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Abstract
This paper considers the financial crisis of 2008 and its likely impact on English football, notably the English Premier League. It mostly examines the history of financial instability and sporting stability, in the sense of club survival, that is characteristic of English football and possibly much of football in the rest of the world. The paper suggests that while shareholders often lose money, clubs seldom disappear. It also suggests that while clubs are not immune to economic cycles, the impact is likely to be limited. The reasons for the financial instability of particular clubs and stability and success of the English leagues are discussed.
Keywords: financial crisis, football clubs
Introduction
In September 2008, the investment bank Lehman Brothers collapsed. At the time the bank employed 26,000 people worldwide. In September 2007 the company had an income of $59 billion, profits of $6 billion, and a market capitalization of $34 billion; by September 2008 the amount of bad debt on the company's books made it worthless. Manchester United in 2007 had income of $400 million, profits of $120 million and, had its shares been traded in the market, they would probably have been valued at around $1.5 billion; in other words, Manchester United was a financial midget compared to Lehman's in 2007, but in 2008 Lehman's ceased to exist, while Manchester United lives on.
There are a number of paradoxes here. First, over the last decade more ink was spilt worrying about the financial stability of football than the banking sector, and the dire consequences of a banking collapse are now plain for all to see: were we worrying about the wrong things? Second, there seems to be a public perception that sport in general and football in particular are inherently unstable from a business perspective, but in fact they are some of the most stable businesses in the world.
The Stability of English Football
In 1923 the Football League consisted of 88 teams organized in four divisions of 88 teams. In the 2007-08 season:
* 85 still existed (97%)
* 75 remained in the top four divisions (85%)
* 48 were in the same division as they were in 1923 (54%)
* Only nine teams (10%) remaining in the top four divisions were...