Credit crunch timebomb threatens Britain's favourite sports

With the big-name British banks, such a lucrative source of sports sponsorship income, now so cash strapped they need Government help, it can only be a matter of time before their marketing budgets also take a hit.

A special investigation by Standard Sport today reveals why many British sports have cause for concern, with football, rugby union and Formula One likely to face the greatest pressures.

The revelation by Football Association chairman Lord Triesman that the Premier League clubs are currently £3billion in debt has already prompted UEFA to propose banning the most heavily laden teams from the Champions League.

Now football clubs have received a warning from Deloitte, the global financial services organisation, that they must concentrate as never before on ensuring wage bills do not spiral out of control.

"The crucial factor is whether the clubs generate sufficient revenue to manage the current level of debt," said Pete Hackleton, senior manager in sports business for Deloitte, which has provided an Annual Review of Football Finance for the last 16 years.

"The main cost in football is wages, and we are sending a clear message to clubs about wages-to-turnover ratios. If wages are 60 per cent or less of turnover, that's fine, and if the figure is 70 per cent or less, that's okay. But anything over 70 per cent and you will start to see warning signs.

"If revenues fall, wages need to fall accordingly. Our last full Premier League review, of 2006-07, showed an average ratio of 63 per cent. Tottenham were the most circumspect with 42 per cent, and Manchester United were next at 44 per cent.

"At the other end of things, Wigan Athletic's ratio was 100 per cent, Charlton's was 95 per cent and Portsmouth's was 90 per cent. The average for the Championship was much higher 79 per cent and that season Derby figure was 125 per cent."

The outlook for rugby is even bleaker according to Niels de Vos, who took over as chief executive of UK Athletics last year after spending five years as CEO of Sale Sharks rugby union club.

De Vos said: "If banks start to foreclose on loans, there is the potential for some clubs to go out of business. It's something we've already seen happen in this country in sports like basketball and American football. If your income doesn't meet your outgoings you could be in trouble."

As Liverpool are finding in their efforts to finance a new stadium, the credit crunch is impeding big capital ventures. Tottenham and West Ham also have ambitions for bigger homes which are now sure to go on the back-burner.

For Formula One, the big problem could be the falling levels of car sales in the current financial climate, which may persuade the big manufacturers to concentrate on their core business.

"The Federation Internationale de l'Automobile (FIA) are very nervous about the teams owned by vehicle manufacturers," an F1 insider told Standard Sport. "There may be four or five teams at risk of disappearing, which would leave a smattering of smaller teams."

When you see stories about car sales being 20 per cent down and workforces being laid off it can make it harder to justify involvement in a sport which is often seen as glamorous and frivolous."

Across all major sports, what seems clear is that the likely decrease in expendable income within society will have an adverse effect on the finances.Football is the UK's largest spectator sport and, according to Malcolm Clarke, chairman of the Football Supporters' Federation, there is anecdotal evidence that the crunch is having an effect.

He said: "I'm a Stoke City fan, and I know a couple of diehard supporters who go to every away game who have already decided not to travel to some away fixtures this season, including even attractive venues like Anfield. They simply can't afford it.

"I think there is another factor at work at the top end, and that is a sense of discomfort among supporters at the level of wages being paid. It is like the debate over bonuses for City bankers.

"One of my neighbours is a Manchester United supporter, and five years ago you would have thought hell would freeze over before he stopped going to see them. But he has not renewed his season ticket this season.

"It's not so much that he can't afford it, but he is saying 'why should I pay all this so that Wayne Rooney can spend £10,000 on a stag party?'"