Jobs Set to be Lost in Clachan Administration

200 jobs are expected to be lost after Perth-based construction firm Clachan Construction Ltd slipped into receivership.

The ‘general downturn’ in the UK construction industry is being blamed for the company becoming insolvent and receivers Henderson Loggie are currently assessing their position.  All 200 employees are likely to be made redundant.

The company operate many sites across central Scotland including Longannet Power Station and Stirling.

Joint receiver Claire Middlebrook said, "The directors of Clachan Construction asked the Bank of Scotland to appoint receivers for the business on Tuesday at 6pm.

"Unfortunately it looks like most, if not all, of the company's workforce will be made redundant.”

Government help for those facing redundancy has been called for by Murdo Fraser, Conservative MSP for Mid Scotland and Fife.

He said, "The loss of 200 jobs is huge blow to the jobs market and today I, along with my colleague Elizabeth Smith, have contacted SNP ministers to ask for PACE (Partnership Action for Continuing Employment) to be sent in to help respond to redundancy situation."

 

Posted at 01:52PM Jul 08, 2010 by Marc Stenton in Insolvency  |  Comments[0]

Premier League must abolish the ‘football creditors rule’ for the long term good of the game

Under the ‘football creditors rule’ – upheld by the Premier League and The Football League - clubs, players and managers owed money at the time a club enters Administration receive ‘super preferential status’.  This basically means that in order for the club to maintain its status in the football pyramid, all football creditors must be paid in full.  In contrast, unsecured creditors, including HMRC, usually receive a few pence in the pound.

 

The Inland Revenue (now HMRC) challenged the rule and lost in May 2004, however they now appear ready to try again.  In the wake of the Administration of Portsmouth FC, HMRC filed a legal writ against the Premier League on 18 May 2010.  “There is no legal basis for the football creditor rule”, a spokesman for HMRC said.  “Non-football creditors are being seriously short changed and enough is enough”.

 

The Premier League has vowed to “robustly defend” the rule, insisting that the football industry must protect its members by making sure all money owed stays in the game.  This is an insular thought process and a more global view point needs to be taken for the long term financial health of the game – the Premier League should abolish the rule.

 

As things stand, the only way football creditors will not be paid in full, is if a club enters into Liquidation proceedings and therefore ceases to exist.  An English football club from the top four divisions has not entered Liquidation since Aldershot Town in 1992, therefore this scenario is unlikely.  This promotes a liberal attitude amongst clubs with regard to offering generous credit terms to other clubs that is not conducive to prudent business practice. 

 

In July 2008, Portsmouth agreed a fee of £9 million with Liverpool for Peter Crouch.  In football transfers it is very rare for all of the money to be paid immediately.  Common practice would be for 50% to be paid on completion of the transfer with the remaining 50% to be paid in instalments over the next two years.  Therefore, on completion of the transfer, Portsmouth probably still owed Liverpool £4.5 million.  The Directors of Liverpool were happy with this arrangement as they knew the only possibility that would see them out of pocket was the unlikely scenario of Portsmouth entering Liquidation.

 

In accounting terms, footballers are effectively fixed assets of football clubs, just as machinery is to a manufacturing company or a crane is to a construction company.  In no other business sector would a company agree to transfer title of a fixed asset to another company without either receiving payment in full (or at least the vast majority of it) or retaining security over that asset.  Indeed, would you agree to give up title to your house with no security forthcoming on the promise that you will receive 50% of your money now and the balance in two years time? 

 

Abolishing the football creditors rule would make clubs less likely to get into a financial mess.  If the rule didn’t exist, do you believe Liverpool would have accepted Portsmouth’s offer for Peter Crouch? Probably not, it would have been too risky.  Portsmouth would only have been able to offer money for players that their cash flow could support.

 

Clubs would have to start actually behaving like prudent businesses.  They would only be able to spend money on transfer fees that they actually had.  If there were any credit terms to be given, the selling club would have to perform credit checks on the buying club and make well informed business decisions.

 

Of course, just like in any industry, there will still be some clubs that overstretch themselves and end up in Administration.  However, should the worst happen, at least the Administrator would be able to simply make players in their squad redundant.  As things stand, players often hang around indefinitely to the detriment of their club because they know that their contracts have to be honoured.  Some footballers who have contracts on more money than their market worth will lose their jobs and be unable to find another employer willing to pay them the same salary (or even unable to find an employer at all) , but hey, welcome to the real world! 

 

The sudden unwillingness of the selling club to offer lavish credit terms is likely to see transfer fees curbed, this can only be a good thing.  You never know, this might reduce the exorbitant amounts of money that currently leave the game straight into agents pockets, somehow I doubt it though.

 

The FA should bite the bullet and let HMRC have their day.  This legal writ shouldn’t be defended on the basis that it promotes financial extravagance.  Football already tugs at the emotions of usually sensible business people, thereby persuading them to make illogical financial decisions.  They don’t need the added measure of rules unique only to football that encourage them to act on impulse instead of financial prudence. 

 

Whilst they are at it they should bring in harsher penalties for clubs that do enter Administration and also abolish their ridiculous rule that a club must exit Administration via a Company Voluntary Arrangement but perhaps these are arguments for another day...........

 

 

 

 

 

 

 

 

 

 

 

 

 

Posted at 10:47AM Jul 08, 2010 by Kris Wigfield in Director Kris Wigfields blog  |  Comments[0]