Football’s new watchdog will whistle down ‘careless’ club owners

Men’s professional football in England and Wales was bracing for greater scrutiny of its finances after the UK government on Thursday laid out plans for a new regulator that it said would stop “careless” owners from ” bet” with the future of the game.

Financial regulation is at the heart of proposed reforms aimed at restoring the balance sheets of clubs that tend to overspend in the transfer market and pay players high wages in a bid to secure promotion to the lucrative Premier League.

The reforms are aimed at putting clubs on a stronger 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 are fighting for promotion to the Premier League, wages have risen to 129% of revenues in the 2019-20 season, highlighting an over-reliance on owner funding and unsustainable business models.

Sports Minister Stuart Andrew told MPs that “inadequate ownership and governance can leave clubs at the mercy of careless owners” as he unveiled the long-awaited proposals,

“Many, if not most, club owners are good stewards of their clubs, but all too often we hear of blatant financial misconduct, unsustainable risk-taking and poor governance driving clubs to the brink. And the owners aren’t just playing clubs that fans love. They are threatening the stability of the entire football pyramid,” he added.

The 100-page document insisted the intervention was necessary because the “free market (does not) adequately account for the full social value of clubs to their fans and communities”.

The proposed regulator would have broad powers. That would include a role in facilitating an agreement on how the 20 clubs that make up the Premier League share some of the revenue from their lucrative TV rights with the rest of the football pyramid. The Premier League and the English Football League, which runs the three divisions below the top flight, have so far been unable to reach an agreement.

Under the proposals, the Premier League’s six biggest clubs by revenue would pay half of the governing body’s set-up and operating costs.

The so-called “Big Six” of Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham Hotspur were part of a failed attempt to establish a breakaway European Super League in 2021 that has accelerated calls for government action. The regulator would also be able to block future escape attempts.

The regulator, which will be independent of the government, would have the power to force clubs to share detailed financial information and business plans, as well as introduce stricter requirements and oversight of owners and directors, including their source of funding.

Clubs would also need to demonstrate that they are financially secure enough to survive shocks such as relegation or a sudden loss of funding from owners.

Each club would need to obtain a license from the regulator to be able to compete, with the governing body having the power to punish violators with fines or suspensions. In cases of “persistent, flagrant and willful non-compliance” with the new licensing system, the regulator can bar individuals from their clubs or from the game.

But the government also warned that the regulator would not operate a zero-fault regime as it should not create “perverse incentives” for landlords.

Leveraged buyouts, used by the Glazer family in their £790m takeover of Manchester United in 2005, could also fall within the regulator’s scope. The government has confirmed that it is considering whether the new supervisory body should set “tougher restrictions” on debt-driven takeovers that use the club as collateral for borrowing.

The Glazers, who are weighing a possible sale of the club, have been the subject of fan outcry during their ownership of United for collecting the club’s debts.

Clubs have been told they will have a “grace period” to adjust, with rules to be implemented gradually over time. But there are concerns about the scope of the regulator’s powers and the extent to which any decision can be challenged..

Alex Haffner, regulatory partner at Fladgate, cautioned that the white paper suggests “any decisions by the regulator should only be appealable on the basis of judicial review, a narrow scope for challenging what are likely to be contentious decisions.”

The government’s 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 Abu Dhabi’s ruling family since 2008. “We are not venturing into the area of ​​foreign policy,” said André .

The government also gave no indication of when it might introduce legislation to implement the new regulatory regime.

Paul Rawnsley, director of Deloitte’s sports business group, said the reforms could “encourage financial responsibility and sustainability, redistribute revenue and build a better future for clubs and sport as a whole”.

The government’s plan was widely welcomed by supporters’ groups and the EFL, including several of its member clubs. However, there are fears among Premier League clubs that a new regulator will damage the top league’s global standing and attractiveness to foreign investors.

The Premier League, one of Britain’s most powerful cultural exports, has long resisted attempts at outside intervention. It is watched across the world and its record TV rights deals have allowed it to break away from the other top European leagues.

Premier League chief executive Richard Masters has warned of lasting damage to the game if the government gets it wrong. “This needs to be a very precise regulatory tool and not a sledgehammer, otherwise it could drive football sideways, 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”.