Derby County’s problems are conflating in a dangerous way, and the way in which this is happening puts the club at serious risk.
This time it looks as though there will be no escaping relegation for Derby County. The extra nine-point deduction which was added to the 12 already taken off for collapsing into administration in the first place has left them 20 points from safety, all but eradicating any of the small steps that manager Wayne Rooney had taken towards an extremely unlikely escape indeed. But such is the condition of the club that even the relegation that they managed to avoid on the last day of last season feels like a relatively trivial matter when compared to the club’s other problems.
It has now been reported that the biggest obstacle to the club exiting administration is HMRC. This is a familiar refrain, but the rules have changed since the last time a league club was confirmed as insolvent. Until the start of December 2020, the law ensured that the tax office was an unsecured creditor under these circumstances, but a change in law – which went largely unreported in football circles – made HMRC a preferential creditor in such circumstances, and the club’s unpaid £26m tax bill is now proving a major stumbling block to finding the club new owners and could yet even result in the liquidation of the club.
They don’t have to accept any offer made by Quantuma, the administrators dealing with the club, of less than £1 in the pound, and their likely refusal to do so makes Derby County a far less attractive investment for someone extremely wealthy who fancies their chances on this particular one-armed bandit. For some, the purchase of a club in the EFL Championship can be a very healthy investment indeed. Promotion to the Premier League would bring in the sort of revenues that would pay for the cost of buying it in the first place.
But Derby are not a club with good prospects of getting into the Premier League in the next couple of years. The points deductions have left the club looking at relegation, and there remains every possibility that further points deductions could be in place next season which would make relegation to League Two as likely as promotion straight back from whence they came, should they fail to reach agreement to pay all creditors at least 25p in the pound by the end of this season (or 35p in the pound over the next three years), as per EFL rules. Derby County are no longer one of the gaggle of clubs hunting down a place among the gilded elite; they’re now a club looking nervously over their shoulders and wondering how far they could fall.
All of this leads us to an uncomfortable double-whammy. If a deal can’t be struck with HMRC, the cost of rescuing Derby County becomes considerably more expensive, while every single thing that seems to be happening to the club is pushing it further and further from the Premier League. If we might reasonably assume that prospective investors are usually primarily interested in Championship clubs for their relatively close proximity to the promised land of the Premier League, then it’s difficult to believe that Derby would be a good investment, in comparison with almost every other club in the Championship.
On top of that we have to layer the cost of buying the club (and even a new owner prepared to put in money would be likely to spend less on the necessary rebuilding project, the more the club and its assets cost to buy in the first place), and the fact that there remain court cases pending against Derby from Middlesbrough and Wycombe Wanderers, either or both of which could land the club with even more money to pay out. None of this means that liquidation is inevitable for Derby County. But what it does mean is that the next couple of months may be the most important in the history of the club.
Firstly, the Christmas and New Year periods offer clubs a small windfall with the number of fixtures being played, while the beginning of their involvement in the FA Cup will also bring in a little extra cash, and Quantuma need that money to keep the club operating on a day-to-day basis. Secondly, when the January transfer window opens, it’s likely that Derby will have to sell some of their more prized players if offers are received. The administrators would, in this case, have little choice, but any offers made would likely be of the ‘fire sale’ variety. The January transfer window is never a good window in which to be doing business. It certainly seems unlikely to be a good window for any club needing to sell players to try and keep the books balanced.
Should HMRC be playing hardball with Derby County? Well, it certainly shouldn’t be a surprise if they are. But while the taxman is an easy target for critics, it is worth remembering that the money that we’re talking about is £26m of taxpayers’ money, and why should the taxpayer be footing the bill for Mel Morris’s fever dream-induced overspending, a systematic series of rule-bending designed to skirt around EFL regulations specifically designed to prevent football clubs from falling into the traps that Derby repeatedly laid for themselves?
Morris played a very high-risk game of poker in the way he ran the club, but Derby County may well end up paying a very high price indeed for the way in which he misplayed his hand. Tales of this sort of over-ambition and subsequent crashing are as old as the game itself, but that doesn’t mean that anyone should accept what happened to Derby County as ‘just the way things are’. Football in this country can do better, but it still needs a regulatory framework to protect clubs from the toxicity of bad ownership.
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