David Conn: Prudence steadies the Burnley ship

The chairman Barry Kilby is determined that if the worst does happen his club go down on a sound footing At Burnley Football Club, they are still thrilled at their elevation to the Premier League, wh

The chairman Barry Kilby is determined that if the worst does happen his club go down on a sound footing

At Burnley Football Club, they are still thrilled at their elevation to the Premier League, which rewarded fans for loyalty, galvanised a town desperately needing a boost and plastered a smile on most of the rest of football. They are not, though, losing their heads. The chairman, Barry Kilby, is aware to his bones of the “catastrophes” which have befallen clubs who spent too much on trying to stay in Premier League riches. In January Burnley will have “some money” to spend, he says, but will emphatically not “bet the ranch” on staying up. “I don’t want a disaster on my watch,” he warns.

Burnley’s accession to the top flight for the first time since relegation in 1976 was a winningly romantic tale, but came at a cost – the just-published accounts for the year to this June are, Kilby shudders, a “horror story”. They paid £2.3m more in wages than the club even earned, racked up an £11.7m loss, enormous for the Championship, and loans from Kilby and his fellow directors added up to around £9m. Had Burnley, who finished fifth, not beaten third-placed Sheffield United 1-0 in the play-off final, Owen Coyle’s smart footballing side would have been broken up, and more loans required from the directors as ballast.

Kilby describes the financial gulf between the Football League and the Premier League, which broke away from the other three divisions in 1992, as “one of the biggest problems in football, it distorts the game terribly”. He believes nobody ever contemplated the gap growing so large when “that band [of big clubs] got together and broke away”. The leagues should reunite, he argues, while conceding that the top clubs would never vote for it. The divide causes problems both ways; Championship clubs mostly overspend to climb up, then clubs are too easily drawn into outsized wage bills which cause them calamities when they are relegated.

Kilby smiles, over fish and chips in the wood-panelled chairman’s lounge. “We’re enjoying it, it’s fabulous,” he says, “but we’re realistic. The money now can steady the ship, but we cannot take on massive obligations.”

With Coyle’s team having won five of their seven home matches, including the marvellous August defeat of Manchester United, but claimed only one point away, Burnley are being drawn into a fight for Premier League survival. In January, they face “a big decision”, about whether to convert the striker David Nugent’s loan deal from Portsmouth to a permanent contract, and make “one or two” strategic signings. “It is so uncertain,” Kilby warns, “how hard you dare push it.”

What is certain in January is that Kilby and his fellow directors will, from the Premier League windfalls, be repaid their loans, including £3.7m loaned by operations director Brendan Flood from his retail development company, Modus Ventures. Flood, a lifelong Burnley fan like Kilby, has had an awful year; his wife’s parents, his own mother and his brother’s wife all passed away, while his company collapsed into administration. “It has been the worst 12 months of my life,” Flood says. “In the middle of it was promotion, which should have been the best day, but I haven’t been able to enjoy it.”

He is still being pursued by Allied Irish Bank for £35m they claim he owes in personal guarantees, while Flood is counter-claiming for £100m he says the bank had committed to supporting Modus before the credit crunch, when they pulled the plug. Regardless, Modus’s loan to Burnley was due to be repaid if the club reached the Premier League, and the other directors, including Kilby, will have theirs back too. “It’s only fair,” Kilby says. “If the club has the means to pay it, it should.”

Promotion, worth around £40m in television money alone, was further nibbled into by improved wages and bonuses for Coyle and his players. Steven Fletcher, bought from Hibernian for a modest-looking £3m, was in fact Burnley’s record signing. The club also fulfilled a promise to 7,000 fans who bought season tickets in the Championship, that they would watch for free if the club went up. At around £360 on average for a season ticket, that has cost the club £2.52m.

That still leaves the club significant money but Kilby is reluctant to spend too much of it on players in this first season up. His caution has roots deeper merely than last season’s overstretched finances. In two hours of conversation, the Burnley chairman returns repeatedly to one particular match. Not the play-off final, which he does not mention once, nor the Manchester United victory, which he describes as “fabulous” but only when asked. The game etched into his supporting soul was on 9 May 1987, a 2-1 victory over Leyton Orient in the old Fourth Division. That day other results went in their favour, too, and Burnley scraped out of becoming the first club automatically relegated out of the Football League. Lincoln City went down to the Conference instead.

Kilby, born in Accrington, stuck with Burnley in threadbare crowds throughout that near-total decline. The clawback began there, he believes. “I think, that day, the town saw what it might lose.”

He made his own fortune devising bingo and other competitions to be inserted in newspapers or TV formats here and round the world, then sold his company in 1998 for £15m, and made his first investment in Burnley. He bought shares steadily up to a majority, then reduced his stake to 30% as Flood, later, put £2.6m into the club for 24.5%.

In 2006, with Burnley struggling to compete in the Championship and needing money again, Kilby and another director, John Sullivan, bought Turf Moor itself, via a company, Longside Properties, for £3.2m. The club became tenants, paying around £330,000 annually in rent, with an option to buy the ground back. Kilby says he was “never comfortable being both landlord and tenant” and, given Burnley’s stretched state and Flood’s inability to put more money in, in March this year he and Sullivan sold Longside, together with Turf Moor, to another company, Lionbridge. The price paid is not a matter of public record, but Kilby says he and Sullivan about broke even.

“I felt I needed to have cash available, just in case,” he explains. The club still have the option to buy the ground back, and there are plans to develop it, worked up by the chief executive, the former striker Paul Fletcher, which were postponed when the recession hit.

“If we survive this season,” Kilby says, “we will look seriously at doing it. But it is a conundrum now: do you spend money on buying the ground back, or on buying a player who could keep you up?”

That dilemma has confronted all promoted clubs since the Premier League broke away to stop sharing TV money with the other three divisions. Parachute payments, a self-serving measure, give relegated clubs money (currently £11m for two seasons) to pay players with Premier League salaries still running in the Championship. Several clubs have nevertheless been relegated with unpayable wages and collapsed into insolvency, including Leeds, Leicester, Derby, Barnsley, Wimbledon, Southampton, Ipswich and Queens Park Rangers.

West Bromwich Albion negotiated the divide after promotions in 2002, 2004 and 2008 by spending carefully, with contracts tailored to adjust financially after their relegations to the Championship. Kilby considers that yo-yo existence a respectable aspiration for Burnley: “I think West Brom are a model for a club of our size. We should not be worried about going down strong.” If that seems a somewhat cautious message from a chairman new to the glittering Premier League, it illustrates how, at Turf Moor, they know intimately how far clubs can fall if they get it wrong.

Copyright © 2009 Guardian News & Media Limited 2009