The EFL’s acceptance of the need for an independent regulator of football has been described as a ‘seismic’ shift in the national game, which could keep lower league clubs in business.
The EFL, Premier League and FA have previously presented a united front when threatened with external regulation, always claiming they can manage the game between themselves.
But now that front has fractured and with clubs battling financial crisis, at each other’s throats and political opinion of football at an all-time low, EFL teams believe the prospect of an independent regulator is closer than ever.
EFL chairman Rick Parry has accepted an independent regulator may be needed to save clubs
As reported by Sportsmail, yesterday, the EFL chairman Rick Parry has written to Tracey Crouch MP, who is leading the Government’s review of football and pleaded for intervention to bring more money for the lower leagues and tougher regulation.
‘This is seismic,’ one well-placed source told Sportsmail. ‘The EFL has broken ranks. They have refused to sign up to the Premier League and FA position.
‘They are the organisation with the biggest number of clubs and they are no longer aligned with the Premier League. The EFL has accepted the government must get involved. And the only route is an independent regulator.
The EFL’s volte-face has been motivated by the belief that more money must flow from the Premier League to the 72 Championship, League One and Two clubs, or more of them will go to the wall.
Bury went out of business due to poor financial management and overspending on players
But according to the EFL there has been no ‘meaningful engagement’ from the top flight on a new financial distribution.
EFL OPENS THE DOOR TO AN INDEPENDENT REGULATOR
The creation of an independent regulator for English football has never been closer.
After years of reviews, and inaction, a combination of factors appear to be conspiring to create the conditions for change.
The widening financial gap between the Premier League and the rest of the football pyramid and the precarious financial position of many EFL clubs have sharpened the debate.
Disgust and dismay over the self-interest of the Big Six, the European Super League, Project Big Picture and Government’s frustration at how long it took the top flight to bail out lower league clubs devastated by the Covid pandemic has changed the political mood.
Add to that lot the evidence gathered by Tracey Crouch MP and her team over the need for change and there is already impetus to act.
But the revelation that football’s traditional united front against regulation has fractured could be the game-changer.
The EFL, which represents 72 clubs, is asking for government intervention because football cannot get its own house in order. Chairman Rick Parry’s letter to Crouch changes the narrative.
There is a natural suspicion where Government steps into any industry, which stays the hands of politicians.
But if Government acts now, it is not only responding to instability in the national game and the fans’ concerns over the future of their clubs, but also a request from one of the sports foremost authorities to intervene.
‘This letter just reflects the frustration,’ said another EFL source. ‘There is just no agreement over a fair distribution of money or parachute payments, so the conclusion is it has to be a regulator.’
Crouch, a former sports minister, told the football authorities in July that they needed to come up with a financial solution.
Not surprisingly, they haven’t. And Parry has now told Crouch that in fact, discussions with the Premier League have gone nowhere.
The Premier League has insisted it is talking to the EFL and Crouch about these issues and it accepts the need to review the fiancial situation.
However, Parry has come to the conclusion there is little or no prospect of persuading the top flight to part with more cash or abolish parachute payments, which hugely distort competition in the Championship and drive up wages and transfer fees beyond what many clubs can afford.
‘To be frank, it seems unlikely to us that any [financial] agreement will be reached without some form of external intervention,’ Parry wrote in his letter to Crouch.
And ‘there is simply not enough money to go round [in the EFL],’ he added.
In a nutshell, Parry and the EFL are saying, they need more money, more fairly distributed and greater regulation to stop owners overspending and putting their clubs at risk.
Crucially, he is also admitting that if regulation has to be done by an independent regulator, then so be it, as long as it dictates how much money the Premier League must pay and parachute payments are abolished.
Parry still insists the EFL has a role to play in regulation, but he acknowledged to Crouch the ‘valid arguments you have put forward in favour of independent regulation’.
And he added: ‘We are therefore very happy to engage in a constructive debate about the scope of regulation required and how our work can dovetail with that of a proposed regulator.’
The Premier League is by far the richest competition in Europe, generating revenues of £5.9 billion in a year, but only around £350M of that finds its way to EFL clubs annually.
The EFL is proposing the amount directed to the Championship, League One and Two clubs is increased to 25 per cent of pooled media revenues, which works out at around £750M – an increase of £400M.
The Premier League’s lack of engagement is surprising, given the pressure for independent regulation in the game and such a long list of controversies in the last year alone.
The Premier League, as an organisation, may never have been weaker. Its members were divided over Project Big Picture and the European Super League, when the Big Six made brazen grabs for power.
It was hammered by government over the length of time it took to come up with a rescue package for the lower leagues during the Covid pandemic.
And the league is divided again over the handling of the Newcastle United takeover, which has essentially led to an informal vote of no confidence in the chairman, Gary Hoffman, who is now standing down.
Crouch, who is a Conservative MP, is due to publish her report and recommendations on the governance of football next week. It will be interesting to see how the Premier League and FA respond.
Fans support for reform of football has increased after the European Super League fiasco
Crouch’s document and proposals will certainly be well-sourced. It is a fan-led review which has taken 100 hours of oral evidence, 70 documents of written evidence and 16,000 responses to an extensive online survey.
WHY IS FOOTBALL OVERHEATING?
The fundamental problem is the absolutely enormous money-gap between the Premier League and the Championship and the EFL.
When the Premier League was formed in 1992, no one ever imagined that it would attract such huge sums of money and leave the EFL so far behind.
The revenues in the Premier League are driven by incredible growth in the money earned from the sale of media rights. The EFL just hasn’t developed at anywhere near the same rate.
The Premier League’s annual media revenues have grown from £50M in 1992 to £3BN now. While the EFL has seen its TV income go up from £25M to £150M, in the same period
Overall, in the 2018-19 season (pre Covid), Premier League clubs generated £5.9 BN, while Championship clubs’ revenue was £785M.
It is these gaps that encourage clubs to gamble on promotion by spending beyond their means. Championship clubs overspend, ploughing all of their income and more into player wages and transfer fees.
This drives up costs for the whole football pyramid.
And if a club makes it to the Premier League with a sustainable financial strategy, their own wealth and value will rocket. If they don’t, they risk doing a Derby, a Sunderland, a Wigan, a Bolton… And could go out of business.
And you can add to that a welter of popular figures who have spoken out in favour of an independent regulator, including Gary Neville, Gary Lineker and Jamie Carragher.
The first recommendation in the Crouch Report is almost certainly going to be an independent regulator; however, it will only be created if Government act upon her proposals.
Many EFL clubs are desperate for the recommendation to be accepted.
‘It gets us dealing with the really serious issues,’ said Ian Mather, chief executive of Cambridge United and a leading member of the Fair Game group, which supports a regulator. ‘One is the fairer distribution of money and the other is to make sure the money is spent wisely.
‘We need regulation of player pay and we will never get there without some rules that everyone sticks to. If we don’t have that any extra money will just fuel a wage war.’
In recent years Bury and Macclesfield have gone out of business, while Bolton and Wigan have gone close after they over reached themselves.
Currently, Derby County is in administration, with a 21-point penalty and in need of a wealthy buyer to rescue the club, while Reading have been handed a six-point penalty over its financial management.
Parry is pinning the EFL’s hopes on Crouch’s recommendations including a mechanism to increase funding from the Premier League. That is likely to be a regulator equipped with the power to impose a financial settlement and enforce it.
And the EFL chairman’s letter to Crouch is carefully calibrated to pique the interest of politicians in the Conservative government, who will ultimately have to the decisions, and he is encouraging them to act.
Parry suggests that by delivering a ‘financial re-set’ in the national game, linked to improved regulation to ensure the financial stability of clubs, Government will be supporting its flagship policy of ‘levelling up’ richer and poorer parts of the country.
‘In achieving [financial stability of clubs], the Government would make a significant commitment towards its ambition of ‘levelling up’ the many towns and cities that have all too often been left behind in the rush of capital and people to larger urban areas – in football as in many other areas of daily life,’ Parry wrote.
Teddy Sheringham of Nottingham Forest fires past David James of Liverpool to score the only goal in a 1-0 win for Forest in the first Premier League game to be televised on Sky. Since then revenues have rocketed in the Premier League (below) and left the EFL trailing in their wake
The cost of screening Premier League football at home and abroad has rocketed since 1992
|League||Revenue per club (£m)||% Total club revenue|
|Source: UEFA Benchmarking Report 2019|
‘Places such as Blackpool, Scunthorpe, Plymouth, Gillingham, Mansfield, Blackburn and Hartlepool to name just a few that we are proud to have amongst our membership and whose fans should also dare to dream.’
Most of those towns are widely considered to include crucial ‘Red Wall’ seats, which historically supported the Labour Party, but have been won by the Conservatives at General Elections and by-elections since 2017, supporting the Government’s current majority.
The Tories success at the next election may well depend on those constituencies voting Tory again.
Football clubs are important for the economies and wellbeing of communities, and their demise has a huge impact. If the local football club goes bust it would be politically damaging.
WHY DOES THE EFL WANT TO ABOLISH PARACHUTE PAYMENTS?
Parachute payments aim to bridge the gap between the hugely rich Premier League and less wealthy Championship.
The idea is that clubs need to pay more in players’ wages to compete in the top flight, but that leaves them vulnerable if they go down. They could be saddled with contracts they can’t afford.
So, clubs relegated from the Premier League receive up to £45M in the first year after they go down and as much as £90M over three years.
In contrast, a club that does not benefit from parachute payments receives just £4.5M from the Premier League in a solidarity payment.
Watford have introduced relegation clauses into new contracts in case they go down
Not surprisingly, a relegation bonus of tens of millions of pounds increases a club’s chances of promotion.
Research from Sheffield Hallam University has revealed that clubs receiving parachute payments are twice as likely to go up and twice as likely to avoid relegation as those that don’t. It is a huge advantage.
Inevitably, other clubs start spending more to compete, which is why second tier teams are stuck with eye-watering debt.
There are alternative ways of dealing with the problem. Promoted clubs could consider writing relegation clauses into contracts so a player’s pay falls if the club goes down.
This season, Watford have introduced 50 per cent salary reduction clauses into new contracts, in case of relegation, to help keep the club sustainable in the future.
Clubs that receive parachute payments are twice as likely to be promoted to the top flight
Making similar clauses a requirement in the Premier League would provide a relegation cushion.
The EFL wants the money currently spent on parachutes to be included within a £750M annual payment to the EFL clubs, which would be distributed among all 72 teams.
That could also fund an expanded merit system. Currently, Prem clubs are rewarded for each place they climb in the final top-flight table. It could be extended to the Championship, so clubs finishing near the top of the division are better placed to step up.
EFL chairman Rick Parry believes the financial gap between the second and top tiers could be halved from around £80M to about £40M. Not ideal, but more manageable.