This article was first published in Issue 20 of The Blizzard in March 2016 On…
Relegation is painful. Each season, one or two Premiership clubs face the prospect of dropping down a division, with wide-ranging knock-on effects. Initially, there’s a loss of prestige soon followed by the release of high-earning players in a bid to cut costs. Relegation often leads to lower attendances, bringing even less money into the club. And it’s the financial penalty, more than anything else, which hurts teams in the long run.
It’s a lesson Dundee United have been learning over the last two campaigns. Since the club’s relegation at the end of the 2015/16 season, the Arabs have struggled to regain their place at Scottish football’s top table. Two third-place finishes in as many years meant that United qualified for the promotion playoffs but ultimately fell short on both occasions. As they prepare for a third consecutive season in the Championship, doubts are rising over the long-term financial well-being of the club.
When a club gets relegated, there are two distinct methods of managing the playing squad. The safe option is to release most first team players, vastly reducing the wage bill and replacing them with cheaper players, with Championship experience preferably. The second, more risky option is to double down on the squad that was previously relegated and stick by the players, in the hope that a superior, more expensive squad will bounce back to the Premiership quicker.
Ross County and Partick Thistle both look to have opted for the first option here, based on statements issued from each club over the last month or so. When Dundee United went down, however, they gambled. First team players were retained and the squad has been reinforced with Premiership players willing to drop down a division. Scott McDonald, Tam Scobbie and Grant Gillespie are just three players to have made the drop down to the Championship in recent seasons.
Signing established Premiership players on expensive contracts is a gamble for Championship sides and leads to a huge amount of pressure on players and coaching staff alike. Clubs operate at a loss each year, making promotion the following season even more urgent and there is a serious risk of their financial problems snowballing if success isn’t immediate. And, as even Rangers have learned in recent years, there is no guarantee of promotion in what is a hotly-contested league.
This should be Dundee United’s most pressing concern at the moment. Earlier this season, ex-chairman Stephen Thompson revealed that the club was missing out on £2.5 million worth of revenue each season they failed to win promotion to the Premiership. This has proved costly indeed, with United’s most recent financial statements revealing that they made a loss of £1.55 million for the 2017/18 financial year. The result is clear – Dundee United are operating under an unsustainable model that could leave the club in serious trouble for each season they remain in the Championship.
The financial reality of their situation has already started to sink in. Earlier in the year, the Arabs board announced that shareholder Mike Martin – who would replace Thompson as chairman a month later – was going to invest £1 million into the club by buying the training facility, Gussie Park. The deal provided United with some much-needed capital in the short term but at the cost of long-term stability. The club have the option to buy the training ground back from Martin, who is not allowed any commercial gain from a potential sale in the future.
Selling a club asset to a shareholder is preferable to relying on loans from a third party, but it’s still far from ideal. Privatising areas of a club leads to a lack of control from within and reduces the opportunity for any potential revenue from that source. It’s a quick fix, based on the impossible assumption that league success the following year is guaranteed. Which, of course, it never is.
Things could be worse at Tannadice if it weren’t for the club’s fantastic work in the transfer market in recent seasons. Over the last six years, Dundee United have brought in around £9 million from player sales – only Celtic have raised more money in Scotland over the same period of time. Andy Robertson, Stuart Armstrong and Ryan Gauld are just three players to have departed the club in multi-million-pound deals over the last few campaigns but as the playing standard has dropped at United, so has transfer income. Championship players simply aren’t as valuable as Premiership players and it’s unthinkable to expect any similar sums being spent on United players anytime soon.
Very few clubs can rely on transfer revenue as a regular and reliable source of income and Dundee United are not one of them. If it weren’t for the significant profits they’ve made on players in recent years United would be millions of pounds worse off, haemorrhaging money as they languished in the Championship. Without that £9 million, it’s entirely possible that the club would be on the brink of financial oblivion.
The 2018/19 season, then, will be massive for Dundee United. A return to the promised land of the Premiership would bring a financial windfall with it, enough that the club would most likely turn a profit or, at the very least, break even. For now though, United will continue to make a loss year-on-year, with the importance of promotion only becoming more pronounced as the playing budget is reduced year after year. It’s a vicious circle that, if left unchecked, could result in financial meltdown for any team. Dundee United can’t afford to keep missing out.