Our club now has problems with EFL P&S rules due to gambling on achieving promotion. I understand and support why P&S rules were established due to many clubs over-reaching themselves and going into administration. HMRC were then rightly angry that football used the Football Creditors Rule to ensure that creditors such as players, former players, managers and other clubs were at the front of the creditors queue whilst they were at the back with suppliers, St John Ambulance etc, usually receiving 10% of what they were owed. EFL had to act and introduced FFP which morphed in P&S in 16/17. The Championship situation is further complicated by relegated PL clubs having access to £90m in PP’s spread over 3 years and also being allowed higher P&S losses than the rest of the Championship clubs. Academic evidence has concluded that over the period 2006/7 to 16/17 relegated PL clubs had an unfair advantage due to PP’s, and this was under the old rules when PP’s were lower than they are now. I accept that they don’t guarantee success but PP’s increase the chances and they help drive up the demand for Championship players and consequently transfer fees and wages. Into this unhealthy maelstrom step the clubs without PP’s, and who are limited by P&S rules, trying to compete for promotion - we were one. It can be argued that our club could have been smarter in the attempt to compete by signing players with re-sale values but nonetheless we are a classic example of the boom and bust approach.
EFL and its clubs at the moment appear to be incapable or unwilling to tackle the PL by changing the rules related to clubs relegated into the Championship, no doubt for fear that the PL would then question the so called “Solidarity Payments” to EFL clubs from the PL vast TV deal wealth. I think it would be much more stable if relegated clubs had to operate under the same rules as others as regards P&S concerning losses (£39m over 3 years) and PP’s can only be used to cover losses above and beyond that where it can be clearly demonstrated that the losses have been incurred due to liabilities formally entered into when the club was in the PL, eg a player on a contract. Or, alternatively PL clubs could build relegation clauses into contracts which reduce wages on relegation so that PP’s would not be needed at all. Or, EFL could amend the P&S rules to allow owners to fund whatever losses they wanted to up to a maximum that is much higher than the current figures, but the owner has to put that money into a bond to ensure the cash is there and an owner could not incur massive losses but then exit stage left before having to pay up. My point is that there is good argument for applying pressure to EFL to change the rules. This would be a good fan campaign.
But the rules will continue to be in force until changed so we have to find a way to live within them. In the medium term I think 3 things have to happen:
In the short term we have a problem to tackle. It’s probably fair to assume that our P&S losses for 16/17 are £17m, and the same again for 17/18 which means when the 18/19 figures have to be included we can have a £5m loss for 18/19. That means reducing the wage bill and income from player sales to the tune of £12m in the 18/19 accounting period. That would then leave us with space for a £7m loss in 19/20 to keep us under £39m for the 17/18 – 19/20 3 year period. Or, of course we win promotion this season! But remember if we win promotion and breach P&S rules we can receive a disciplinary sanction that would be implemented in the PL which could include a point deduction – the world has moved on since Bournemouth and QPR played the old FFP game. Reducing the loss from £17m down to £5m would mean player sales or a big player sale on top of the changes we have so far made. In this context it is no surprise that we are under a transfer embargo and have been since April which is just after we submitted our financial figures to EFL including 2 year projections on top of the initial 3 years. We may remain under EFL restrictions for some time. Player sales have now become an absolute necessity as part of the process of re-positioning the club – the only question is which players do we sell and when? The decision on KW is unpopular with many fans, I suspect that a few more unpopular decisions will have to be made in the months to come. As I said the other day we have a large omelette to make and we won’t do it without breaking some eggs.
The plan for me then is:
It’s a tall order but it’s where we are, sadly.