Luton Town chief executive Gary Sweet believes that the impending cash crisis brought by the Coronavirus shutdown of English football lays bare that the game is not run on a sustainable model.
The EFL last week announced a £50million support package to help out clubs from the Championship to League Two as a result of football’s response to the Covid-19 pandemic – now in its third suspended weekend, with games not due to return until April 30 at the earliest – but it is largely an advance of money that clubs were due anyway.
Financial Fair Play rules have allowed some of Luton’s Championship rivals to operate with up to £39million of losses over a three-year period, while Derby are facing an EFL charge of recording more than that, but recouping cash after selling their stadium to owner Mel Morris for a reported £80million. Birmingham were deducted nine points last year for a similar charge.
Luton, however, have the smallest budget in the division, and have not indulged in the same sort of spending, and had aimed to break even this term.
Even though Town chief Sweet confirmed the Hatters have already received some of their slice of the £50million, he said: “It helps us just in the interim, that short-term period. It is by no-means anywhere near enough for a club.
“The situation with football clubs is generally that it’s not a sustainable model, football is not a sustainable business for clubs, generally.
“The common theme here at the moment is, you’ve got too many clubs that have got huge amounts of debt, you’ve got too many clubs that are overspending on their monthly P and L (profit and loss), their P and L has got a massive negative gap.
“They have got players on too much money. In many other cases, players on long-term contracts. So, I am delighted that Luton isn’t necessarily one of those, however all clubs operate on a really tight cash leash, provision. Because that’s what makes us competitive, that cash is always utilised.
“So, even though, financially, we are pretty stable, even if the games had continued as normal this year, we were hoping to break even.”
Sweet is convinced the enforced break will see some clubs “will go to the wall”, though expects Luton – who were managing their finances more prudently – to emerge from the unprecedented situation “in a stronger position”.
He added: “As everybody knows we have got a salary cap for players. Players haven’t got contracts that are huge in length and the only debt we do have is other short-term creditors, we have some internal debt from our own shareholders, in respect of the land purchases for Power Court and Newlands Park.
“So, we are in a much, much better shape than most football clubs, but we still do need the cash to be operational.”
Talking of the measures announced by the EFL, Sweet said: “Whilst it’s helpful, and it sounds like a lot, the £50million isn’t an additional sum of money. It’s the same sum of money that clubs would have got over time anyway. Most of it was from April and May.
“There is a little bit of it from rounding up payment on the basic award right at the beginning of next season, and then we can pull forward some money from the beginning of next season if we wish to.
“Yes, we are going to have to use all of those resources of course, and what that means is what we’ll be doing it building up some debt, which will be interest-free of course, which means that it will probably be worthwhile, but we’ll be building up some debt which is something that we don’t really feel very comfortable with, going forward.
“Ideally, we’d like to run a business debt-free, but it’s not possible at this time.”
