By Nick Harris
6 March 2011
Birmingham’s financial plans for the coming year will be scrutinised by the Premier League at the end of March in the first stage of the process that will determine whether the Carling Cup winners will be allowed to play in Europe next season or not.
Uefa’s licensing rules means clubs must be in good financial shape to take part in their tournaments; Mallorca of Spain were banned from Europe for 2010-11, for example, because they went into administration last year and couldn’t provide guarantees they would survive.
Birmingham have earned a place in next season’s Europa League by beating Arsenal in the Carling Cup a week ago – but they could be denied the chance to take it up if they are in financial meltdown, as is feared could be the case if they are relegated, or perhaps even if they survive.
The club’s parent company’s interim results, released last week, showed Birmingham International Holdings lost £5.2m in the six months to December 2010 and liabilities exceed assets by £27.5m. (Announcements can be accessed here).
They also showed funds being sought for the past year have failed so far to materialise, and that chairman Carson Yeung is willing to put up his private property as security to raise cash.
The interim report also carried a warning about the ‘material uncertainty’ over the future. That paragraph is here:
This can be interpreted as worrying especially as the 2009-10 accounts effectively admitted that Birmingham have no financial plan to handle relegation. As the extract below from those accounts shows, some £7.5m of parent company cash will be needed even if the club meets its performance target (unstated, but approximately mid-table), and another £3m if Blues fail to meet that target but stay up.
There appears to be no contingency whatsoever for relegation, with the report saying: “The directors are confident that the football club will retain its Premier League status and both forecasts have been prepared on that basis.”
So where does Uefa come into this?
Well Uefa essentially insists that clubs most show they will be financially viable enough to complete the season in which they are taking part in European competitions. And to simplify, Uefa asks local governing bodies to help it check that is the case.
Thus the Premier League will be seeking ‘future financial information’ from all its clubs at the end of March as the next stage in monitoring their financial health. And as Birmingham are supposedly headed into Europe, the League will be doing careful checks on Birmingham on Uefa’s behalf.
Birmingham continue to insist there are no financial problems. Indeed a spokesman told the Press Association today: “To reiterate, there are no problems with the day-to-day running of the business. The board are looking to raise capital to invest into the business.”
And that is true. If Birmingham stay up and manage to find the funding they are seeking, they might tick all the sustainable boxes to get their Uefa licence.
But if, come the end of May, they have succumbed to relegation, or survived but failed to find new money to keep their debts at bay, then they will struggle to get that licence.
The Premier League is certainly monitoring the situation closely, as it has done since last summer, both to gauge Birmingham’s financial health, and to try to keep track of who exactly earns all the club’s shares, which it hasn’t always known.