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Financial regulations, more rules, independent regulators, politics. Why is England’s most loved sport being tied up in knots with more regulation? Why is it being turned into “big business”? Is the new independent regulator necessary? Will it achieve the goals it sets out to? Are there alternatives?

Since Tracey Crouch completed the fan-led review into football governance was published in November 2021, there has plenty of discussion about the recommendations within the report. The strategic recommendations are below:

A wide variety of issues are discussed throughout the report. We will review the recommendations which impact the financial landscape of English football below.

English football is of vital importance to the country. It is one of the country’s most valuable exports and attracts players, audiences, partnerships and fans from all over the world. The recommendations above have been made with the protection of the game in mind. But how realistic are they and what will additional regulation mean for clubs, players, owners and fans? Is additional regulation on top of complicated financial rules the right way to go?

Let’s look at the intention behind each of the finance-related recommendations above in turn.

The introduction of IREF to oversee financial regulation

The first point to note here is that it is clear that The Premier League is to be included in the oversight of IREF. This will be challenge number 1 – for an independent regulator to oversee financial regulation, the current regulators must relinquish control. Given the commercial power of The Premier League in particular, giving up control of financial regulation will be a big ask for the league as well as the clubs who make it up. Clubs already have to adhere to a significant amount of regulation from the usual statutory regulators – independent auditors, HMRC (Senior Accounting Officer), UEFA (where applicable), the FA, FIFA, The EFL/Premier League. It is difficult to see how these bodies will relinquish all control to the IREF – this means there shall be more compliance at a cost to the clubs.

A licencing regime shall be put in place – a concept that will be familiar to those competing in UEFA competitions but one that will be a new process for clubs who don’t compete in UEFA. In my opinion, alignment with UEFA would be preferable to keep compliance costs to a minimum and allow clubs to apply for a domestic/UEFA licence seamlessly.

It appears early intervention is preferred, before matters get too far out of hand. IREF shall look to work with clubs to ensure they comply with the rules prior to breaching them and having to be punished. “Upstream compliance” which ensures everyone is aware of the rules and the consequences of breaching is more preferable to reprimanding clubs once financial rules have been broken. Regulations that are put in place purely to punish clubs or a subset of clubs for making losses is not the intention here. Ultimately, banning a club from a competition is the harshest of punishments and could lead to financial ruin for the club – exactly what these regulations look to prevent. So a proactive approach to compliance should be welcomed. But how will it work in practice? This is yet to be seen.

IREF will have a board and chair appointed by a range of experts, independent from the government and from a range of industries. How will this board be made up? Will it be elected? For what term? How will independence from clubs or other stakeholders be measured. There is still a lot to determine here.

Financial regulation based on prudential regulation is recommended following the review, allowing IREF to look at club financial plans and ensure adequate cash is coming into the business. Prudential regulation is currently used to oversee the liquidity and capital requirements of entities that the public rely upon such as in the banking industry another highly controversial sector with a history of financial mismanagement.

Equity Funding

In the past, equity funding has been preferred by regulators to provide financial support to the club from shareholders. In practice, this only increases the reliance on the shareholder since the club can look to a benefactor for further funding. This becomes the club’s comfort blanket and often a habit of asking for a bail out when things don’t always go to plan on the pitch. Continuous equity funding is traditionally an expensive and unsustainable way of financing a business. Most businesses that are reliant on it would not survive for a prolonged period since the shareholder is obviously not able to make a return if it is reliant on indefinite equity funding. The issue here is when the shareholder leaves, stops funding or sells the club. What has the club committed to that isn’t recorded on the balance sheet?

Equity funding plugs the historical loss gap but doesn’t secure the future of the club. In theory the recommendation is sound, in practice, the control environment of clubs needs to be transformed in order for it to be a success.

Upfront capital injections, which appear to be recommended through other elements of the fan led review, would solve this problem in part, however, the practicalities of this may put some investors off. In addition, the proposed limits on owner subsidies is looking to take away the competitive edge of the club owned by a rich benefactor that is willing to invest. Something that some fans with loathe, since a rich owner has historically been a ticket to success. The owner subsidy limits look to protect the club and the industry as a whole from wage inflation which the review concludes is out of control.

Restricting investment and controlling competition with a view to protecting the industry will be a big ask for the clubs across The Premier League and beyond. The balance act between sustainability and competition when it comes to regulation is always a difficult one.


Finally, in the chapter discussing IREF’s role. There is a recommendation for the government to work with FIFA and other relevant authorities to support the regulation of football agents. Agents are described as significant contributors to the inflationary pressures placed on the industry. The agent’s role in protecting the player’s interest and taking their own commission is driven by the short-term nature of football. Rewards are given on a seasonal/annual basis. Bonuses are paid based on performance in that season. Players have a much shorter career than that seen in other industries which drives agents to want to get the most of the players they represent. Football is a cut-throat business and players can be dropped at any time. In our view, more needs to be done to incentivise players and agents in long term incentive plans.

Long Term Incentives

Government schemes already exist to encourage investment and reward management teams for long term growth of the businesses they run. Why can’t players be rewarded in similar ways? Reward the players based on financial metrics over a number of years that tie their remuneration into the years after they may leave the club. This would reduce their income today and that of the agents, and reward them over time assuming they and the clubs they play for hit metrics designed to promote sustainability on long term success. When the career of a football player is so short, it is understandable that players want to make the most of their opportunity financially, especially when that opportunity is presented to so many.

Owners and Directors Test

Although not a direct finance-related matter. One point to note on the new Directors test is that Directors must demonstrate skills and qualifications. At Football Finance Professionals, we appreciate we are biased but we believe finance should be the second discipline of any director as a minimum. Having a broad understanding of the financial impact of your decisions is key whether you are a trained finance professional or work in other parts of the business. This is the reason why we exist – to educate professionals or aspiring professionals on finance concepts through the medium of football. We welcome the requirement for training or ‘proof of skills’ as part of the improvements that are recommendation. If the Directors are able to demonstrate an understanding of the regulations that surround the game through education and assessment of the competency, they have no excuse for non-compliance.

Corporate governance

A topic that we appreciate isn’t the most glamorous but is one which we cover in our flagship course is corporate governance. Since most football clubs are privately owned, the level of governance is set by the shareholders and board of directors. This is an interesting topic and one which we have first hand experience of in the world of National Governing Bodies (‘NGBs’), since our Founder sits on the Board of British Weight Lifting and is Chair of Trustees at the British Weight Lifting Foundation.

This experience complements the experience gained within football. The two environments could not be more different. One is reliant on government funding, with governance at its heart. Non-compliance would lead to funding being cut and would ultimately risk the going concern status of the NGB. Football clubs, at least the larger ones, have turned into commercial behemoths, who do not rely upon government funding at all.

A Code for Football Governance

The introduction of compliance with a ‘Code for Football Club Governance’ may be a difficult concept for some clubs to adhere to. However, it looks like this will become part of the licencing regime being put in place, so clubs will need to make the necessary changes to comply. Again, we would wonder if non-compliance leading to a suspension from a competition is really in the long term interests of protecting the clubs?

The principles of the code are based on the existing Code for Sports Governance already in place which include sensible recommendations in theory – the difficulty will come in the execution of the below.

  1. Independent Non-Executive Directors (‘INEDs’)- A concept already tried and tested in the world of business and NGB sport. 30% of the board shall be made up of INEDs
  2. Maintenance and review of a board skills matrix – again already in existence in the world of NGBs
  3. Director remuneration disclosure – a concept already required as part of the Companies Act, however, it appears this will be enhanced to include tickets, gifts and trips paid by the owner.
  4. Financial transparency – the majority of clubs will stick to a statutory minimum level of disclosure. Additional disclosure of key financial metrics that is consistent across leagues will improve the quality of analysis and comparability
  5. Other non-finance related recommendations include the need for improved promotion of equality, diversity and inclusion, better engagement with fans and other stakeholders, an increased focus on the welfare of players, staff and fans and reporting on the temporary stewardship of a community asset

Distributions in football

Football club financial success is currently measured on revenue – a metric used due the historical loss-making nature of the majority of football clubs and one which is directly linked to on-pitch performance in at least two out of the three categories. Parachute payments from The Premier League to relegated clubs look to close the gap and assist in the transition from The Premier League to the EFL, however, the gulf in revenues is still substantial. The fan-led review looks to recommend better ways to distribute funds from The Premier League to other divisions in the football pyramid in addition to mandating cost control mainly in football wages for those clubs moving between leagues.

This topic is extremely complicated and will take some time to resolve. The Premier League is the “cash-cow” of English football and will control the funds it generates. It has currently been left to the football authorities to improve the distribution mechanism.

Closing thoughts

The report and its recommendations appear sensible and in some respects obvious to someone who has an inside view of life in football. Several recommendations come from the viewpoint of improvement whilst taking ideas from other industries which have differing levels of regulation than the current football model. As discussed earlier, football clubs already have to adhere to various levels of regulation and it appears this will only add to the task.

Given the way that football clubs have operated from the board level down to the team on the ground, significant change will be needed, both in personnel and in their focus on governance. From experience, we believe it will be hard to get people who are used to the current regulatory environment to tighten their belts. It will likely distract them from other areas of innovation that clubs may much rather focus on. Our view is that there will be a huge clash of strategies between the new regulator and the clubs as well as the current leagues who control governance.

A power struggle will lead to debate and ultimately change will happen if this is being mandated by the government. Here are some practical recommendations from us on what clubs can do to prepare for these changes:

  1. Educate – introduce continual professional development programmes for finance and non-finance professionals – particularly those changed with governance – the directors
  2. Internal audit – complete a review of the control environment of the club and report back to the board. Implement a continuous improvement programme
  3. Disclosure and transparency – voluntarily disclose information about the club that fans and stakeholders may find useful which goes beyond the minimum requirement of The Companies Act
  4. Introduce elements of the review recommendations early – for example, INEDs are generally seen to be a highly effective and well-utilised control in other organisations
  5. Recruitment – ensuring there is a team in place that is equipped to deal with an increase in regulation

The majority of the recommendations above will likely cost the club. Compliance isn’t cheap and the IREF will understand that clubs will have to incur costs to ensure it is compliant. In comparison to the scale of football wages, however, this is likely to be insignificant.

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