Men’s professional football in England and Wales was bracing for heightened scrutiny of its finances after the UK government on Thursday set out plans for a new regulator that it said would stop “careless” owners from “gambling” with the game’s future.
Financial regulation is at the centre of the proposed reforms designed to restore the balance sheets of clubs that have been prone to overspend in the transfer market and paying players big salaries in a bid to secure promotion to the lucrative Premier League.
The reforms are designed to put clubs on a firmer financial footing, in an attempt to avoid crises that led to the collapse of historic clubs such as Bury. In the Championship, the second tier of English football where clubs fight for promotion to the Premier League, wages soared to 129 per cent of revenues in 2019-20 season, highlighting an overreliance on owner funding and unsustainable business models.
Sport minister Stuart Andrew told MPs that “poor ownership and governance can leave clubs at the mercy of careless owners”, as he laid out the long-awaited proposals,
“Many, if not most, club owners are good custodians of their clubs, but all too often we hear of flagrant financial misconduct, unsustainable risk-taking and poor governance driving clubs to the brink. And owners aren’t just gambling with fans’ beloved clubs. They are threatening the stability of the entire football pyramid,” he added.
The 100-page document insisted intervention was necessary because the “free market [did] not properly account for the full social value of clubs to their fans and communities”.
The proposed regulator would have extensive powers. This would include a role in facilitating an agreement on the way the 20 clubs that make up the Premier League share some of the revenues from their lucrative TV rights with the rest of the football pyramid. The Premier League and English Football League, which runs the three divisions below the top flight, have so far been unable to agree on a settlement.
Under the proposals, the six biggest clubs by revenue in the Premier League would pay half the costs of setting up and running the regulator.
The so-called “Big Six” of Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham Hotspur were part of a failed attempt to set up a breakaway European Super League in 2021 that accelerated calls for government action. The regulator would also be able to block future breakaway attempts.
The regulator, which will be independent from the government, would have the power to force clubs to share detailed financial information and business plans, and introduce stricter demands and oversight of owners and directors, including their source of funding.
Clubs would also need to demonstrate they are financially secure enough to survive shocks such as relegation or a sudden loss of funding from owners.
Each club would need to gain a licence from the regulator to be able to compete, with the watchdog granted powers to sanction wrongdoers with fines or suspensions. In cases of “persistent, flagrant and wilful non-compliance” with the new licensing system, the regulator could bar individuals from their clubs or the game.
But the government also warned that the regulator would not operate a zero-failure regime, as it should not create “perverse incentives” for owners.
Leveraged buyouts, used by the Glazer family in their £790mn acquisition of Manchester United in 2005, could also fall under the scope of the regulator. The government confirmed it was considering whether the new watchdog should set “tougher restrictions” on debt-fuelled acquisitions that use the club as security to obtain loans.
The Glazers, who are weighing up a potential sale of the club, have been the subject of fan protests throughout their ownership of United for loading debt on the club.
Clubs have been told that they will have a “grace period” to become compliant, with rules to be phased in over time. But there are concerns about the scope of the regulator’s powers and the extent to which any decision could be challenged.
Alex Haffner, regulatory partner at Fladgate, warned that the white paper suggests that “any decisions of the regulator should only be appealable on judicial review grounds, a narrow scope upon which to challenge what are likely to be contentious decisions”.
The government proposals, however, did not address the issue of foreign state ownership of clubs. Newcastle United has been owned by a consortium led by Saudi Arabia’s sovereign wealth fund since October 2021, while Manchester City has been owned by a senior member of the Abu Dhabi ruling family since 2008. “We are not venturing into the area of foreign policy,” Andrew said.
Nor did the government give any indication of when it might seek to bring forward legislation to put in place the new regulatory regime.
Paul Rawnsley, a director at Deloitte’s sports business group, said the reforms could “encourage financial responsibility and sustainability, redistribute revenues and build a better future for clubs and the wider game”.
The government’s plan have been widely welcomed by fan groups and the EFL, including several of its member clubs. However, there are fears among Premier League clubs that a new regulator would damage the top league’s global standing and attractiveness to overseas investors.
The Premier League, one of Britain’s most powerful cultural exports, has long resisted attempts at outside intervention. It is watched all over the world and its record TV rights deals have allowed it to pull away from the other top European leagues.
Premier League chief executive Richard Masters warned of lasting damage to the game if the government got it wrong. “This needs to be a very precise regulatory tool and not a sledgehammer, otherwise it might take football sidewards, or even backwards, rather than forwards,” he told the BBC.
David Sullivan, co-owner of top flight club West Ham United, dismissed an independent regulator as a “terrible idea.”
