English football is ready for a rule change when it comes to financial management

Nov 15, 2023

Christina Philippou, University of Portsmouth

Football fans are frequently involved in heated arguments over the rules of the game. Soon it will be the turn of elected politicians to debate new regulations which govern how the sport in England will be run.

On November 7 2003, the UK government announced a new bill which aims to “safeguard the future of football clubs for the benefit of communities and fans”.

Central to the new legislation would be the creation of an independent football regulator to address “systemic financial issues in football”. It would also seek to preserve club heritage, protect the voice of fans, and safeguard against breakaway competitions such as the doomed attempt by six Premier League clubs to form a European Super League in 2021.

When that happened, fans were quick to show their anger, the government threatened a “legislative bomb” and eventually the English clubs backed down.

But that episode was part of what led to the fan-led review of English football being published in November 2021. And one of its main recommendations was the creation of an independent football regulator to deal with the finding that “without intervention, football at many levels risks financial collapse”.

Ultimately, the concern is that English football club finances are not in a strong position, with many clubs losing money both before and after the pandemic. This has been particularly bad in the Championship (English football’s second tier), where efforts to get promoted to the extremely lucrative Premier League have led to risky behaviour.

The potential disastrous outcome of weak finances was illustrated in 2019 by the sad demise of Bury FC, which was expelled from the English Football League (EFL) after 125 years of membership for being unable to pay its bills. (Fans have since worked hard to rebuild the club, which now plays in a regional league.)

The saga at Bury showed how football clubs going into administration has a wider impact on local communities, with businesses losing custom and people losing jobs. The independent regulator is due to oversee changes that will seek to avoid a repeat of this happening elsewhere in the top five tiers of men’s football in England (Premier League, Championship, League One, League Two and the the National League).

The precise make up of the independent regulator – who will appoint the key personnel, where the funding will come from, what scope it will have in terms of sanctions and punishments – is yet to be made clear. But so far, the idea has received plenty of backing from the football world.

Fans appear supportive, as has the EFL. Research also indicates that regulators in other industries have been known to fix issues where the market has failed its customers (which in this case would be fans and local communities).

Financial fitness

But not everyone is cheering. The Premier League has objected to the idea, fearing that increased requirements over financial reporting and monitoring may put off future investors. Research suggests they may have a point, and that heavy regulation can lead to inefficiency and reduced resources.

But despite those concerns, change to the financial side of football looks to be gaining momentum. Uefa has updated its regulations to limit squad costs to 70% of income for all clubs playing in European competitions .

And there have already been governance changes in English football since the publication of the fan-led review. The English Football Association brought in a rule to protect team strip colours and club crests from unwanted changes, as well as a code of governance which includes board member term limits and targets for diversity and inclusion.

Meanwhile the Premier League has introduced a “fan engagement standard” designed to improve the involvement of fans in decision-making, and have moved to strengthen ownership tests.

All of these changes are designed to make the sport more resilient; to prevent the collapse of clubs which have been part of their communities for decades. Football fans throughout the leagues will be hoping they succeed.

Christina Philippou, Principal Lecturer, Accounting, Economics and Finance, University of Portsmouth

This article is republished from The Conversation under a Creative Commons license. Read the original article.