The English Football League is being tipped to consider a major overhaul of its financial regulations, following the Premier League's recent decision to abandon Profitability and Sustainability Rules (PSR).
Financial expert identifies potential EFL shift
Dr Tom Bason, an Assistant Professor in football finance at Coventry University, has told BirminghamLive that the significant disparity in financial rules across English football's divisions could prompt the EFL to act. He suggests the league will at least consider adopting a Squad Cost Ratio system, similar to the 85% of football-related revenue spending cap recently voted in by Premier League clubs.
Currently, Championship clubs operate under PSR, which permits maximum losses of £39 million over a three-year rolling period. Breaches of these rules carry severe consequences, as Birmingham City experienced firsthand in 2019 when they were docked nine points for excessive spending.
The growing concern over Championship finances
Dr Bason highlighted a fundamental problem within the second tier, stating that the current situation has to be a worry for the EFL. He pointed out that numerous Championship clubs are consistently spending more on wages alone than their total revenue generates, even before additional costs like transfer fees are factored in.
"There's so many clubs in the Championship who are spending more on wages than they're making in revenue," Dr Bason explained. This financial reality, combined with the new regulatory landscape in the Premier League, makes a future change in the EFL increasingly plausible.
The promotion and relegation complication
A key driver for potential harmonisation is the difficulty clubs face when moving between leagues with completely different financial rulebooks. Dr Bason noted the challenge for teams being promoted and relegated to constantly adapt to new financial regimes.
However, such a change would present a monumental challenge for clubs dropping into the Championship from the Premier League. Using Wolverhampton Wanderers as a hypothetical example, Dr Bason illustrated how revenues would drop off a cliff following relegation, while many fixed costs, such as player amortisation, would remain stable.
He concluded that even with standard relegation clauses reducing player salaries, the income drop is often far steeper, making compliance with a strict spending ratio very, very difficult for relegated clubs to manage.
