Is the Premier League decoupling from the rest of English football?
Ed Warner pores over a report on the polarisation of English football and comes up with a solution to the Premier League’s stand-off with the EFL for the new regulator.
“I just hope they don’t mess it up.” The Premier League club chairman’s answer to my question about his hopes for the Independent Football Regulator at a recent private event was at one with his previous outspoken opposition to its creation.
Football is now saddled with the IFR, an organisation still in the process of construction but which is already burdened with the unrealistic hopes of both its politician architects and fans across the country.
Wearied by the dead hand of bureaucrats across industries throughout my working life, the prospect of a sport I love being subject to outside regulation is dispiriting.
You don’t have to be a free-marketeer to believe that collectively the FA, Premier League and EFL should be responsible for rooting out unfit owners of clubs within their curtilages, as well as establishing and then policing financial regulations that protect the integrity of the game.
Or that sane, solvent investors should be allowed to gamble on their ability to generate success on the pitch.
Arguments about the success or failure of the regulator-less world are now moot. Yes, barely any professional clubs have actually disappeared; but yes, many have gone bust and their fans “punished” with points deductions that have often led to relegations.
Fair to say that few think the three bodies cited above have done a good job on this front, so it’s unsurprising they are not being trusted to do so in future.
Now it is for the IFR to police balance sheets and business plans in an attempt to minimise financial failures. A new study this week throws light on the strain inherent in many clubs’ operating models and, by extension, the scale of the task before a regulator that will cop the flak for any that implode.
That study is the latest annual analysis of financial sustainability across the English league pyramid from consultant LCP’s sports analytics and advisory team. As always this gives a fascinating insight into the relative success of clubs in balancing their books in the drive for footballing glory.
The big takeaway this year is that while overall losses across the leagues (based on 2023-24 data) fell by a third to ‘just’ £0.8bn, this is only because the finances of Premier League clubs have significantly improved. Elsewhere losses grew. LCP talks of “a growing decoupling of the Premier League from the rest of the football pyramid”.
Collectively, Championship clubs lost £369m in the 23-24 season, 42 per cent more than those in the Premier League whose revenues and assets make them far better placed to cope with operating deficits.
Top flight clubs bore a four per cent loss margin; Championship ones 38 per cent. Lower down, the red ink flows yet more freely. League One clubs’ loss margin was a whopping 68 per cent.
If you support one of the teams singled out by LCP for their financial success you might take comfort in the prudence of its owners. You might also, though, find yourself chaffing at their presumed stinginess.
Brighton and Hove Albion, often cited as exemplars of sound management, but trophy-less in 125 years of existence. Doubtless Seagulls fans will be joining those of every other club in debating just what they ‘need’ to do in the upcoming transfer window.
Debates which won’t be about which stars they should sell to bank a profit, but which players simply ‘must’ be bought to improve their team’s chances. Tell me, honestly, that you haven’t been having those thoughts yourself, whoever you support. Financial sustainability? That can wait until LCP’s report in December 2027…
The Premier League and EFL have been engaged in sporadic negotiations about the proportion of the PL’s broadcast income that flows down the pyramid. The EFL has publicly vented its frustrations about the pace of progress, but it is hardly surprising that the Premier League has played a long game, using concern about potential inflation of player wages rather than the solving of fundamental financial problems as a defence.
LCP clearly shares that concern and argues that a proportion of any funds distributed in a new deal between the leagues be ring-fenced for investment in club infrastructure such as stadia, training grounds and academies; social impact initiatives; and debt-repayment.
Even then, one imagines the Premier League might baulk at direct investment into balance sheets as reward for owners’ past cavalier behaviour.
If the new regulator achieves one thing it must be to insert itself at the centre of these negotiations and any process to distribute funds to clubs below the Premier League. Having overseen the sharp deterioration in its members’ financial health, perhaps the EFL should be removed from the process entirely. After all, if independence is deemed so necessary, then let any new system rely on it entirely.
In return, the IFR might wish to endorse the EFL’s arguments for an end to parachute payments for clubs relegated from the Premier League as constituting a distortion to competition. The prize for promotion to the top flight is all the greater for coming with the financial protections afforded those who drop down to the Championship.
Take away the insurance that parachute payments constitute and jeopardy will increase for perhaps half of Premier League clubs, but it should help temper the excessive spending across the Championship, with a ripple benefit all the way down the pyramid.
Every negotiation requires give and take. The EFL to accept strict ring-fencing in return for the PL conceding a substantial reduction in PL parachute payments. There’s my Christmas present idea for the IFR’s mediators.
Fantasy football
This week Bruno Fernandes has been quoted in a Portuguese interview saying “money is more important than anything” to Manchester United’s hierarchy.
LCP’s chart above indicates just why United’s captain and the club’s fans might want it to be more Liverpool or Arsenal, taking a financial chance on success.
If you’d like to scrutinise LCP’s data across all of the EFL and the National League, you can find all you need and more here.
Ed Warner is chair of GB Wheelchair Rugby and writes his sport column at sportinc.substack.com