FC United of Manchester

FC United of Manchester pioneered a new model of football finance through community shares

What will be learned from the case study?

  • How mutually owned clubs under the IPS Community Benefit Society structure can use their unique community shares mechanism to raise funding from their fan-base
  • How the plans of FC United will benefit the whole community by developing improved community sports facilities and acting as a wider catalyst for regeneration in one of the most deprived areas of the country
  • How ambitious new sports facility projects can take many years from inception to completion and require considerable commitment of dedicated personnel to see the process through.

Setting the scene

FC United of Manchester was formed as a member owned semi-professional football club in 2005, using the Industrial and Provident Society (IPS) Community Benefit Society model. The club was established as a new model of ownership for football; to bring about social change, community cohesion and an improved quality of life for the local community.

The club is very popular, regularly attracting crowds of 2,000 people, and has outgrown the facilities it currently rents from another club. In 2006, the club started looking for a site close to the city centre to build a new stadium. The club found an underperforming local authority owned sports site 10 Acre Lane in the deprived inner-city area of Newton Heath, Manchester. The club then started discussions with the local authority to develop the facilities, (comprising a 5,000 capacity community stadium, clubhouse with community rooms, artificial football pitch and integration of the existing sports hall).

The club's key argument was that they could save the council 27% of their costs on the centre over the next 10 years

The club's key argument was that they could save the council 27% of their costs on the centre over the next 10 years. Both parties came to an agreement that the subsidy the local authority would pay per year for the centre could be capitalised for the club into a £650,000 grant up-front, with a tapering subsidy each year for the following three years.

As the club were set up as a Community Benefit Society with an 'asset lock' provision, the local authority were assured that the asset would always remain for community benefit. The Club will also increase community use of the site by integrating it with its own existing Community Programme.

The local authority’s Chief Executive and Leader supported the project from the start, and set up a project group with senior officers and elected members. One challenge for the local authority since senior level commitment was secured has been to resource ongoing support from other council officers, who might only be picking the project up part way through.

Approach taken

The club registered as an IPS Community Benefit Society in 2005. The club's governance rules were strengthened further when it was proposed that the stadium and community facilities would be owned by the club. The club operates under a one member one vote system. Members of the club elect the trustees at the AGM every year. There are 11 trustees on the board.

To ensure that the community obligations and benefits from the site are realised, there is an agreement between the local authority and the club, with the ultimate responsibility resting with the board of the club. There is a legally binding asset lock to prevent the value of the club's assets, including its interest in the stadium, being 'demutualised' in the future. The club's commitment to long term community benefit, as outlined in a Community Use Plan, is overseen by a Monitoring Board with both club and local authority representation.

The club currently employs 2 full-time-equivalent staff, 6 young people under the Future Jobs fund, and part-time football staff and players. The club has had to buy in expertise from consultants in order to backfill the time of the General Manager who has been leading on the capital project.

The capital development timeline

The FC United staff and board have had to develop a lot of skills and expertise since the club’s inception. The following event timeline outlines the significant ground that has been covered by club personnel, and the external expertise that has been employed at critical points in the journey:

  • Dec 08 - Jan 09: Feasibility Study conducted on the site by AFL architects. This demonstrated how the facilities could fit on the site and what configurations were possible
  • Mar 09: Draft Schedule of Costs, undertaken by Davis Langdon quantity surveyors. This scoped the cost of the project at between £3.5m - £3.8m
  • 2009: Community Use Plan conducted indicating how the facility would increase site usage, provide benefits to local residents and ultimately benefit 21,000 people per year
  • 2009: Travel Plan indicating how the impact of increased use of the site for both football matches and community facilities could be minimised, by encouraging public transport and minimising car use;
  • Mar 09: FC United survey of supporters and initial supporter consultation exercise with architects
  • Dec 09: A 'turnkey' cost estimate prepared by John Austen Associates Ltd quantity surveyors, which costed two options for the project at £3.1m and £3.4m respectively
  • Jan 10: Business plan submitted to the local authority, which formed the basis for the mutual agreement between the club and the local authority
  • May – Sep 10: Extensive consultation and design work undertaken
  • Sept 10: Planning Application submitted
  • Sept 21st 10: Community Share scheme launched
  • Sept 23rd 10: Open meeting for supporters or potential investors to find out more about the share offer
  • Oct – Nov 10: Grant funding bids prepared
  • Nov 10: Planning permission granted
  • 28th Feb 11: Share issue officially closed.

The Community Share issue

FC United were awarded the Coops UK Cooperative Excellence Award in 2009. The club were then picked as one of just ten projects to receive support by the Development Trusts Association and Coops UK, through a community shares project funded by Communities and Local Government and the Office of the Third Sector (now Office for Civil Society).

This has enabled the club to raise finance from the issue of withdrawable share capital through their IPS Community Benefit Society structure. The Offer Document for prospective investors was issued near the end of September 2010. The main aim of the shares was to provide investors with a social return by funding the football and community objectives of the club, but the club’s business plan also provides for potential financial returns for investors.

 

At a time when many clubs are in debt or in the hands of major investors, we aim to demonstrate that there is a real alternative

Andy Walsh, general manager, FC United of Manchester

 

Andy Walsh, FC United general manager, said: "At a time when many clubs are in debt or in the hands of major investors, we aim to demonstrate that there is a real alternative. We want to change the way football is run and financed by putting supporters at the heart of the game."

The minimum share was £200. In the end the average share was just over £1,000, with a few individuals committing to the maximum investment of £20,000 each. There is a moratorium on any capital withdrawals and interest payments for three years and a 10% limit on withdrawals after that. As at the 22nd Feb 2011, the club had raised £1.2 million from 1,060 investors. Although a considerable achievement, this is slightly less than the £1.5m target. Discussions are underway with a major investor to bridge the shortfall with a quasi equity-loan commitment.

The asset transfer

The site is owned by Manchester City Council's Leisure and Sports Trust, and is currently run by Serco under contract. FC United hope to confirm the transfer of the 6.5 acre site on a 99 year peppercorn lease from the local authority very soon. Legal ownership is complicated, with the Leisure Trust having to cease their management contract with Serco, and then transfer the asset back to the local authority. There are charitable covenants on the site and VAT implications for the local authority as well.

It is hoped the asset will be transferred in spring 2011, to enable the site to be fully open in April 2012, after a 38 week build. If the current site proves too difficult to transfer, the club will have to look at alternative sites near the city centre.

Capital costs and funding:

  • Feasibility: At a time when many clubs are in debt or in the hands of major investors, we aim to demonstrate that there is a real alternative £20,000
  • Business plan: £5,000
  • Legals: £80,000
  • Accountancy, planners/project managers and community consultation: £250,000.

The club needs £3.5m of capital funding, allocated as follows:

  • Community shares: £1.5m
  • The club's Development Fund: £0.5m
  • The Football Foundation’s Football Stadia Improvement Fund: £0.15m
  • The Football Foundation Community Facilities Fund: £0.3m
  • Sport England Iconic Facilities Fund: £0.45m
  • Other grant income: £0.125m
  • Manchester City Council grant: £0.65m.

This shows a healthy mix of equity (share capital) and grants, giving the club a good start for their enterprise based model.

Outcomes and impact

The development of the new stadium will ensure the sustainability of FC United by:

  • Maximising existing income streams, (eg: through increased capacity on match days, income predicted to increase 20%)
  • Reinvestment of existing income levels in their own asset
  • Providing new income streams, (eg: through catering, events, sports hall hire and car park fees)
  • Ensuring expansion is possible
  • Fulfilling the club's community obligations.

20% predicted increase in match day income

For the local authority a key benefit of the transfer is to generate better value on what is accepted to be an underperforming and declining facility, thus providing real cost savings for the council in the long term. The development also addresses key sports, health and education targets of the Manchester Community Strategy.

For the people of Newton Heath the new development will:

  • Provide an enhanced sports facility to encourage increased participation in football and sport, with associated health benefits
  • Benefit the local area by bringing in new investment, with some new job creation, as well as increased footfall and additional spending in the area
  • Bring an expanded Community Programme to the area, increasing access to sports facilities and participation in sport, health and education.

Critical success factors

  • Put effort into a proper site search which will help you fulfil all your aims;
  • Make sure communication with the local authority is constant, as priorities may change over time. An open dialogue is key;
  • Obtain political and officer support for the project at the highest level;
  • The legal process can be long and potentially complicated, so make sure you are aware of all of the considerations, (the ATU has produced a legal toolkit to make the process of transfer more effective).

Links to external resources

Case study contact details

Andy Walsh, General Manager: andywalsh@fc-utd.co.uk, Tel: 07875054651