuel Hembert, principal at A.T. Kearney and an expert in the business of football, the European football market is on the verge of a systemic crisis: “This dramatic development with the Rangers highlights the fact that the beautiful game may be on the verge of a systemic crisis. The big question at the moment that needs to be considered is whether the Rangers going into administration will herald the same advance warning that Lehman Brothers proved to be for the global banking industry?”

Glasgow Rangers

European football system under pressure

The A.T. Kearney consultant warns that there is a threat that the bankruptcy of the Rangers could create a domino effect in the market: “If the Rangers - such an established club - does not honour its debts, it may threaten the foundations of the entire system. We run the risk of creating a vicious circle, whereby clubs refuse to lend money to each other through deferred transfer payments while creditors call in their money - which is dangerously reminiscent of what we saw in the banking world.”

Sale of players

Most analysts highlight that player sales may be the best way for the club to pay off part of its debts as they are the most valuable assets. However, the value of players is only what another club may be willing to pay for them. According to Hembert, the recent January transfer period confirms this as spending has strongly decreased. Research by competitor Deloitte showed that football clubs in the English Premier League have spent €72 million, in comparison to the €270 million in 2011. In addition to the lower transfer spending, Hembert also notes that financial positions overall are deteriorating. Even the wealthiest clubs have limited cash.


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