Championship clubs up promotion gamble by adopting new financial rules
Loss-making Championship clubs have raised the stakes in their £1.2bn gamble to reach the Premier League by voting in new financial rules.
Teams in the second tier have agreed to adopt a framework based on squad cost ratio (SCR), similar to those set to be implemented in the top division, from next season.
The new rules will replace profit and sustainability (P&S) regulations, which were themselves modelled on the Premier League’s similar PSR scheme.
They will require all clubs to limit spending on their squad – transfer fees and player and manager wages – to 85 per cent of their income, plus an equity top-up of around £10m a year.
It is expected that this will allow teams to make even bigger losses than they do currently, potentially leaving them at risk of financial crises like that suffered by Sheffield Wednesday.
Last season total pre-tax losses for the 24 clubs in the Championship increased to almost £350m. Staff costs, including amortisation on transfers, were £1.2bn – more than teams’ total revenue.
Championship clubs have historically been willing to spend unsustainable amounts in a bid to get promoted to the Premier League, a move which is worth at least £170m.
The new rules will also be monitored during the season in order to speed up assessment and ensure that any sanctions are levied in the same season.
Fears that Championship losses will increase
The vote, held at a meeting of the EFL, which runs the Championship, League One and League Two, required a two-thirds majority to be carried.
“I think there’s a little bit of concern that actually what it’s going to do is to allow Championship clubs to lose more money,” Alison O’Dowd, a member of the EFL Club Financial Review Panel (CFRP), said last week at a Sport Resolutions conference.
“I think there is a willingness to try and align more closely with the Premier League. If it’s an opportunity to lose more money, the clubs that are currently close to their loss threshold are going to vote for it. The clubs that are running very tight ships, they’re going to be against it.”
SCR rules are being adopted in the Premier League to loosely mirror Uefa’s European regulations and in response to challenges to and criticism of the PSR system.
Clubs in League One and League Two, immediately below the Championship, abide by Salary Cost Management Protocol (SCMP) rules, which were also the subject of a vote today.
League One teams agreed to tighten their regulations, reducing the proportion of income that can be spent on wages from 60 per cent to 50 per cent in a bid to curb losses.