Coronavirus: EFL League One, League Two clubs could fold without Government bailout - MP
Damian Collins MP: "In the next few weeks we could see five to 10 EFL League clubs going into administration... without Government stepping in, those clubs could go to the wall."
By Geraint Hughes, Sky Sports News reporter
Last Updated: 22/05/20 2:40pm
An urgent and substantial Government bailout is needed for clubs in the EFL Leagues One and Two, otherwise, up to 10 clubs could go into administration within weeks.
That is the view of former Chair of the Commons Select Committee, Damian Collins MP, and the co-owner of League One Sunderland, Charlie Methven.
In an interview with Sky Sports News, Collins said the parlous financial state of many League One and Two clubs even before the coronavirus crisis was worrying, but the impact of the pandemic was making the plight of clubs more acute.
Collins has called on the Government to provide a financial bailout package, otherwise by next month many clubs will have to file for administration and, if no support is forthcoming, they could cease to exist.
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He said: "In the next few weeks we could see five to 10 EFL League clubs going into administration.
"We saw the outcry last summer when two clubs, Bury and Bolton were in trouble. If that happens there will be huge public demand to do something, without Government stepping in, those clubs could go to the wall and there may be others that follow.
"Yes it be would be nice if football could help itself, but it won't be able to do it.
"I don't think there is a body able to stump up the cash needed… it requires leadership from the government here. They need to offer a stake in the clubs, as it's a community asset. Those stakes could be bought by Trusts and local authorities."
Collins and Methven have drafted a six-point plan to "rescue football and protect community assets for future generations to enjoy".
In their open letter, the six-point plan advocates...
- A 'Football Finance Authority' (FFA) scheme should be created by the Football Association - but working with and backed financially by the government - to provide financial assistance to EFL clubs.
- Funds should be provided by the FFA to allow clubs to meet their short-term liabilities and provide them enough breathing space to restructure their finances, but couldn't be used to invest in recruiting new players or improving the club's infrastructure. Rather than being offered as loans, these funds would instead be exchanged for a minority shareholding in the club, of between 10 per cent to 49 per cent, depending on the level of investment required and the value of the club.
- Independent directors would be appointed to the boards of clubs as representatives for this minority shareholding. These directors can be nominated by either a registered Supporters Trust or by the relevant local government authority, but they must be non-political and subject to approval as 'Fit and Proper' by the FFA.
- These Independent Directors shall have real-time access to the financial records of their club and can report their concerns back to the FFA. Clubs that continue to trade outside the rules of the EFL would be put into a form of administration by the FFA, where a credible plan would be implemented by independent auditors to bring the financial affairs of the club back in line with the League's rules.
- Either a recognised Supporters Trust or a local authority can subsequently acquire the FFA shareholding in their club at a discount to market value, and funds raised in this way would be returned to the government to help repay the public investment in this scheme.
- The EFL's financial regulations should be set and enforced by the FFA, the governing body of which should include representation from the EFL, the Professional Footballers Association (PFA), the Football Supporters Association (FSA) and the clubs themselves, but with an independent majority.
Collins warned that a Government bailout, in effect taxpayers' money, must come with a six-point 'strings attached' plan, otherwise, within months the clubs would continue to be run so badly they will be coming back needing more.
Money must not be used to buy players, it's sole function must be used for financial sustainability.
EFL Chair Rick Parry told a Commons Select Committee earlier this month that the EFL would face a 'black hole of £200m' by September and the former Chair of that Committee said that figure was "not fantastical" although he doubted whether any Government would provide a bailout amounting to that figure.
It is understood that the EFL and its clubs have been discussing for some time about ways to reform financial rules and that those positive discussions remain ongoing.
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Following the release of this open letter, a Government DCMS spokesperson told Sky Sports News: "We are in regular, ongoing discussions with the EFL and other football authorities on the impact of coronavirus, how the professional game can safely return and how the wider football family can be supported."
Earlier this month Secretary of State for Culture, Media & Sport Oliver Dowden announced a £16m package to help Rugby League through its financial problems.
Their six-point plan has received backing from the former Football Association Chair Baron David Triesman.
He said: "Damian Collins and Charlie Methven have clearly devoted considerable thought to the financial and social crises facing football.
"They have identified some very practical routes through to a more secure future and I welcome this wholeheartedly. It is a pity that football so seldom does the work needed itself.
"But it doesn't. This is therefore an especially important intervention."
Malcolm Clarke, chair of the Football Supporters' Association and supporter representative on the FA Council also added his support: "The necessary restrictions arising from the COVID-19 pandemic have made government support for football clubs - a vital part of our communities and culture - an urgent necessity.
"We welcome the call for that assistance to be both prompt and linked to future sustainability.
"Football now has a unique opportunity to reset and adopt new ideas, which not only secure the short-term future of clubs, but help them thrive in the seasons ahead.
"These proposals would be a huge step in the right direction and chime with the FSA's core beliefs - that fans have a key role to play in football governance and ownership models.
"The idea of an independent unit, embedded within the FA, which exists to protect clubs is an idea we've championed for some time. It receives our full support."