Clubs in the English Football League (EFL) could face extinction unless urgent financial support is provided, according to a report by Folkestone and Hythe MP Damian Collins.

The report, authored with Sunderland co-owner Charlie Methven, says the COVID-19 crisis has exacerbated the already weak financial positions of lower league teams, with match day income grinding to a halt after matches were called off.

It says that attracting fresh investment is going to be ‘almost impossible’ in the wake of the current situation.

“the landscape going forward in terms of wages and costs incurred by the clubs has got to change”

RICK PARRY, EFL CHAIRMAN

It also highlights a ‘lack of enforcement’ of current EFL financial regulations and sets out a six-step plan to ‘rescue’ football and introduce measures to reform the running and ownership of clubs for a sustainable future.

The report, titled ‘A Way Forward for Football” sets out a six-step plan as follows:

  1. To introduce a Football Finance Authority (FFA) to provide financial assistance to clubs – run by the FA but backed by the government.
  2. This new body will provide funds to meet short term liabilities but not for player or infastructure investments. This will not be a loan but an investment in return for a shareholding of between 10%-49%.
  3. Independant directors from a supporters trust or local government authority will be appointed to the club to represent this minority shareholding.
  4. These independant directors will require real-time access to their club’s financial records and projections. These directors can then report back to the FFA with any upcoming breaches of financial regulations, who would be able to place a club into a ‘form of administration’ and get finances back on track.
  5. Supporters trust or local authority can aquire the shareholding from the FFA at a discounted cost.
  6. This new body will set and enforce EFL financial regulations, and should include representation from the EFL, the Professional Footballers Association (PFA), the Football Supporters Association (FSA).

For teams in the Premier League – around 80% of their revenue comes from broadcasters – which can still be earned if games are played behind closed doors.

But teams in the EFL – made up of The Championship, League 1 and League 2 – are heavily reliant on income from match days, with broadcasting revenue only making up 10%-20% of their income.

EFL Chairman Rick Parry told a parliamentary committee that 1,400 out of contract players could suffer this summer

The report says that what could prove fatal in the coming weeks is the absence of advance season tickets sales, which will have dried up due to the uncertainty about when spectators will be allowed to watch football again.

“It is that loss of a large chunk of forecasted income, rather than the small number of matches lost at the end of this season, which will push some clubs over the edge.”

The new plan, involving the creation of a Football Finance Authority, aims to work towards improved enforcement of EFL financial regulations.

The Football Supporters’ Association says it backs the plans

The strategy aims to use financial forecasts to identify offenders in real time, rather than by the current retrospective method – to allow the football authorities to act before it is too late – as was the case with Bury FC in the 2019/20 season.

The report came after League Two voted to curtail their season, with the associated rising costs from taking players off furlough and coronavirus testing a concern.

EFL Chairman Rick Parry told a parlimentary committee on the 5th May that “the landscape going forwards in terms of wages and costs incurred by the clubs has got to change.”

Current financial & ownership regulations in place for EFL clubs include:

  • A Salary Cost Management Protocol – whereby teams are only allowed to invest a certain amount of their turnover in wages. This is set at 50% for League Two & 60% for League One.
  • Financial Fair Play regulations for the Championship, which allow for losses of up to £13m a year
  • Clubs breaching these regulations can be subject to a transfer embargo

Nigel Clough stepped down from his role as manager at League One club Burton Albion this week in order to reduce the financial pressure on the club.

Burton Chairmain Ben Robinson said “Unfortunately, the coronavirus pandemic is having a dramatic impact on all football clubs, meaning we have to make difficult financial decisions going forward in order to safeguard the club and ensure it still exists for the supporters and the benefit of the community for generations to come. At present we have no idea when football will be safe to re-start and whether we will be able to play in front of crowds or behind closed doors, which brings a high degree of financial uncertainty.”

MP Damian Collins’ report ends by saying it is aiming move towards the German football ownership model where communities own 50% of their local club – to ensure clubs are no longer treated as a ‘rich man’s plaything’.

I also summarised today’s article in a Facebook Live:

Posted by James Pegg – Journalist & Broadcaster on Friday, May 22, 2020

And here is a round up of the rest of the day’s stories: