A whole new ball game
Grilled by MPs, chairman Rick Parry pulled no punches about the state of the English Football League, calling for a “complete reset” of its business model.
The football industry has been hard-hit by the coronavirus crisis, particularly those clubs sitting outside the Premier League. And there is growing concern about their future.
Parry told the Digital, Culture, Media and Sport committee in May: “Perhaps one benefit of going through this pain is we will be shocked into coming up with a more sustainable model for the future.”
The game was not in good shape before the pandemic. At the start of the 2019/20 season, Bury FC became the first league club to go out of business since Maidstone United’s liquidation in 1992.
Parry said: “The EFL model financially was not great before the virus. That model is not sustainable at any time. It is definitely not sustainable during the virus. It is definitely not sustainable post-virus.
“So, some harsh decisions have to be taken. Tough decisions are going to have to be taken now and big decisions are going to have to be taken for the future in terms of sustainability. We need a complete reset and rethink about how the business model works.”
Lancashire is home to the EFL, which has its offices in Preston. The county also has six clubs in the league: Blackburn Rovers, Preston North End, Blackpool, Fleetwood, Morecambe and Accrington Stanley. Burnley sit above them in the Premier League.
There needs to be a calming of wages and wage to turnover ratio outside the Premier League in particular
Parry warned that clubs faced a £200m financial hole by September. “Clubs are stacking up creditors and there are a great deal of uncertainties,” he said.
Since Parry’s appearance before MPs there have been some signs of the reset that he and others are calling for.
Clubs in League One and League Two, where Blackpool, Fleetwood, Morecambe and Accrington sit, have voted for ‘squad salary caps’ of £2.5m and £1.5m respectively.
The aim is to address wage inflation. In the two leagues, wages were 80-90 per cent of turnover in 2018. In the Championship the figure was a staggering 106 per cent.
Talks are also going on amongst the lower league clubs about additional measures aimed at addressing “financial sustainability”. However, there is also a growing belief throughout the game that much more is needed.
That incudes changes to the redistribution of money down from the Premier League, the majority of which is currently made up of large parachute payments to relegated sides. There have also been calls for an independent football regulator.
The perilous state of the game outside the Premier League was also spelled out by Peter Ridsdale, representative of Preston owner Trevor Hemmings, in a message to fans, pointing out the Championship club was in a much healthier financial position than many rivals.
He said: “The finances of a significant number of EFL clubs are extremely fragile with many having implemented player and staff wage cuts or deferrals and many have taken Inland Revenue payment holidays but are now being faced with substantial repayments.
“Many of our competitors cannot afford such repayments in the short term. Recent years have seen a number of clubs get into financial difficulty including entering administration and it is likely that there could be more to follow.”
In his assessment of the situation Dan Jones, editor of Deloitte’s annual review of football finance, said: “The Covid-19 outbreak has accentuated the losses, and cash flow difficulties, of Football League clubs which have manifested themselves over a number of years.”
He added: “Change is needed desperately. Critical to how the finances of football emerge from this extraordinary short-term shock will be the actions of the game’s business leaders.
“Football has the potential to return not only intact, but stronger and more resilient if the right lessons are learned and measures are taken, perhaps collectively”.
Blackpool’s chief executive Ben Mansford is one of those who has called for a ‘reset’. He believes the lower divisions’ salary cap is a good start but more is needed.
He’d like greater financial regulation and a look at the EFL’s current owners’ and directors’ test. He says: “It is important that there is proper due diligence when it comes to the sale of football clubs. These are long-standing community assets.”
Mansford worked for the Israeli club Maccabi Tel Aviv and says that at the start of every season its owners had to put up a financial guarantee the national football organisation could call on in the event of them walking away.
He says of the salary cap: “There needs to be a calming of wages and wage to turnover ratio outside the Premier League in particular. When you look at the Championship a turnover ration of 106 per cent just isn’t sustainable.”
Mansford points to reports that 1,400 players are out of contract in the EFL, adding: “I think a great proportion of them will never have a professional football contract again.”
Despite the challenges, he believes there is a future for football outside the Premier League, though on potentially radically different budgets. He said: “Fortunately there are lot of good people that still want to put something back and run their football clubs for the good of their communities.”
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